I have customers who deposit funds to their accounts via PayPal. I create a Receipt for their full deposit amount. Then I create a Payment to reflect the PayPal transaction fee. I know that this fee cannot be deducted from the customer’s deposit amount. Essentially they get credit for their full deposit and my company must pay the fee.
I am curious to know whether I am handling these transactions correctly within Manager. I simply categorize the PayPal fee as an expense, exactly the same a Bank Charge. My problem is when I reconcile my bank account. Since this is a “hidden” charge, my attempt to reconcile doesn’t zero out because the bank account doesn’t have a record of the Expense. The deposited amount from PayPal has already been reduced before depositing.
The actual treatment of the PayPal fee depends on what you agreed with your customer.
If you both agreed that the customer will bear the fee then you should record the customer payment net and don’t record an expense. The customer will still owe you the fee amount.
If, on the other hand, you agreed that you will bear the fee then your treatment is correct – not the most efficient, but still correct nonetheless.
The most efficient method is to use receipt rules and have Manager make the split according in the lines of the receipt itself. See this guide:
https://www.manager.io/guides/9243
I don’t think this is correct. It leads to the issue @InfoHunter described - where they have an expense that isn’t on their bank statement & then they can’t reconcile.
Don’t create a separate payment.
Instead, create the receipt as the total owing from the customer (“Accounts receivable” if you invoiced them), and then on a second line item in the same receipt add the PayPal fees (record it as “Bank fees” or similar).
The result is that “Accounts receivable” for the customer is modified by the correct (full amount), but the total for that receipt is their payment amount less the PayPal fees … meaning it will reconcile with what your bank statement actually shows.
If this is unclear I can provide a screenshot later to demonstrate. Currently on phone.
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Thanks for the offer, ShaneAU. A screenshot would be great.
I thought I read somewhere that PayPal has a policy in the User Agreement that bars a business from passing on the Transaction Fee to a customer. I am currently back and forth with their customer service to confirm that policy. If there isn’t one, I will simply log the credit as the amount PayPal deposits into my account after they have deducted the fee. If there IS a policy, I will be using your info because it sounds exactly like what I need. I appreciate your understanding of my dilemma with reconciliation. Thanks!
Don’t bother with a screenshot, ShaneAU. I just got to my computer and tried your process. It works exactly as needed. Thanks. I will just note for anyone else who uses this thread to learn about this topic, the fee must be logged as a negative value. I also suggest creating a separate “Expense” in the chart of accounts specifically for the PayPal fee. That way, you still have “Bank Fee” reserved for those fees. I named mine “PayPal Transaction Fee (2.89%+$.49)”. That way it is clear how PayPal is determining the fee they charge.
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