A common question from anyone that receives bulk payouts from online sales is how to reconcile the bulk payout against the invoices raised for each transaction, and how to handle the merchant fees in your accounting software. This article explains the recommended process, using Xero as the example accounting software and Debitsuccess as the payment provider.
Included in this article:
- Online Payments, Xero/MYOB and Payouts
- Step 1: Reconcile the payout and related invoices
- Step 2: Manage the Merchant Fee (transaction fee)
Related articles:
Online Payments, Xero/MYOB & Payouts
If you take payments online via VostroPay, POLi or Debitsuccess, and have Xero or MYOB integrated with your Sporty site (with invoices set to raise automatically whenever someone completes a registration form with a payment associated), you will receive a bulk payout into your nominated bank account relating to all transactions from the previous payment period.
- VostroPay - Daily payouts
- POLi - Same day as bank processing
- Debitsuccess - Weekly payouts
The payout will be 'net' meaning that the merchant fees will have automatically been deducted for you.
For example: if there were ten registrations submitted on the same day each for $100, then there would be ten invoices automatically raised in Xero totaling $1,000. The payout received into your bank account is less the transaction fee as this is kept by the payment provider, therefore a payout received into your nominated bank account for this example would be $950 (5% of $1,000 is $50.00).
Step 1: Reconcile the payout and related invoices
Xero publishes a support article here regarding the best way to manage reconciliations when you receive bulk payouts from online transactions.
Here is a summary of Xero's recommendation.
- Create a separate Current Asset account to use as a clearing account as this is where all these transactions will be coded to. For example, "Debitsuccess clearing account". This clearing account should be set to "No GST" as GST (if any) will already have been recorded on income through each invoice that has been created. Ensure that "Enable payment to this account" is ticked.
- When the bulk payout is received from VostroPay/POLi/Debitsuccess and is ready to be reconciled in the bank, credit the payout to the clearing account. You will then debit the individual invoices from the same clearing account to reconcile each one when you know that it's been paid. The credits and debits cancel each other other, with the exception of the processing fees. See below for guidance on how to do this.
1. Payout received from Debitsuccess > code this to the Debitsuccess clearing account (you are crediting this account).
2. Open the appropriate invoice showing as awaiting payment (awaiting payment if the invoice had been issued, however if the invoice is still sitting in drafts you will need to approve this first to move it to awaiting payment) and click Add payment. (You will need to do this for each invoice that relates to the payout - ensure you have viewed the payout report to match the correct invoices to the payout received).
3. Set the Date paid and Account fields then click Add.
Date paid is the date that the payout was received as this field will automatically be populated to today's date. You may not be reconciling the invoice the exact day the payout was received.
Account is the clearing account code (you are debiting this account).
In this way you are able to reconcile each individual invoice as soon as you're satisfied it has been paid without needing be concerned that each invoice total will be slightly higher than the amount you actually receive (since the amount you receive already has the processing fees deducted).
Step 2: Manage the Merchant Fee (transaction fee)
Create a manual journal to manage the merchant fees (also called the transaction fee). Note that this journal does not need to be done daily, however it is recommended that it is done regularly to ensure that items are being captured appropriately.
1. Create a new Expense account set to 15% GST on Expenses. For example "Merchant fees (GST)". This account is similar to your Bank fees expense account, however your Bank fees account will most likely be set to No GST.
2. Identify the transaction fee total for payout
3. Credit the clearing account (No GST) and Debit the Merchant fees (GST) account.
- Credit the "Debitsuccess clearing account" to deduct merchant fee value as this had been taken by the payment provider before the payout was deposited into your bank account.
- Debit the "Merchant fees (GST)" account to add this merchant fee value to the expense account for fees.
Using the earlier example of a payout received for $1,000 total ($50 transaction fee, $950 net), see below for how the journal would look.
If you need help accounting for online revenue or merchant fees in Xero, please seek assistance from your accountant or directly from Xero.com.
For more information, please visit www.sporty.co.nz/xero or download the full Xero User Guide.