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How do I manage my Paypal, Stripe and Amazon accounting?

Paypal Stripe and Amazon

As an online retailer you need to be able to take payments from customers in many different ways and most people choose to use a combination of third party services.  The most common of these are Paypal, Stripe and Amazon.

But how do you deal with them in your accounting?

Although they are not bank accounts like your current account, they do have a lot of the same mechanisms.  They get money paid into them (by customers), money is paid out of them (normally to your current account), and they may hold a balance of money in them.  For this reason, the best way to deal with them is to set them up as individual bank accounts in your accounting software and you can then use the normal bank account processes to keep track of them.  You will also then see the money held in these accounts appear as assets on your balance sheet.

Also consider currency.  If you use multiple currencies, then it is a good idea to set each currency up as a separate bank account in that currency.  For example, if your Paypal account holds both GBP and USD balances, then set up each as an individual account – it will be much easier to manage.  For each account:

  • record money into the account when customers pay you
  • record money out of the account when you do a refund
  • record bank transfers when money gets paid or settled from one of these accounts to your normal bank account

Some of the third party providers also deduct fees from the account before passing the balance on to you.  If this is the case, then you can replicate this in your accounting system by recording money out of the account to a ‘fees’ category to represent the fees being paid.

With Paypal, you can also make purchases using the funds in your account.  This can be managed in your accounting system simply by recording the purchase invoice as normal but then recording the payment against it from your ‘Paypal’ bank account.

As for other bank accounts, it is a good idea to do a bank reconciliation for these accounts on a regular basis.  There are some good reasons for doing this.

  • if you know that the accounts are correct, then you can be confident that you haven’t missed any sales in your profit and loss report
  • the process of reconciling the balance in the accounts will also make sure that you have picked up any fees that have been paid or other costs that have been deducted such as Amazon advertising and your costs section of your profit and loss report will be more accurate
  • if you have made refunds, then you can be sure that you have picked this up and will be able to claim back any VAT that is refunded

If you need any help with setting up or managing these accounts in Xero or Brightpearl, just contact us – we’d love to hear from you.

 

 

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