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Reconciling invoices against bulk online payouts

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.

If you have integrated Sporty with Xero, then draft invoices will be raised automatically for you in Xero whenever people pay you online, and each week you'll receive a bulk payout into your bank account relating to all transactions from the previous payment period.

The payout will be 'net' meaning that the merchant fees will have automatically been deducted for you. For example, if there were 10 payments of $100 then ten invoices totaling $1,000 would appear in Xero and these transactions would result in a payout of $950 into your bank account (being 4.35% + GST = 5% fees deducted from the total value of transactions processed).

Xero publishes a support article here regarding the best way to manage reconciliations when you receive bulk payouts from online transactions: https://central.xero.com/s/article/Reconcile-payments-received-from-online-sales#Processmerchantfees. Essentially, Xero recommends that you create a separate current asset account for these transactions that acts as a clearing account. So go to your Chart of Accounts in Xero and add an account to Current Assets called say 'Debitsuccess clearing account'. Note that this account should be set to 'No GST' since GST (if any) will have already been recorded on income through each invoice that will be created.

From then on, you'll simply credit the bulk receipt of funds from your weekly pay-out from Sport$Pay/SchoolPay to this clearing account, and debit the individual invoices from this same account to reconcile each one when you know its been paid. These debits and credits cancel each other out, with the exception of the processing fees.

So when the pay-out amount appears on your bank reconciliation in Xero, code it to this clearing account (you can set up a bank rule to do this for you). For each invoice that you know was paid online, go to the invoice and use the 'Receive a payment' area at the bottom of the invoice in Xero to show the full amount as paid, coding it to the same clearing account.

Xero_receive_payment.png

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).

To handle the merchant fees, you simply take the fees total from your bulk pay-out report and create a manual journal that credits your clearing account and debits the total to an expense account for fees. Note that merchant fees normally attract GST, so don't use your normal 'Bank fees' expense account since it will probably be set to 'No GST'. You can simply create a new expense account in Xero called say 'Merchant fees for online sales' and set its tax to be '15% GST on expenses'. You only need to do this once.

So, your journal entry would then look like this:

Xero_journal.png

If you need help accounting for online revenue or merchant fees in Xero, please seek assistance from your accountant or directly from Xero.com.

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