POS transactions are a cornerstone of financial dealings in Saudi Arabia, with Al Rajhi Bank offering services for processing payments made by customers using various types of cards. As accounting professionals, it is crucial to understand how these transactions are processed and how the associated fees are calculated, to streamline accounting tasks and ensure accurate financial operations.

Processing Debit Cards (Debit Cards)
When customers use Mada debit cards, Al Rajhi Bank follows a simple but defined process. The bank deposits the full amount paid into the merchant’s account without deducting any fees. Then, in a separate transaction, the bank records a fee of 8%, plus 15% VAT. This process makes it easier for accountants to track the calculated deductions and oversee financial transactions in a sequential and organized manner.

Processing Credit Cards (Credit Cards)
For credit cards such as Visa, MasterCard, and American Express, the process is slightly different. The bank deducts 2.5% of the amount paid, in addition to 15% VAT on this fee. What distinguishes this process is that the deduction is made in a single transaction, and the net amount is directly recorded in the merchant’s statement.

Difference in Payment Cycles Between Debit and Credit Cards
One key difference lies in the timing of depositing received funds. In the case of debit cards, funds are immediately deposited into the merchant’s account. However, for credit cards, it may take longer due to settlement processes handled by the service provider. This delay necessitates careful tracking of receipts and regular review of account statements to ensure all due amounts are received.

Accounting Recommendations
From an accounting perspective, it is recommended to use an intermediary account to accurately track the collection processes, follow up on uncollected amounts, and claim them from the bank. Then, each case can be handled differently:

Debit Cards: Two accounting entries are required; the first to record the received amount and the second to record the deducted fee and VAT. The received amount should match the one recorded in the intermediary account.

Credit Cards: The accounting process here is more complex, where a compound entry can be used, combining the paid amount, the deducted fee, and the original amount. Since the only known amount is the paid amount, it must be reconciled to determine the original amount and calculate the fee and its VAT.

Accounts and Businesses Tool: Saving Time and Enhancing Efficiency
To facilitate the work of accountants, “Hisabat wa A’mal Business Services” has developed a smart tool that automates the accounting processes related to POS transactions, saving around 90% of the time typically spent on manual processing. This tool helps accountants focus on strategic tasks and significantly boosts their productivity.

By implementing these accounting tools and processes, businesses and merchants can ensure accurate financial transactions and enhance operational efficiency in line with best financial practices.

For any inquiries or if you need assistance managing your financial operations, don’t hesitate to reach out to our specialized team at “Accounts and Businesses “. We are here to support you in achieving your financial goals with professionalism and efficiency.