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CONNECTED ACCOUNTING

Best Accounting Practices for Stripe + QuickBooks

Dec 3, 2018

Best Accounting Practices for Stripe + QuickBooks

Overview

You’ve found the best payments platform for your business, now learn the best accounting practices for automating your sales data! There are just a few things to keep in mind to maintain your Stripe accounting like a pro. To make it as easy and accurate as possible, we've spent years perfecting our Stripe integration for you. Greenback can easily track any sales and (optional) application fees that Stripe nets out. We support standard, express, and custom Stripe accounts. We've also engineered unique solutions for advanced use of Stripe like Stripe Connect where 3 parties may be involved in a transaction and multi-party payments. The following steps and how-to videos will help you get setup with Stripe, Greenback, and QuickBooks.

Let's clarify what we know. The most important thing to remember is that Stripe holds funds on your behalf. You already know that when you make a sale or accept a payment, Stripe will take the payment from the customer, then deposit the funds to a holding account. This is your balance of funds comprised of different types of transactions (e.g., payments, refunds, etc.). Stripe will then transfer these funds (payouts) from your available account balance into your actual bank account based on your payout schedule.

You also know that Stripe withdraws funds from your balance (ie: Stripe funds/balance) to pay for various expenses such as payment processing fees and refunds. Thus, (and this is key!) the transfers Stripe will periodically make to your actual bank account will not reflect all the credits and/or debits behind the scenes. That's where Greenback provides outstanding support. Our platform will sync and generate (if necessary) all the transactions that affect your Stripe balance. And our platform also helps get all of them into QuickBooks as sales and expenses.

Here are the best practices we are going to go over. It will help if you’ve already signed up for a Greenback account, and connected Stripe, and QuickBooks. You’re going to customize your Chart of Accounts by creating an informal Stripe Bank Account, and creating an Expense Account. Then you’ll teach Greenback the mappings by exporting a sale, expenses (like fees), and a refund.

Step 1: Add a Bank Account in QuickBooks

Since Stripe maintains a balance of funds on their platform for your shop, they act like any other bank account for your business. As a best accounting practice, you'll want to create a new bank account in QuickBooks to reflect the funds Stripe holds. When Stripe transfers funds to your actual bank account, you'll simply "transfer" those funds in QuickBooks from your "Stripe Funds" bank account to your actual bank account.

Rather than have a dedicated account in your Chart of Accounts for Stripe as Undeposited Funds -- we recommend having a dedicated account that is a Bank -> Checking Account instead. Because you'll be paying for expenses like payment processing fees, issuing refunds, etc. all from this specific account, it acts more like a real bank account than simply a place undeposited funds are held.

NOTE: Remember that Stripe does not refund payment processing fees.

Greenback will note where funds came from/went to on every transaction. If you change your bank account information associated with your Stripe Balance, you'll need to pick the right account in QuickBooks. Stripe only uses your actual bank account to make a payment if you don’t have enough funds in your Stripe balance. Make sure your bank allows both credit and debit payouts. During a training session, we’ll run thru how the Greenback UI (user interface) provide hints and selects defaults based on the account we know you paid from or deposited to.

On your QuickBooks dashboard, you'll click on Accounting > Chart of Accounts > New. Next, you’ll add a new account to customize your Chart of Accounts. The Account Type is “Bank” and the new bank account can be named "Stripe Payout Funds" or something similar and the Detail Type is “Checking”. Select the currency that mirrors the country of your merchant account in Stripe (which must also match your settlement currency, per Stripe). In the video we chose USD because we get USD payouts sent to a USD-denominated bank account. Click Save and Close.

Step 2: Add an Expense Account in QuickBooks

Stripe charges you various fees for doing business on their platform. For example, when you sell an item, Stripe will charge (and auto-deduct) a fee for payment processing. To simplify accounting for these fees, Greenback recommends the best practice of also adding a new account to your Chart of Accounts with an "operating expense" account category to represent these Stripe Merchant Fees.

On your QuickBooks dashboard, go to Accounting> Chart of Accounts> New. The Account Type is "Expenses", the Detail Type is “Other Business Expenses” or possibly “Bank Charges” etc. and the Account Name is "Stripe Merchant Fees" or something similar, then click Save and Close. You can leave the Description blank. Greenback has special per-transaction handling of sales and VAT taxes depending on how you have your shop set up.

As a best practice, Greenback recommends that you treat payment processing fees, application fees, etc. as operating expenses and simply lump them together as Merchant Fees. Some businesses will account for some of these as a "Cost of Goods Sold (COGS)" or "Cost of Sales (COS)", but most accounting professionals we surveyed recommended that they get treated as a standard operating expense.

Step 3: Add a Credit Card Account in QuickBooks (Optional)

This step does not actually apply to Stripe. Some marketplaces or platforms have a back up credit card on file in case your funds balance does not have enough to cover fees or refunds. However, Stripe debits funds automatically either directly from your Stripe Funds balance or from your actual bank account (checking account associated with your Stripe Funds) when your Stripe funds have a negative balance. You can safely skip to Step 4.

For other platforms, if you would like to see an example of how to add a credit card account for a negative shop funds balance, see Step 3 as an example here: Add a Credit Card Account in QuickBooks.

Step 4: Connect Stripe and QuickBooks (Optional) in Greenback

If you have not yet connected your Stripe and QuickBooks accounts to Greenback, you'll need to do that now. If you've already connected both, then skip ahead to the next step.

On the Greenback dashboard, click “Connect” in the left nav, find Stripe and click on "Connect", and click Connect again. You'll be redirected to Stripe where you can follow the steps to authorize Greenback to connect to your account eg: Connect My Stripe Account. Once you’ve completed that, you'll be redirected back to Greenback where an initial sync will complete. You will see your sales, payment processing/merchant fees, purchases, refunds, etc. if you have any.

On the Greenback dashboard, click “Connect” in the left nav, find “QuickBooks” and click on "Connect", and click Connect again. You'll be redirected to QuickBooks where you can follow the steps to authorize Greenback to connect to your account eg: Allow Access. Once you've completed that, you'll be redirected back to Greenback where an initial sync will complete. You’ll also get a glimpse of your initial scorecard.

Pro-tip: Free users have access to a limited amount of historical transactions on Greenback. Paid users can request a "Catch Me Up" support ticket to get more historical data synced to Greenback. View our Pricing Plans for more info.

Step 5: Export a Sale to QuickBooks

You are now ready to export your first Stripe sale to QuickBooks! Greenback learns the correct export settings and mappings as you do them. So you'll only need to export a few different types of transactions (e.g. sales receipt, payment processing fee, refund) and Greenback will begin to pick the right defaults every time.

On the Greenback dashboard while your Stripe account is selected on the left nav,--- choose a sales transaction that represents an item that you’ve sold (immediate payment) on Stripe and click on the white “Export” button. Greenback will refresh your settings from QuickBooks and search for possible matches/duplicate transactions. (We are fanatical about protecting your books.) Next, click on “Create a New Sale” since the transaction doesn’t exist in QuickBooks yet and click Next. When you select this option, Greenback will add a new transaction to QuickBooks after the next 2 steps are completed.

For the Customer field, we haven't done any exports yet and the actual Stripe customer is not on your existing customer list yet, so let’s add Stripe as a new customer eg: “Add Stripe-Sales”. Greenback will add the “customer” you input here (marketplace/seller platform, or customer name if available) to your list for you in QuickBooks and remember it for you the next time. The Deposit To field is where the deposit should be applied to. Select the bank/asset account “Stripe Shop Funds” that we already set up in Step 1. For the Product/Service field, you can choose a “Sales” income account from your Chart of Accounts in QuickBooks. You may or may not be dealing with sales tax, but we usually include it and select QuickBooks’ "Auto Lookup" option in our demos. Greenback’s Automated Sales Tax feature helps Stripe sellers by detecting when your shop or platform has collected sales tax for you, so we either include it as a line item in the text receipt and the Sales Tax will say “0” or it will appear as a line item under the Subtotal where it typically appears in a transaction. It depends on how you have set up your Stripe Shop. Click "Export" and you're finished.

NOTE: Always speak with a tax advisor about your obligations to avoid a sales tax audit even when you use a seller platform.

Greenback creates a sales receipt transaction in QuickBooks with the details of what you sold. Greenback also makes a deposit to your Stripe Payout Funds account in QuickBooks. Remember, there’s no need for an invoice in QuickBooks, when the sale is immediately paid.

To view it in QuickBooks, go to Sales, All Sales, and click anywhere to view that transaction.

Step 6: Export a Payment Processing Fee to QuickBooks

Every sale will likely have an ancillary "payment processing fee" transaction in Greenback. These transactions are unique to Greenback and the way we help get associated fees correctly on your books. While Stripe simply deducts these out on their platform, Greenback creates a second transaction.

On your dashboard, choose the payment processing fee transaction, then click the white "Export" button. Next select "Create New Expense" and click "Next". Since you've already exported a sale in Step 5, notice how Greenback defaulted to Stripe as the “Payee”. To indicate the payment method used to pay for the expense, choose Stripe Payout Funds (the “bank account” you created in Step 1) as the “Bank/Credit Account” (the “Payment Account” in QuickBooks). Now you just need to pick the Merchant Fees item we created in Step 2 for the Line Item account. Click Export.

Now let's take a look at your purchase in QuickBooks.

Go to Expenses, and click on Expenses. Greenback created a purchase in QuickBooks with the details of what you expensed. Greenback also created a payment for the purchase and withdrew funds from your Stripe Payout Funds account in QuickBooks to pay for it.

Let's take a look at a couple of reports in QuickBooks after this transaction.

Go to Expenses, Vendors, Stripe-Expenses and check out the total. Next go to Reports, choose Profit and Loss and look at the “Stripe Merchant Fees” and Sales ie: “Income”.

Step 7: Export a Refund and a Reimbursement to QuickBooks (Optional)

If you sell enough on Stripe, you'll eventually need to issue full or partial refunds. So let's go through an example of one to show you how it works. For every “discount/refund” you issue on Stripe, you are not credited back any of the fees you originally paid. If Stripe did, then Greenback would create two transactions for every refund for you. One would represent the "negative" sale and the other would represent the "negative" expense or the reimbursement to your Merchant fees operating expense account. Luckily Stripe does not charge you for processing refunds.

On your dashboard, choose a Refund transaction, then click the white "Export" button. Next select "Create New Refund" and click "Next". Greenback defaults to “Stripe-Sales” as the Customer. The Deposit to bank/asset account is “Stripe Payout Funds” (the “bank account” you created in Step 1). For the Product/Service field, select the “Sales” income account. Click Next. You are finished.

Here's Stripe's Payment Processing Fee policy for refunds...

NOTE: Remember that Stripe does not return fees from the original sale when a refund is given.

If you would like to see a video demonstrating a reimbursement of a fee, check out Etsy Best Practices Step 7 Export a Reimbursement Fee in Xero.

Let's take a look at a couple of reports in QuickBooks after the Refund transaction. Go to Reports and then Profit & Loss. Then check out your Transaction Report for your Sales ie: “Income”, and Refunds. Now go back to your Profit and Loss if you wish and look at your Stripe Merchant Fees to see if they affected your Net Income.

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