Accounting for ebay Adyen payments and final value fee VAT

[Rob-Ed]

Hi guys.
Much as I hate (hate hate hate) ebay, it's a fact a of life for most mail order businesses. We've been forced (against our will) to adopt their awful managed payments solution provided by Adyen. There's nothing especially wrong with Adyen but the implementation means it's extremely difficult to account for.

Example: We sell an item for £10 all in, ebay deducts fees and gives us £9 of this but the sale is for £10 and that's what we must show on our customer invoice. We only have £9 in our bank to reconcile but a customer invoice for £10 to reconcile against. Ebay only invoices for the fees once a month so if you want to reconcile before a month is up (I do mine weekly) you're stuffed. So we have to 'fudge' it with a bank payment of £1 to offset against the extra £1 we charged and didn't receive. The more ebay sales - the more fudging, it's not encouraging.

Now I finally have a monthly ebay statement to look at I can see that the fees that were kept by ebay (£1 in my example) are deducted from the fees invoice subtotal before VAT is added. i.e. We are invoiced VAT on subscription/listing fees but not the variable final value fee. Have we been charged VAT for final value fees or not?? There is NO reference to VAT for these fees which are made up of a fixed rate £0.36 per transaction + whatever percentage is due for the category in which the product was sold.

Anyone had any experience of this or been able to make sense of it in their own accounts?
Thanks
Rob

 

[LPB 123]

Rob, I think you're making it more complicated by trying to reconcile every week. There's no need to "fudge" eBay fees for every transaction just do all ebay fees at the end of the month as they do advise on their invoice the amounts they've already taken from MP in the "deducted fees" column.

At the end of the month on your invoice it will show ex VAT, the VAT amount and Total amount. It will also show the "deducted fees" further up the invoice too.

You are charged VAT on FVF fees and fixed rate fees.

Raise an invoice from the amounts on the monthly invoice, then mark a payment made from your eBay selling account (or whatever account you have set-up that receives the eBay payments in your accounting software) using the "deducted fees" figure shown on the invoice.

Your statement ending balance should now reconcile.

 

[paulears]

I use FreeAgent - reconciling ebay is for me, totally impossible. Fees deducted from the amounts paid, then invoiced, then extra s that don't seem to have a home - two different kinds of invoices, and no way to remotely workout how the 800 quid they just paid you should be distributed. My accountant has set my bank account in FreeAgent to have an ebay account. I raise the invoice for the full amount, and add a manual entry for each one - ignoring the fact what is paid into the main account is different. Then, all the payments into the current account I transfer in FreeAgent to thew ebay account. Over three months it seems to be close, once the fees statement is entered in as money as a bill. It will need balancing entries to keep it tidy and I'm planning on doing these quarterly, but it galls me that if they were to miss a payment, I will never know. It's a farcical system and takes me so long to do - but the constant transfers and manual invoice payments worries me because I cannot say, yes that has been paid. Sometimes I get unexpected large payments into the bank - and I can never work out why. Then you get returns and the bizarre way these are documented. I hate having to trust ebay, but tracking an individual sale is just impossible. When they make a payment - they don't even tell you which transactions it is for - just 'have some money'. We'd never get away with that with our suppliers. I reckon the results over the past three months are close - but how close I cannot work out. If every time they sent you the email saying pat yourself on the back, you sold something - all they need to do is tell you the reconciliation Items sold for £200, payment will be £180, or whatever - but they just say "have £180 for stuff sold, at some point, and it could be 1 x £180, or 3 x £60 ones?"

 

[Mr D]

I use FreeAgent - reconciling ebay is for me, totally impossible. Fees deducted from the amounts paid, then invoiced, then extra s that don't seem to have a home - two different kinds of invoices, and no way to remotely workout how the 800 quid they just paid you should be distributed. My accountant has set my bank account in FreeAgent to have an ebay account. I raise the invoice for the full amount, and add a manual entry for each one - ignoring the fact what is paid into the main account is different. Then, all the payments into the current account I transfer in FreeAgent to thew ebay account. Over three months it seems to be close, once the fees statement is entered in as money as a bill. It will need balancing entries to keep it tidy and I'm planning on doing these quarterly, but it galls me that if they were to miss a payment, I will never know. It's a farcical system and takes me so long to do - but the constant transfers and manual invoice payments worries me because I cannot say, yes that has been paid. Sometimes I get unexpected large payments into the bank - and I can never work out why. Then you get returns and the bizarre way these are documented. I hate having to trust ebay, but tracking an individual sale is just impossible. When they make a payment - they don't even tell you which transactions it is for - just 'have some money'. We'd never get away with that with our suppliers. I reckon the results over the past three months are close - but how close I cannot work out. If every time they sent you the email saying pat yourself on the back, you sold something - all they need to do is tell you the reconciliation Items sold for £200, payment will be £180, or whatever - but they just say "have £180 for stuff sold, at some point, and it could be 1 x £180, or 3 x £60 ones?"

I see the sale, I see the fee for the sale - what is the unknown element that cannot be accounted for? What else is deducted that does not show?

 

[paulears]

Yes, but eventually. I see a sale. I see money come in from eBay. I don't assume that say selling something for £100 and next day getting maybe £90 something is the same item? Selling five items in a day and getting a random amount of money is confusing. Often, I'll get say £750 paid in, yet the next day another similar amount - looking at the sales figures - they were relatively steady, so some payments were presumably held for a while, then paid, others came quickly. How do you deal with this? Waiting till the end of the month then having to check back is a silly system. I don;t trust them, but have to? Managed payments is a farce - mismanaged fits.

 

[Mr D]

So perhaps a spreadsheet would work?

I added a column to my spreadsheet for Adyen, so far its spot on with the figures. No random amounts, can see at a glance what is coming.

Payment sent, payment arrives - I check that daily but so far (2 payments) its working ok.

This will be the first weekend payment next week but so far the processing amounts add up exactly.

Edit - the managed payments system has affected cashflow but that will settle down in a month or so.

 

[Rob-Ed]

Thanks for the replies. Yes, I could make the ebay element of my reconciliation simpler by only performing it at the end of the month when they finally release a statement but that would make the rest of my reconciliation significantly more difficult. Having been in a mess with several months of catching up in the past I decided I wouldn't get into that situation ever again. Reconciling weekly means that there is still current memory of each and every transaction (we're not all that busy) and inconsistencies can be fixed more easily. The problem is to some extent my own fault, the only way I've ever been able to reconcile is to match each and every payment to an invoice, I'm sure this is not how most businesses reconcile. As an aside, how would a big shop, e.g. M&S, ever be able to reconcile accurately??

ebay's statements are woefully confusing, they appear to make up the details. If we were selling a lot on ebay (which, thankfully, we aren't) reconciliation would be even more of a nightmare. There's a complete lack of consideration for the seller and their accounting needs, we just have to fit in with ebay's regimen and make our figures fit what ebay decides we owe them.

@paulears, I feel your pain. The problem as I see it is a 'rolling' error, ideally you'd want to cease all activity for a period, to clear any invoiced amounts and sales, get the balance back to zero, starting with a zero balance you should be able to identify when things start going awry.

I have received a reply from ebay which confirms that final value fees do attract VAT. Illogically, ebay deduct the final value fees at the moment of payment though, which means they have to add them back to the invoice total on the statement and then apply VAT up to a month after the charge has been made. Personally I'd prefer an option for a disbursement once per month, the same day that the rest of the fees are charged, it seems that would be too much trouble for them though.

Thanks and regards.
Rob

 

[NEF]

End of month just look at your total ebay sales from the monthly statment. The deduct your VAT from your sales prices. Then the fees/vat are shown also..

As far as the Adyen payments, into your bank account just as mentioned concile them from a bank statment excel sheet for your year end..

 

[Brennerz]

I use FreeAgent - reconciling ebay is for me, totally impossible. Fees deducted from the amounts paid, then invoiced, then extra s that don't seem to have a home - two different kinds of invoices, and no way to remotely workout how the 800 quid they just paid you should be distributed. My accountant has set my bank account in FreeAgent to have an ebay account. I raise the invoice for the full amount, and add a manual entry for each one - ignoring the fact what is paid into the main account is different. Then, all the payments into the current account I transfer in FreeAgent to thew ebay account. Over three months it seems to be close, once the fees statement is entered in as money as a bill. It will need balancing entries to keep it tidy and I'm planning on doing these quarterly, but it galls me that if they were to miss a payment, I will never know. It's a farcical system and takes me so long to do - but the constant transfers and manual invoice payments worries me because I cannot say, yes that has been paid. Sometimes I get unexpected large payments into the bank - and I can never work out why. Then you get returns and the bizarre way these are documented. I hate having to trust ebay, but tracking an individual sale is just impossible. When they make a payment - they don't even tell you which transactions it is for - just 'have some money'. We'd never get away with that with our suppliers. I reckon the results over the past three months are close - but how close I cannot work out. If every time they sent you the email saying pat yourself on the back, you sold something - all they need to do is tell you the reconciliation Items sold for £200, payment will be £180, or whatever - but they just say "have £180 for stuff sold, at some point, and it could be 1 x £180, or 3 x £60 ones?"

I'm just looking into this now and also using FreeAgent, I've emailed my accountant to check this is the best way to do it and actually it is fairly simple.

eBay report for manage payments gives you:-
Date of Transaction
Payout Date
Gross Total
Final Value Fee - Fixed
Final Value Fee - Variable

So if you were to make 3 copies of the report and create a separate 'bank account' for ebay on your accounting software

1. File which only contains relevant data to record Sales (e.g. Date, Customer Name, Gross Value... remove everything else) - this will give you sufficient data to account for sales/refunds

2. File which only contains relevant data to record Final Value Fees - Fixed (e.g. Date, Final Value Fees - Fixed) - this will give you sufficient data to account for the fixed value fees for each transaction relating to the sales/refunds

3. File which only contains relevant data to record Final Value Fees - variable (e.g. Date, Final Value Fees - Variable) - this will give you sufficient data to account for the fixed value fees for each transaction relating to the sales/refunds

You would then upload these CSV to your 'ebay bank account' in your accounting software and explain the transactions accordingly e.g. sales as sales inc/ex vat...... final value fees as marketing?

You could make 2. and 3. into the same CSV

You then have to separately deal with payouts, again this is straight forward - ebay allows you to export a CSV with all of your payouts. You can then modify this CSV, upload it to your accounting software but explain all the transactions as 'Transfers from ebay bank to main bank'

If you want to be sure you have been paid out the correct amounts, you could use your transactions export and cross reference the 'payout dates' for each transactions with your actual payout totals.

I'm not an accountant, so this may not be the best way, however I feel it is the simplest and quickest way.

 

[Mr Dibb]

If you are on Xero or Quickbooks, check LinkMyBooks. Works well for me.

 

[Spur Support Services]

As Mr Dibb says, Look at Link My Books. It will save so much more time than it costs.

However, word of caution, that it is still advisable to download the detailed order data, to ensure you can fully support all entries.

I'm an accountant with a love of VAT and Online Trader complexities.
Ebay Managed Payments has made the previous systems so much harder.

Previously, you could use Xero Bank Feeds to link each Paypal Currency account to the accounting software and then just set up bank rules to clear 100's transactions and payment fees efficiently with one click. Ebay fees were charged and collected monthly.

Under Ebay Managed Payments, its all flowing through one Ebay Managed Payment report, which mixes currencies within GBP Payouts and provides the data in a column format which makes it more difficult to create an upload routine.

"Link My Books" takes away this pain for both Amazon and Ebay, summarising transactions between broad categories, assigning VAT rates according to your configuration and generating an easy upload including some basic overseas categorisation functionality. However, VAT is still a transaction tax, so you need to ensure that you still have full visibility of what you are selling, who you are selling to and where you are selling.

If you are anywhere near or above the VAT threshold, I really advise ensuring that you have appropriate accounting support for VAT as well as year end compliance.
The Online Traders that I support underestimated the complexity of this area.

 

[Andy Swan]

Is there any way of being VAT registered and NOT import every transaction into the accounting software?

We're approaching the VAT threshold and this question bothers me. Wouldn't it be enough to just monthly include a statement from Amazon or Ebay saying that sales for this period are XXX and vat collected is YYY? I know there are people doing just that, the question is - is it legal?

 

[paulears]

How will you be able to cope with some of your entries being individual and some being a group. The totals would be the same so what would the point be? On top of that you're going to get very confused as you'll then need to keep a manual system for things that haven't gone in normally. I suppose there are two elements here. The first one is to be accurate and have your accounts exactly matching the business you do, and the other is to start to manipulate your figures to massage them into apparently just not hitting the mark. My understanding is that the VAT people are viewing this as avoidance. The benefits of using software is that it makes your book keeping simpler and more accurate. Not having to keep receipts and invoices is a real benefit to me. Being able to type in an amount, or a name, or item description and having it pop up showing you when you sold it or got paid etc etc is so useful. Your system would prevent it being able to do this. Trying to find a single transaction that is merged with loads of others would be a pain. Apart from avoiding going over the limit, what is the point? In terms of the ceiling, your system would not be accurate as the date and tax point on the documentation is the important one for HMRC - not the date you decided to lump them together?

 

[Andy Swan]

I'm sorry my question was rather vague, I'm using FreeAgent and by "monthly include a statement" I ment adding a transaction to a virtual Amazon or Ebay bank account in FreeAgent, attaching the marketplace statement to it and thus showing my total sales and total VAT collected.