Reconciling Paypal transactions in Xero...

[ph001]

Hi all,

There are a couple of other threads on Paypal and Xero but none which seem to address my question.

I have my main business account and my Paypal account set up in Xero for auto feeds. I'm not sure how to process the resultant transactions that appear, particularly the paypal fee of £5.56. Please could somebody advise best practice?


Main account

Paypal account

 

[VanillaOnlineAccountancy]

The PayPal withdrawal is a transfer from PayPal to bank.

I would manually import the PayPal statements so you can deal with foreign currency payments and enter a cheque for the fees due to the way the PayPal statements work.

You need to "create" the transactions to be able to reconcile them.

 

[ph001]

Thanks, but I am still unclear.

Ok, so in the Paypal account:

The £151.94 I just assign as transfer to Main bank account.

The £5.56 - I actually create a bill in the Paypal bank reconciliation against 'bank fees' and reconcile the £5.56 against that?

Then the £157.50 I just click OK to reconcile against the invoice.

 

[VanillaOnlineAccountancy]

That's right. I would call it Paypal fees rather than bank fees so you see at any time how much PayPal is costing you. The issue you have at present is that you haven't told Xero about the transactions so there is nothing to match the transactions from the imported statements against.

 

[ph001]

Thanks Chris. This all seems a little arduous to be honest.

I was wondering if I would be better just deleting the Paypal account and feed completely from Xero - then I just reconcile in my main bank screen when the Paypal funds come in and add an adjustment for the £5.56 bank fees.

This is one operation as opposed to 3.

Any drawback of doing it this way?

 

[VanillaOnlineAccountancy]

The issue with doing that is you can't reconcile sales or check if the PayPal account is correct. I have come across many an occasion when the PayPal fees are wrong or a refund hasn't been entered correctly.

You may want to consider doing the PayPal recconciliation manually (I.e don't import it) so you can enter a weekly/monthly total for sales, refunds, fees etc. The PayPal data is easier to work with in excel rather than Xero.

 

[David Griffiths]

Thanks Chris. This all seems a little arduous to be honest.

I was wondering if I would be better just deleting the Paypal account and feed completely from Xero - then I just reconcile in my main bank screen when the Paypal funds come in and add an adjustment for the £5.56 bank fees.

This is one operation as opposed to 3.

Any drawback of doing it this way?

It's often easier not to have detailed transactions imported from PayPal, but to simply manually enter the totals from the downloaded report at the end of the month.

The main factor in deciding to go this way is if it is important to you to record every sale separately in Xero. If it is then the detailed download works best. You might want to do this if you have repeat customers and want to track their activity.

If on the other hand you are happy with the total reports, and (like a shop) don't need to track individual sales, then inputting from the monthly report is much faster. You'll already have the bank transfers from when you reconcile the current account, so basically just enter total sales (less returns) as receive money transactions, and enter fees and any PayPal purchases as spend money.

 

[ph001]

Ok, thanks for all your inputs guys. Will have a think which is best for us.