How to keep records correct?

[hairymonkey]

I'm getting myself into a pickle about the correct way to be keeping my accounting records. I'm just a small business selling items online. I have transactions coming through from various means including paypal and payment methods used by differing online maketplaces.
My question is, should I be recording when payment for orders is received in my business bank account, or should I be recording when each transaction occurs. For instance, last Monday I made two sales on Etsy. One was paid via Etsy direct and one was paid via paypal. I did not transfer the money over to my bank account until Wednesday.
Do I record the transaction as taking place on the Monday or the Wednesday? Do I also need to record their respective charges for the transaction? Or can I simply keep a record of the total money I received after charges (i.e. what comes into my bank account?)
Thanks guys!

 

[David Griffiths]

You have to record the gross sales as your income, and then the PayPal or Etsy fees are an expense. The date of the transaction would be the Monday.

It can be a time saver to record the monthly totals from PayPal, and other payment gateways, not the individual transactions. That assumes that you have no need to refer back to individual sales - some traders need to do that to help with things like stock control and marketing to existing customers,

 

[MyAccountantOnline]

Hairymonkey it's certainly very easy to start spending hours recording sales as an online seller. I act for a lot of online sellers and as David has mentioned entering monthly totals into your accounting records is often a significant time saving.

What system are you using for record keeping?

 

[Pish_Pash]

Humour me here...if you sell online all over the world, how on earth can you calculate your VAT *if* aren't recording per transaction (but instead aggregate all your sales once per month)...for example

£10 sale to the UK
£10 sale to the EC
£15 sale to Australia.

Total Sales = £35 .......if you applied VAT crudely to that total sales figure, you'd arrive at a figure of £5.83 owing in VAT. But if you record on a per transaction basis, you's soon know that only £3.33 is owed (becuase the Australian sale can be zero rated)

Not to mention the loss of the abiltity to run granular reports, to pickup on sales trends, predict stock very accurately blah blah.

I just don't get how aggregating can work for an online seller...it might work in the old days (when all you were selling to was your locality...or nationwide), but online in 2015?!!!

To the OP...I record every transaction, it needn't take a long time...there are many tools out there that will make this quick.

 

[MyAccountantOnline]

Humour me here...if you sell online all over the world, how on earth can you calculate your VAT *if* aren't recording per transaction (but instead aggregate all your sales once per month)...for example

£10 sale to the UK
£10 sale to the EC
£15 sale to Australia.

.......

That's an easy one to answer.

When you have summarised your PayPal transactions for the month rather than have one figure for sales you simply analyse the sales so that you have totals for example for your UK sales, EC sales and Australia sales etc. Its really quick and easy to do if you sort the Excel sheets.

Just because you are summarising the figures it doesnt mean you cant analyse them and doing that in my experience is still one heck of a lot quicker than processing each transaction.

Agreed you do have to decide whether the time saving of doing this outweighs the disadvantage of having less information on your sales in your accounting records, but it gets down to how much time you have, and want, to spend on bookkeeping - in my experience most one man businesses don't want to spend hours on bookkeeping.

 

[MyAccountantOnline]

.....

To the OP...I record every transaction, it needn't take a long time...there are many tools out there that will make this quick.

That depends on how many transactions you are processing.

I have some clients who sell low value items who can sell huge numbers each month and entering all of those even with automated PayPal imports, which is a pretty common feature on many packages, is a very time consuming task.

 

[john1989]

Pish_Pash clearly has a system that works for them. But a solution for one is not necessarily the best option for another.

I find that many business owners see bookkeeping as a necessary evil and the quickest way is usually their preferred method.

Nicola has given the solution to splitting the VAT. However, there was no mention of VAT in the OP – not all online retailers are VAT registered or have any desire to grow their business to the point where they will need to register for VAT.

 

[antp__]

One thing I can't get my head around is when starting out cash flow is a major factor. If you are deducting paypal fees as a final figure each month end there will be a point where you will see more in your account than actually available. Or am I missing something?

You have £500 in you PayPal account but your fees tot up to £200 at the end of the month.
However, up until this has been deducted from your £500, you think you have £500 available to reinvest? However you only actually have £300.

Does this make sense or am I thinking in the complete wrong direction. I'm in the same boat as the OP if i'm honest.

 

[MyAccountantOnline]

One thing I can't get my head around is when starting out cash flow is a major factor. If you are deducting paypal fees as a final figure each month end there will be a point where you will see more in your account than actually available. Or am I missing something?

You have £500 in you PayPal account but your fees tot up to £200 at the end of the month.
However, up until this has been deducted from your £500, you think you have £500 available to reinvest? However you only actually have £300.

Does this make sense or am I thinking in the complete wrong direction. I'm in the same boat as the OP if i'm honest.

I've read and re-read your post but you've confused me....fairly easily done sometimes I hasten to add

What's been suggested to the OP is to summarise the monthly PayPal transactions and enter the monthly totals into a accounting package. The accounts package will at the end of the month always show the actual PayPal account balance.

So just to use some round figures lets assume your £500 PayPal account balance was arrived at by making sales of £1,000 from which fees were deducted of £100 and you bought some stock using the PayPal account of £400. Your accounting records and accounts will show sales of £1,000, PayPal fees of £100, Purchases of £400 and a balance of £500 which will agree to the PayPal account balance.

Does that help?

 

[Pish_Pash]

That's an easy one to answer.

When you have summarised your PayPal transactions for the month rather than have one figure for sales you simply analyse the sales so that you have totals for example for your UK sales, EC sales and Australia sales etc. Its really quick and easy to do if you sort the Excel sheets.

So by aggregating sales for a single monthly you are creating other work elsewhere (whack-a-mole)! Anything that involves analyzing data should be avoided like the plague. Personally, I don't know of any simple/quick way of analyzing the data to pick the bones out of the sales data in the way that you speak of within Paypal. And if you are then in the domain of using Excel sheets (double keying the data) to work out your VAT, then your end to end accounting processes have failed (badly).

IMHO bookeeping shouldn't take more than a few minutes per day for an efficient online seller.

 

[MyAccountantOnline]

So by aggregating sales for a single monthly you are creating other work elsewhere (whack-a-mole)! Anything that involves analyzing data should be avoided like the plague. Personally, I don't know of any simple/quick way of analyzing the data to pick the bones out of the sales data in the way that you speak of within Paypal. And if you are then in the domain of using Excel sheets (double keying the data) to work out your VAT, then your end to end accounting processes have failed (badly).

IMHO bookeeping shouldn't take more than a few minutes per day for an efficient online seller.

Pish Pash

I really dont think you understand what I am suggesting.

If someone wants a quick and easy way to record PayPal sales once a month all they need to do (and this is primarily for those with a large volume of PayPal transactions) is export a monthly summary to Excel. They then analyse that Excel sheet sorting it into columns for sales, fees and purchases etc (adding extra columns if further analysis is required for sales etc). You use the Excel sort function to do that. Then do a reconciliation summary showing the total sales, fees, purchases etc to agree to the closing PayPal balance - job done! It takes a few minutes to sort and summarise hundreds of entries like this much quicker than entering each and every transaction.

You then keep the Excel sheets as part of the accounting records.

 

[MyAccountantOnline]

If you use the above you arent duplicating any work - believe me I'm all for keeping it simple

 

[David Griffiths]

It's possible to export the individual sales to a spreadsheet, then identify (for example) the Non-EC ones or the EC B2B and (using the sort function) enter totals for those and a total for all the others.

 

[antp__]

I've read and re-read your post but you've confused me....fairly easily done sometimes I hasten to add

What's been suggested to the OP is to summarise the monthly PayPal transactions and enter the monthly totals into a accounting package. The accounts package will at the end of the month always show the actual PayPal account balance.

So just to use some round figures lets assume your £500 PayPal account balance was arrived at by making sales of £1,000 from which fees were deducted of £100 and you bought some stock using the PayPal account of £400. Your accounting records and accounts will show sales of £1,000, PayPal fees of £100, Purchases of £400 and a balance of £500 which will agree to the PayPal account balance.

Does that help?

I knew it would!

Everyone saying PayPal, me thinking eBay. Holy crap i'm even more confused now.

If you check your PayPal Balance on 6th of the month and it shows £500 (this is of course minus PayPal fees, but not eBay fees) - eBay fees aren't taken until the end of the month. Say these eBay fees add up to £200. Without taking these fees from each sale you are unsure how much your fees will eventually be.

So go back a few days, to the 10th, you use all £500 to buy stock.
However, come the end of the month when eBay needs their fees you have nothing.

I know I am missing something here. But until it kicks me straight in the face (while i'm down) I can't get to grips with it. Probably my age! (Young, not old).

 

[Pish_Pash]

I knew it would!

Everyone saying PayPal, me thinking eBay. Holy crap i'm even more confused now.

If you check your PayPal Balance on 6th of the month and it shows £500 (this is of course minus PayPal fees, but not eBay fees) - eBay fees aren't taken until the end of the month. Say these eBay fees add up to £200. Without taking these fees from each sale you are unsure how much your fees will eventually be.

So go back a few days, to the 10th, you use all £500 to buy stock.
However, come the end of the month when eBay needs their fees you have nothing.

I know I am missing something here. But until it kicks me straight in the face (while i'm down) I can't get to grips with it. Probably my age! (Young, not old).

this isn't an accountancy issue...it's a funding (cashflow)issue. You need sufficient funds to run a growing business & can't just cycle the same amount. If you want to buy £500 of goods, I'd say you'd need at least £1000 ...else you'll be screwed - not all your stock will have sold, you need to replenish, but not only that you need to replenish with higher quantities for the good sellers (or another problem - you can't get the price breaks by ordering in small quantities for the dosh you have available)

to give you an example, I started with £50k sunk into my business ....but I actually needed about £100k behind me ...this is because my stock doesn't arrive instantly...but takes 3 months from ordering to get here from my supplier. So at any given time, I have stock on the shelves that can be sold, but some on a ship on its way to Southampton, some still being packed at my supplier etc etc.)

 

[Walkol]

I know I am missing something here. But until it kicks me straight in the face (while i'm down) I can't get to grips with it. Probably my age! (Young, not old).

Common sense. When you get yer wages on the 31st, you don't go down the bookies and spend the lot as you know on the 1st you have to pay the rent, the bills, food for the month etc etc etc.

You need a cashflow forecast to give you an idea of whats kicking about to be able to invest.

 

[antp__]

this isn't an accountancy issue...it's a funding (cashflow)issue. You need sufficient funds to run a growing business & can't just cycle the same amount. If you want to buy £500 of goods, I'd say you'd need at least £1000 ...else you'll be screwed - not all your stock will have sold, you need to replenish, but not only that you need to replenish with higher quantities for the good sellers (or another problem - you can't get the price breaks by ordering in small quantities for the dosh you have available)

to give you an example, I started with £50k sunk into my business ....but I actually needed about £100k behind me ...this is because my stock doesn't arrive instantly...but takes 3 months from ordering to get here from my supplier. So at any given time, I have stock on the shelves that can be sold, but some on a ship on its way to Southampton, some still being packed at my supplier etc etc.)

Perfect, thank you! So need to think of them as separate altogether. That is all I needed.

Common sense. When you get yer wages on the 31st, you don't go down the bookies and spend the lot as you know on the 1st you have to pay the rent, the bills, food for the month etc etc etc.

You need a cashflow forecast to give you an idea of whats kicking about to be able to invest.

Rude, but hay-ho. We are all new at some point. It just takes time to get your head around it. It's better than jumping right in and thinking sod it. Excel for me so far is great, just monotonous.

 

[Pish_Pash]

It's possible to export the individual sales to a spreadsheet, then identify (for example) the Non-EC ones or the EC B2B and (using the sort function) enter totals for those and a total for all the others.

of course it's possible, but my point being, by aggregating the sales data, you've kept that part simple, but then you've still got to pick the bones out of it for VAT purposes (or stock trending/prediction)... therefore why not just have it done all at the same time?!!

The notion of aggregating sales into accounts, but then exporting & crunching data in spreadsheets seems oh so early 1990s ...now then, where did I put that Oasis CD, I can probably save some time while listening to it - Definitely Maybe.

 

[David Griffiths]

The notion of aggregating sales into accounts, but then exporting & crunching data in spreadsheets seems oh so early 1990s ...now then, where did I put that Oasis CD, I can probably save some time while listening to it - Definitely Maybe.

They don't aggregate into accounts and then export.