Quickbooks Tip: Accounting for Paypal Fees
You’re a 2010 business owner. This means that unless you live under a rock you probably allow your clients to pay you with Paypal, Intuit’s Payment Network (IPN), etc.
Most of these payment gateway services charge you some transaction fee for accepting payments through them. So how do you account for Paypal fees in your QuickBooks file so that you aren’t scrambling around, punching numbers into your calculator and swearing that you “hate Paypal” each month when you do your bank reconciliation?
The answer is so easy that you will be wondering why you didn’t realize this sooner. After all so many of us use Paypal, right?
I’m going to walk through this from the beginning – aka….receiving a payment
Steps to Account for Paypal Fees in QuickBooks Using Undeposited Funds:
- Receive Payment: when you do this enter in the full dollar amount received from the client (not the amount Paypal is actually giving you)
- Save your payment receipt – the entire payment is now sitting in your Undeposited Funds account. Next step….
- Go to “Record Deposits” — select the appropriate payment(s) from your Undeposited Funds account and click “OK”. This takes you to….
- Your “Make Deposits” Screen. Here you should see the payment(s) you just selected to deposit with the columns in this order: Received From, Account, Memo, Check Number, Payment Method and Amount. At this screen you need to do this….
- At this “Make Deposits” screen you manually enter in – at minimum: “From Account” – which is the account you want to put the Paypal fees withheld to (I use Bank Fees). In the amount column you are going to put in a negative amount.
- The total at the bottom right of the screen should match the NET amount you received from the payment(s).
Client A owes you $100 and Paypal keeps $5.00.
Your “Make Deposits” window in Quickbooks should look like this:
- Received From: Client A
- Account: Undeposited Funds
- Amount: $100.00
- Received From: this can be blank – in my case I have Paypal set up
- Account: Bank Fees (or whatever you call it)
- Amount: -$5.00
Deposit Total at lower, right should read: $95.00
A later post will walk through how to account for Paypal fees in Quickbooks when you do not use Undeposited Funds and rather deposit directly to your Bank account (or a Paypal account you’ve set up in Quickbooks as a “bank” account).
If this all seems totally gibberish you can contact me to set up a time to do a remote screen share and I can teach you how to do it. If bookkeeping has you stressed out, I do offer Virtual Bookkeeping Services.
PS: Have you checked out Intuit’s Payment Network? Very similar to Paypal but it only costs you $.50 to get your money! They are a great alternative to Paypal.