Name: Congruent Software Inc
Address: 4205 148th Ave NE Suite 200, Bellevue, WA, 98007, US
Telephone: +1-844-567-5232

Payment Method Codes in Microsoft Dynamics 365 Business Central let you automate how your business receives and tracks digital payments.

The Payment Method Codes are labels like "ONLINE," "CARD," or "PAYPAL" that informs Business Central how a customer paid you. These codes do more than organize transactions. They can trigger automatic payment posting, streamline bank reconciliation, and give your finance team clear visibility into cash flow.

Whether you are looking to improve cash flow tracking, or planning to implement payment automation, or looking to simplify operations, this guide gives you practical steps you can implement today. You'll learn how to:

Create and configure Payment Method Codes for online transactions
Set up automatic payment posting with balancing accounts
Apply payment methods to customer records and invoices
Use Business Central's payment services like PayPal
Follow best practices that prevent reconciliation errors

Ready to streamline your payment processes? Our Business Central Consulting team can help you set up automated payment handling tailored to your business needs.

1. What are Payment Method Codes in Business Central?

Payment Method Codes are tags that identify how money moves in and out of your business. They inform system about which ledger accounts to use and how to post each transaction. These codes make it easier to automate posting, improve reconciliation, and maintain clear financial reports.

Common examples include:

Code	Description	Typical Use
CASH	Cash Payment	Walk-in or retail sales
BANK	Bank Transfer	Direct bank deposits
CARD	Credit/Debit Card	POS or manual card entry
ONLINE	Online Payment	Payment gateway or website checkout

2. Why Use Payment Method Codes for Online Payments in Business Central?

Digital payments need accurate tracking. When a customer pays through your website, that transaction must hit the right bank account in your books. Payment Method Codes make this happen automatically.

These codes connect to balancing accounts in your chart of accounts. When you post an invoice with a Payment Method Code linked to a bank account, Business Central can create the payment entry at the same time. No second step required. For businesses processing dozens or hundreds of online payments monthly, proper Payment Method Code setup eliminates hours of manual work.

Using Payment Method Codes gives you several advantages like:

Automated posting rules — map payments to the correct bank accounts automatically
Simplified reconciliation — keep online receipts separate for easy bank matching
Better reporting — analyse online vs. offline payment trends
Integration-ready — Connect payment gateways and e-commerce systems with ease
Reduced manual effort — Eliminates reclassification of transactions during month-end closing

3. How to Set Up Payment Method Codes for Online Payments in Business Central

Step 1: Open the Payment Methods Page

Click the search icon at the top of your screen. Type "payment methods" in the search box. Select Payment Methods from the results list.

The Payment Methods page displays all existing codes in your system. You'll see default entries like BANK, CASH, and CHECK already configured. This is where you'll add your online payment codes.

Step 2: Create a New Payment Method

Click New to create a payment method code. You'll need to fill in two required fields:

Code – Enter a short label (up to 10 characters). Use clear names like ONLINE, CARD, or PAYPAL. Keep codes simple and easy to understand.

Description – Add a longer name that explains the payment type. Examples:

Code: ONLINE → Description: "Online Payment Portal"
Code: CARD → Description: "Credit Card Payment"
Code: PAYPAL → Description: "PayPal Transaction"

Your team will see both the code and description when selecting payment methods.

A sample screenshot of a Payment Methods list in a business central system, showing payment code entries along with their Balance Account Type and Number.

Step 3: Configure the Balancing Account

This step determines whether Business Central posts payments automatically. The balancing account tells the system where money goes when an invoice is posted.

You'll configure two linked fields:

Bal. Account Type – Choose between Bank Account or G.L. Account.

Select Bank Account if payments go directly to a specific bank (most common for online payments)
Select G.L. Account if you use a clearing account or need more control

Bal. Account No. – Select the specific account where payments should post.

For Bank Account type: Choose your PayPal bank, Stripe bank, or merchant account
For G.L. Account type: Choose a clearing account or revenue account

Step 4: Save & Validate

Click OK or close the payment method card to save your changes. Business Central stores your new code immediately.

This automation saves significant time. Instead of posting an invoice, then creating a payment journal entry, then applying the payment to the invoice, you do all three actions at once.

4. How to Assign the Payment Method to Customers

You can make sure online payments are automatically selected for specific customers.

Step 1 - Go to Customer Card and select Payments tab.

Step 2 – Under Payment Method Code, select ONLINE.

A sample screenshot from a Business Central system displaying the Payment Method Code set to ONLINE within a customer or vendor settings form

How to Use in Sales Transactions

When creating a Sales Order or Sales Invoice, you can use ONLINE in the Payment Method Code field. Once you post the invoice, Business Central automatically creates the cash receipt entry in for the Bank Account applies based on the posting rules.

5. Simplifying Online Payments in Business Central

Proper Payment Method Code setup eliminates the manual work that slows down your finance team. Invoices post with payments attached. Bank reconciliation becomes a matching exercise, not a data entry marathon. Your cash position updates in real time, not at month-end.

The key is matching your configuration to your actual payment timing. Use balancing accounts for instant payments. Leave them blank when timing is uncertain. This simple rule prevents most posting errors and reconciliation headaches.

Whether you’re integrating Stripe, PayPal, or a local payment gateway, this setup helps you automate financial workflows, minimize manual effort, and maintain complete visibility into your cash flow.

Talk to our experts to get help setting up online payments or optimizing your Business Central workflow.

How to Handle Online Payments Using Payment Method Codes in Business Central