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Handling payments from merchant accounts

Many businesses these days receive daily payments from online payment providers like PayPal, GoCardless, Worldpay, SagePay etc as well as fixed terminal card systems like Streamline, Barclaycard Merchant Services, etc.

Often we don’t want to spend the time putting in every single sales invoice into the accounting system and fortunately, we don’t need to. This guide will explain how to save time and log your sales in bulk.

The basics

When you upload your current account statement into QuickFile you will see all the lump sum payments made by your payment service provider. Effectively what we want to do is tag these as bank transfers from a separate virtual account we call PayPal, Worldpay, Streamline, or whichever service provider you happen to be using.

When we view the virtual bank account for our payment service provider we will see a series of payments out. The idea is that we now balance these payments by entering an equal deposit into the account. You can decide to enter these balancing payments monthly, quarterly or any other denomination you see fit. The balancing payments represent your gross sales for the given period, when the payment has been entered you now need to tag it as a sales invoice which will represent the gross sales and any VAT where applicable for that period.

And now for the detail

OK, now that you have grasped the basic concept let’s walk through the process in your QuickFile account:

  1. First of all, we need to create a separate merchant bank account to manage our payments. To create a new merchant bank account go to the Bank Management area in the Banking menu >> All bank accounts. Click on the green Create Bank Account button and select Merchant or Payment Service Account:

  2. Select the account name from the list and skip over the sort code and account number fields.

  3. Now go to view your current account bank statement from the bank details screen.

  4. Find a payment from your payment service provider and click on the corresponding magnifying glass. This will bring up all the similar transactions.

  5. Click on the link that shows the number of transactions found and the table will now drill-down on these transactions.

  6. Select all relevant transactions and click on the button ‘Tag Selected’.

  7. Select Bank Transfer Between Accounts.

  8. Now select the bank account you created earlier and save the transfer.

  9. Once you have tagged all your payments you can now go to view the virtual payment service provider bank account.

  10. You will see a list of debits in the bank account corresponding to the amounts you previously transferred.

  11. You will now need to obtain the figures relating to your gross sales for a given period from your payment service provider. These may not always correlate exactly to the payments you have received as they may have debited their fees from the total and paid you the NET amount. Don’t worry about that for now, we will consider this later.

  12. Now for example you know that PayPal paid you £3000 for the month of August 2011, enter this as a new deposit into the bank account by clicking on the button ‘Input New Transaction’. You can set the date as the last day of August.

  13. Now you want to tag this transaction by clicking on the red ‘Untagged’ button.

  14. Select the option ‘Payment from a Customer’ and then ‘Create a new invoice record for this transaction’.

  15. You will now be prompted to enter a customer name. Create a new customer and call it the name of your service provider followed by something like ‘generic sales’. For example ‘Paypal Generic Sales’.

  16. You will see some fields to enter your invoice details. For the description you could enter ‘August 2021 Sales’ and then set the appropriate VAT rate where applicable. Click the save button when you are done.

  17. That’s it you have now accounted for the sales received via your payment service provider. You can check your results by viewing your Chart of Accounts. Dashboard>>Nominal Accounts. These payments will now appear under ‘General Sales’ or any other nominal sales account you posted the transactions to.

Other Considerations

If your gross sales don’t exactly match the amounts received due to your provider debiting their fees from the balance and paying you the NET amount (As mentioned in point 11). Then you will need to enter an additional debit on your virtual payment service provider account and tag that debit to a supplier invoice covering the related charge.

This methodology can also be used for handling payments from offline merchant accounts like Barclaycard Merchant Services or Streamline. Whenever you are receiving an aggregated amount for a group of different sales then you can apply the methods discussed in this guide.

Finally you should avoid entering bulk balancing payments into the virtual account that span across more than one VAT rate period. This could result in the wrong sales tax being levied.