Gift cards and certificates are a great way to add a new revenue stream for your business and bring in new customers. Whether it’s a birthday celebration, graduation, anniversary or other occasion, a gift card is the perfect way to spoil someone. Sell them year-round to bring in additional revenue on top of your usual services and products.
Gift cards are like cash to the recipient, but how they are handled on your end of things is not quite as straightforward. The initial sale of the gift card creates a liability for your business (an obligation to provide goods or services for the value of the card). That liability does not become revenue until the gift card is redeemed. This makes it vital to be able to track each gift card sold and know how much is still outstanding at any time.
Use the following process to record the sale and redemption of gift cards. This method allows you to retain an accurate breakdown of your revenue, correctly report your organization's liability (unredeemed gift cards), and comply with tax and accounting requirements.
|Get Set Up||Sell a Gift Card||Redeem a Gift Card||Report on Gift Cards||Example|
Before you get started selling gift cards, there are a few things to set up in Jackrabbit.
Jackrabbit is not an accounting program; it tracks revenue and accounts receivable, but is not designed to handle liabilities. Because gift cards are a liability until redeemed, there is a need for a little creativity in recording the sale and redemption of gift cards in Jackrabbit.
With the method stepped out in this article, the sale of a gift card takes the payment in, records the sale as 'revenue', and puts it into a Category 1 which will be labeled "Gift Card Sales (Liability)" to allow you to differentiate it from your actual revenue categories.
When a gift card is redeemed in Jackrabbit, it will be recorded as a Payment (Credit) and will be included in your Deposit Slip. Creating a Payment Method of "Gift Card Redeemed" allows you to distinguish which payments were monetary vs which were redeemed gift cards. See the example below for an illustration of how this appears on Jackrabbit reports.
|Add store items for the gift cards with set denominations|
|If you use Jackrabbit's QuickBooks integration||Map the "Gift Card Sales (Liability)" Category 1 value to a Gift Card liability account that you have set up in your QuickBooks Chart of Accounts (not a revenue account).|
Gift cards are sold using the Select Store Items section of the Make Sale/Post Fees screen (from a Family record or the Store menu).
- Select the required denomination from the store items you added in the set up.
- Override the Note field (automatically filled with the item name) and record the gift card number. Note: This must be done to allow you to track outstanding card balances.
Gift cards are redeemed by recording them as a payment in the Payment Transaction Entry screen (from a Family record or the Store menu > Make Sale).
- Set the Pmt Type to Payment.
- Select the Gift Card Redeemed Method (payment) drop-down value you added during set up.
- Record the gift card number in the Chk# field. Note: This must be done in order to allow you to track outstanding card balances.
There are several Jackrabbit reports that will allow you to track the sale and redemption of gift cards, and calculate the balances on gift cards that have not been fully redeemed.
Store menu > Store Reports
Reports menu > Transactions/Financials
Reports menu > Transactions/Financials
Transactions menu > Search
See the example below to follow through a business scenario and see what these reports look like in action!
This example outlines a business scenario where gift cards are sold were redeemed. It illustrates the various reporting options when the transactions are recorded in Jackrabbit using the process outlined above.
On December 18, 2019:
- 4 gift cards were sold totaling $200, and payment was received.
- 3 gift cards were redeemed, totaling $140:
- The Ager family paid an event fee ($25) and December dance tuition ($75) with their $100 gift card #1532214
- The Brown family bought some merchandise ($25) with their $25 gift card #1532216
- The Evans family used part of their $25 gift card #1532217 to pay the balance owing on a tuition fee ($15). There is $10 remaining on their gift card.
The reports for that day are: