For anyone unfamiliar, Venmo is a payment platform, also called a digital wallet, also called a P2P payment app (Person to Person) that “allows you to pay and request money from your friends.” It is designed for situations, for example, where you go out with friends for dinner and you pay 100 percent of the bill, and then your friend/s use Venmo to reimburse you afterwards for their share. Venmo is a subsidiary of PayPal and was named one of the best apps of 2016 by Time Magazine.
A 2017 article published on The Motley Fool website says, “Venmo's growth is exploding and one special quality has made the payment app a runaway success with college students and young working professionals.” That quality is the social media feature; more on that below.
So what happens when our clients start using Venmo to accept payments from their clients or customers? Let’s take a look.
Why Our Clients Like It
Venmo is app-based, which is why it has been so easily adopted by Millennials in particular, especially on college campuses.
Venmo has a familiar social media aspect, allowing users to select from a library of emojis when sending payments to friends, and/or adding comments in the payment description field.
Funds transfer ACH-style. The sender has the equivalent of direct debit from their designated checking account, and the recipient receives the funds as a direct deposit.
Venmo is free to use. There are no service fees per transaction or per month, for either the sender or the recipient.
Venmo is expanding its services. Some merchants now accept a Venmo card for purchases, and according to their website, “You can now use [Venmo] to pay in many apps for food, clothes, tickets, and so much more.”
Why Bookkeepers Don't Like It
Venmo is not designed to be a small business tool. There is no QBO bank feed available. So all Venmo transactions have to be manually entered into QuickBooks. Enough said.
Most of my clients are using Venmo for personal transactions, and for receiving payments from their clients. So the transactions are a combination of business and personal, something we are always asking our clients not to comingle in their checking or credit card accounts.
Venmo is difficult to reconcile. When my clients start using Venmo to accept payments from their customers, I setup a Venmo Bank account in the Chart of Accounts. I quickly learned that if the Venmo account has a balance, payments to Vendors such as Uber can be deducted from the Venmo balance, so the transaction never appears in the linked Checking account. If there is no Venmo balance, the funds are deducted from the linked Checking account. You cannot tell from looking at the Venmo feed which payment method was used, instead you have to download the Venmo transactions to see if the transaction was paid from the Venmo balance, or from the linked Checking account. Ugh.
Lousy monthly statements. When you login to the Venmo website using a computer (not the mobile app) there is a Statement link. The link opens a page called “Account Statement” where you can manually select a date range and click the “Download CSV” button. Astonishingly, the downloaded file is called “Download” not “Download.csv” and because the .csv extension is missing, the downloaded file will not open unless you manually add the .csv extension to the file name.
Once you rename and open the .csv file, it is messy. The “Datetime” field shows the Date AND the Time of the transaction in one long string (example: 2019-08-02T14:54:52), which is difficult to read. I find myself spending time deleting the Time data so I can better read the Date.
The “Note” field cannot download the emojis, so any emoji used is translated into jibberish (example: ðŸ’ªðŸƒ). If the emoji is the only Note, I have to return to the Venmo activity screen to see the actual emoji to figure out what the transaction was for.
The "From" and "To" fields are useful and appropriate, as is the "Amount" field which shows in black for payments received and red for payments sent. However the debits and credits are all in the same column so you cannot sum the debits and credits for the month, which is useful information to have when trying to reconcile a bank statement.
The “Funding Source” column is key – this is where you discover if a payment was made from the Venmo balance or from the linked Checking account. You can link multiple checking accounts, so payments can come from one checking account, and deposits can go to another checking account, if desired. Therefore you have to carefully read each transaction row to determine from which linked bank account funds were debited or credited.
Because you can transfer your Venmo balance to your linked Checking account, you may see a Venmo deposit transaction in the QBO bank feed of the primary checking. Best practice is to write a Check from the Venmo bank to the Checking Bank, so the deposit will show as a “Match” in the Checking account bank feed.
If your Venmo account has no balance, but you use Venmo to pay a Vendor, the payment will appear as a transaction on the Venmo “statement,” but no funds have actually moved from the Venmo account. Instead, you will see a debit from the linked Checking account. However, when you see that payment in the Checking account bank feed, you have no idea who was paid – you have to look at the Venmo transactions or downloaded .csv to find out. So you constantly have to move back and forth between the Checking bank feed, the Venmo register or bank rec screen, and the Venmo feed or .csv. It’s a 3-ring circus.
Finally, the .csv file does show the Beginning and Ending balance, but in my opinion, as .csv download is not a true monthly bank statement. Bottom line: it takes me two to three times as long to reconcile a Venmo monthly statement compared to monthly statements for accounts with a bank feed. Ugh!
Social media feed. The default privacy settings are “Public” which means all other Venmo “friends” can see in their feed that “Maria paid Joe” including the emojis. You must manually Opt Out of this setting. There have been several news stories related to this feature, including a NPR (National Public Radio) February 2019 story (“As Payments Go Social With Venmo, They're Changing Personal Relationships”) and a MarketWatch article from July 2018 (“People use Venmo to spy on cheating spouses—it’s proving more effective than Facebook”.)
I do not consider Venmo to be a good tool for clients to receive payments from their customers – it is not what Venmo is designed for. As a bookkeeper, a Venmo “bank” is difficult and time-consuming to track and reconcile. However, our clients like it because payments are quick, easy and free.
Venmo is not going away, so like so many other new technologies, the bookkeeping and accounting community will have to learn embrace it, despite our distaste for the product as a business tool. That being said, our role includes advising our clients on new technologies and Best Practices. So, I recommend explaining to our clients why Venmo is not the ideal choice, and recommending other options as alternatives.
Jody Linick is an AIPB Certified Bookkeeper, a QuickBooks® Certified Pro Advisor, and a member of the Intuit Trainer/Writer network. Her company, FitBooks Pro (formerly called Linick Consulting), specializes in remote bookkeeping services for professional services firms using QuickBooks Online. You can find her series of Blog posts here.