Updated: Aug 22, 2021
Venmo and Cashapp are considered peer-to-peer lending tools. They are intuitive, easy to use, and imperfect for splitting restaurant checks reimbursements, and other personal expenses. Venmo, in particular, is particularly savvy because they laid on top a social currency to where people can not only do peer-to-peer transactions but can also let the world know what they are paying for.
Businesses, whether big or small, should be utilizing business applications. Venmo and Cashapp are most widely known and used for exchanging money. These two applications were both initially created for peer-to-peer use. Over the years, business owners have begun to incorporate these two tools for paying employees, vendors, and receiving payments for goods and services. Even though these two applications are popular, they are not used for business, nor are they Quickbooks Online friendly. Here's a quick video for further explanation.
Get in Trouble with Venmo
Not many are aware, but Venmo prohibits this (if the business is not recognized as a business profile on Venmo) and states on their website that if they should find out someone is using the app for business, they can reverse the payment. This puts business owners in danger of losing both the payment and the item sold.
“We may restrict the use of your Venmo account, including any business profile, if the selling activity through your account, including any business profile, reaches certain thresholds, involves certain activities, or violates any terms between you and us. In addition, if your selling activity meets certain transaction thresholds, we may require you to provide additional information and documentation to us from time to time for tax reporting or other reasons (for example, to verify your business activities or resolve claims or disputes), and we may suspend or place limits on your account until we receive the requested information and documentation.” (Venmo).
Not Quickbooks Friendly
When a transaction comes in or out using these applications, it simply just states "Venmo" or "Cash App" with no other details as to who it's coming to or coming from who. This gives your accountant a hard time classifying without reaching out to ask the nature of the transaction.
“It is your responsibility to determine what, if any, taxes apply to the payments you make or receive, including transactions through your business profile or that are marked as for goods and services, and it is solely your responsibility to assess, collect, report and remit the correct taxes to the appropriate authority. PayPal is not responsible for determining whether any taxes apply to your transaction, or for calculating, collecting, reporting, breakdown, or remitting taxes arising from any transaction.” (Venmo).
When it comes to business Venmo and Cashapp are extremely problematic. Here’s a break down of the top four problems:
Any person to who you pay more than $600 in a calendar year has to be issued a 1099 form which summarizes the total payments that they received for tax purposes. Venmo and Cashapp lack the reporting tools to help you do that efficiently.
Cashapp and Venmo don’t allow you to attach supporting documentation invoices contracts and receipts so that you can see what services were actually paid for
When Venmo takes the money out of the bank account it just says Venmo. Making it difficult for accountants to properly tag and link to vendors.
For business purposes, there are a plethora of tools in technologies you can use to accomplish the same ends to electronically pay vendors, the best of which is called: Bill.com. This is a system that allows you to electronically pay your vendors and it gives you all the details needed to link that transaction and prove your business operations
At the end of the day, there are plenty of other great options that are available and just as easy for business payments. To learn more about the possibilities and which are most suitable for your business, here's a blog to explore options or contact us today.