Why do Gift Cards need to be processed as a separate transaction?

As a leading provider for business solutions which include point of sale products, most store owners ranging from pizzerias, frozen yogurt stores, and coffee shops ask the question “Why do Gift Cards need to be processed as a separate transaction?”
One of the main reasons why Gift Cards should be processed as separate transactions is due to that fact that it is always recommended that the funds be held in a separate bank account than the operations bank account. This is particularly true for franchises with multiple locations who want to share gift cards between stores. The reason this is always recommended is to keep the funds separate and unable to be used for operation expenses and that the gift cards can be redeemed at any point without effecting the operations account. By keeping gift card revenues in a separate account, franchises can maintain an organized record of all gift card related transactions and ensure that the funds go to the stores who actually redeem the cards and give away product.

Another reason why Gift Cards should be processed as separate transaction is for accounting purposes. Since the funds are not technically the stores until the gift card is redeemed, it should not be considered income which can be taxed.
In addition, Gift Card balances can expire or have fees associated with them, they need to be readily available to be charged or deducted appropriately. Please check your local laws and guidelines for exact details in regards to Gift Card expiration and fees.
Sintel Systems is quality provider point of sale systems to the entire retail and service industries. Its clients include major franchise and chain operations.
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