Managing payments and refunds with transaction fees from payment providers

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Hi all…

Firstly, please accept my apologies for my questions on what I suspect are simple matters for others, but for me are a whole new world. I’ve not used accounting software before, though most of the fundamentals seem relatively straightforward. I’m not an unintelligent chap, and I’m a quick learner :slight_smile:

I’m in the process of starting a new sole-trader business in the UK (meaning I’m my own accounts admin as well as everything else!), manufacturing and selling online internationally a photographic product that I’ve been developing for a couple of years.

Initially, I’m intending to take orders with immediate payments via PayPal in a single currency (GBP), and I’ve set up a business PayPal account for this purpose. I’ve also set up my business PayPal account as a Bank Account in Manager (along with my main “real” bank account).

I understand that every PayPal transaction will attract fees, deducted from the amount the customer pays. Whilst I’m confident most folks will be very pleased with the product, I know that I’ll need to issue occasional refunds for the full price paid - either because the buyer changed their mind and returned the product, or a parcel was damaged or lost, or other reasons I might not yet have considered - and my understanding is that under PayPal’s current Ts&Cs, they keep the original transaction fees.

It’s possible that at some future point I may consider alternative or additional payments providers that refund to me some or all of the transaction fees when I refund a customer, so I want to set up my accounting to allow for this.

My questions (at this point - I’m sure I’ll have more) are…

(1) Assuming that - to begin with - I enter transactions manually rather than importing them, how do I account for the customer’s transaction and the PayPal (or other payment provider) fees? My initial assumption is that for each sale, I’d log two transactions - one receipt to the account for the full price paid by the customer, and one payment from the same account as “bank fees”.

(2) If I’m correct in the above, when I issue PayPal refunds (where they don’t refund fees) I assume I’d just post one payment transaction for the full amount… and if I use a payment provider that returns some or all of the transaction fees for refunds, I’d additionally post a receipt transaction for that amount accordingly.

Does this make sense, or am I misunderstanding / over-complicating things?

Any advice would be greatly appreciated. I realise these are more general accounting questions from an accounts newbie rather than Manager-specific queries, but I hope some kind soul(s) won’t mind advising me!

Thanks in advance & best wishes to all

Mike

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So I can’t answer your main question, I can give you a resource for accounting questions you may have: AccountingCoach.com
I hope that it helps you like it did me.

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I’d always suggest setting up a test business in Manager. That way you can play with various options to see if they comply with your locale’s accounting rules. My first thought would be this. Let’s say you sold 100 gbp item and had to pay 3.75 paypal fee. I’d enter a receipt with 100 going to a revenue account and -3.75 going to an expense account.

This is a gross over-simplification as you may be using sales orders and sales invoices etc. Perhaps it will give you some food for thought.

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Thank you so much cfischer69 :slight_smile:

So, that makes sense to me and aligns with my assumptions… a customer buys item for £100 GBP with 3.75% PayPal fee charged, I post a £100 transaction to “Sales” (a revenue account) and a £3.75 transaction to “Bank Fees” (expense account). Then, for a refund where fees aren’t recoverable, I’d post a negative transaction for -£100 to “Sales” - but if fees are recoverable, additionally a negative transaction of £-3.75 to “Bank Fees” - yes? Or would I post the customer refund to an expense account, and the recoverable fees to a revenue account? It seems like the former approach makes more sense…

Thanks for your patience and advice. It’s very much appreciated… and yes, I’ll definitely set up a test business to play with this :slight_smile:

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