Paypal Fees in Sage - Correct integration?

[deltacreative]

Can anyone please help us?

We have a paypal bank account & business bank account set-up in sage.

Out of Sage sales process:
1. We make a sale of £100 through our online store and the client pays via Paypal.
2. We withdraw the funds £80 from our Paypal account into our business bank account (minus the Paypal fees of £20).

Within Sage sales process:
1. We receive the money from Paypal £80 (minus fees) into our business account, we then credit our Sage Paypal account with the same amount.
2. We then reconcile the clients invoice of £100 from our Sage Paypal account, leaving a debt equal to the Paypal fees within our account of £20.

How do we now reconcile the £20 debt for the Paypal Fees? If we put it through as bank charges it only adds to the debt on the Paypal account?

Any suggestions would be very welcome!!

[johndon68]

I'd do it this way:

1. When the customer pays, post a sales receipt to the PayPal bank account for £100 to pay their invoice. At this point, you have £100 in the PayPal account.

2. Post a bank payment from the PayPal bank account to the Bank Charges nominal code for £20 so you now have £80 in the PayPal account.

3. Do a transfer from the PayPal bank account to the Business bank account so you end up with £80 in the business bank and zero on the PayPal account.

HTH

John

[Accountsportal]

John is correct.

It helps to separate out the fee that PayPal charges on each invoice and think of it as two separate transactions:
1. Receive money for £100 from customer to completely pay off their invoice
2. 'Bank charges' of £20 from PayPal.

It just so happens that PayPal does this all in one 'transaction', but that doesnt really reflect how you post this in your books.

[deltacreative]

Thanks for your responses, this helps me understand the correct process for single transactions. Much appreciated!

Please could you also explain what happens if you process transactions in bulk. For instance, our online shopping cart receives 1000 individual sales a month. Rather than record each sale individually within Sage, we process as one single payment by creating a single sales invoice (from our shopping cart) for the total amount of monthly sales in the cart.

Within the 1000 individual sales, various Paypal fee amounts will apply as product prices differ. When we get to the end of the month, all our invoices have been reconciled as normal. This leaves us with the minus figure in our Sage Paypal account due to the fees.

We have a total monthly figure for the Paypal fees, but cannot seem to find out how to use this correctly to bring the Paypal account balance back in line.

Is this the correct process of doing bulk paypal transactions or should be be using a different method? Again your help is hugely appreciated!

[weebly_one]

I would use the same method for the bulk fees too.

[Welly]

I don't put the PayPal charges into my accounts, though I used to before.

I just key in the net amount I received into my PayPal account, separately for each transaction. I don't do this manually, as I have thousands of transactions - I import them from a CSV file generated by PayPal.

Then I withdraw a fixed amount from PayPal to my business bank account from time to time, using the "Record Transfer" tool.

[Williams lester]

I don't put the PayPal charges into my accounts, though I used to before.

I just key in the net amount I received into my PayPal account, separately for each transaction. I don't do this manually, as I have thousands of transactions - I import them from a CSV file generated by PayPal.

Then I withdraw a fixed amount from PayPal to my business bank account from time to time, using the "Record Transfer" tool.

If you only put the net receipts into your accounts, then your accounts will be incorrect. Your sales will be understated, and if you are VAT registered you will be underpaying VAT. If you are not registered then you may find that you are closer to the threshold than you imagine once you take into account the correct turnover figure.

[Welly]

If you only put the net receipts into your accounts, then your accounts will be incorrect.
Could you point me to any official guidance on this?

[David Richards]

Could you point me to any official guidance on this?
Well on the face of it, you're mis-stating your turnover.

Using the OP's example; the sales turnover is £100 whilst the Paypal fees of £20 are an expense item. If you only record the turnover as £80, then the accounts are incorrect. And as noted by Williams Lester; if you're VAT-registered (or close to the registration threshold) you're liable to incur the wrath of HMRC.

In the Court of Appeal case of Diners Club Ltd and Another (“DCL” – [1989] STC 407), the court held that the transaction fees deducted by credit card companies were a VAT-exempt supply, not a discount.

[anna_idsltd]

I know we are about a year after the OP posted but I have just started using Paypal as a bank and I thought it might be helpful to other beginners. The way I am processing is like this:

Open a Supplier account for Paypal Purchases
Open a Customer account for Paypal Sales
Create a bank account for Paypal Bank

Each month, get a monthly statement from Paypal, it will list each day's transactions for the month and receipts, payments, fees and 'other' in separate columns.

Post the receipts total as a Customer Invoice (net + VAT - whether VAT was applicable or not if you don't have proof to say otherwise)
Post the payments as a Supplier Invoice (net + VAT if VAT is specified and you have a VAT invoice to back it up otherwise post as gross amount)
Pay both Customer and supplier off using Paypal Bank account
Post a Bank Payment from Paypal account for the Paypal fees
Post a Bank Receipt from Paypal account for any Paypal fees (from refunds)

Paypal account online and Paypal Bank account should balance

Treat any amounts sent to, or taken from Paypal to your business account as transfers

Somebody may correct me if I am wrong about posting VAT for Sales but not for Purchases where there is no proof of VAT i.e Ebay purchases/sales. I may be wrong here but to fiddle about with VAT is too much effort if you have a lot of small transactions and to look back and check whether you paid VAT or not on the item you are selling etc. Simplest way is to make them all subject to VAT on sales and HMRC won't be quibbling about that,

[johndon68]

Whilst there is nothing wrong with the way you are doing it, you are entering twice as many entries as necessary as you are entering both invoices and customer receipts/supplier payments where a simple bank payment or bank receipt would have exactly the same effect on your accounts...

John

[anna_idsltd]

Whilst there is nothing wrong with the way you are doing it, you are entering twice as many entries as necessary as you are entering both invoices and customer receipts/supplier payments where a simple bank payment or bank receipt would have exactly the same effect on your accounts...

John

OK, I see what you are saying but that won't take care of the VAT element would it?

[David Griffiths]

OK, I see what you are saying but that won't take care of the VAT element would it?

You can post the bank receipt with a T1 or other appropriate code and that will deal with the VAT correctly

[anna_idsltd]

You can post the bank receipt with a T1 or other appropriate code and that will deal with the VAT correctly

Thanks a lot, you've just saved me some precious time

[David Griffiths]

Thanks a lot, you've just saved me some precious time

It was John that pointed it out first. :)