How do I reconcile merchant fees?

Introduction

Many customers have asked us what are the best practices in reconciling orders in Xero. Our answer is that it depends on the number of orders and your specific business needs.

Payment Processor Duplicates

In Xero, disconnect any payment processor apps like PayPal or Authorize.Net. This will prevent their sync tool and Connex for Xero from syncing the same orders twice:

Your bank account will contain the bulk deposits from your payment processor, so there is no need to connect to them directly.

Expenses Per Order

Adding the fees per order is a bad idea:

  1. If you give away products for free and your total fees exceed the order total, making the order negative, the sync will fail. Xero cannot accept negative orders. By missing orders, reconciliation will be more difficult. 
  2. If a customer calls and requests a copy of the invoice, you can't send it because it has the merchant account fees on it.
  3. Reconciliation will be difficult because the order totals will fail to match.
  4. It is easier to track expenses if they are entered in bulk. The expenses will have one line item in Xero as opposed to several hundred in a report.

Expenses

Payment processors take two to three percent of each transaction as processing fee. All of the orders the payment processor collects are transferred, in bulk, to your bank account. You must match this bulk deposit to orders in Xero.

On your dashboard, Click Reconcile items.

Find the deposit, Click Match

Click on the orders that match that deposit.  You will see there is an over payment, in the amount of the merchant fees.  Enter the adjustment to your deposit, name it Merchant Fees, click reconcile.

 

       

 

 

Matching

Once you connect Xero to your bank account, transactions flow into Xero automatically.  You can start each day by reconciling, and match your transactions by clicking OK. 

 

 

 

 

This will prevent the PayPal transfer from the bank and the transfer from Connex for Xero duplicating deposits in your bank register. 

 

Changing your Deposit Account

To deposit orders into the undeposited funds account, follow these steps:

  1. Login to cconnexforxero.com
  2. On the my connections page, choose your connection. If you only have one, click submit.
  3. On the configure page, scroll down to accounts
  4. Change the last drop down to say undeposited funds: 

 

Orders will now appear under bank deposits in Xero.

Downloading PayPal and Authorize.Net Transactions

When someplace places an order on your website, it goes to your merchant account provider and to your order management system. There is no need to download orders from your merchant account provider and your order management system at the same time. We recommend depositing funds each week or two into your bank. In Xero, check off the date range of the last deposit. 

Reconcile Amazon Fees

Print a transaction detail summary from Amazon. Highlight the rows with the fees and you'll see a sum on the bottom right. Enter the fees in the bank deposits item deposits area of Xero. For instruction, see this video.

Unable to Reconcile

There are times when you're missing orders or they are inaccurate. If you have several transactions, it could take several hours to find the error and move onto the next task.

A shorthand way of reconciliation is journal entries. In the example above, the bookkeeper created a journal entry for $78 to decrease the bank deposits to match the bank deposit. To create a journal entry, go to the plus sign > other > journal entry. Here is an example journal entry:

 

 

 

 

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