We’ve recently started using an American based website to sell our products.
This is how it works:
Buyer orders through our shop front on American based website.
Buyer pays for item direct to American website (Say $100) (Website issues an invoice to purchaser)
Website charges us fees of 10% at time of purchase.
Balance of $90 is then transferred to our Paypal account in $.
At some point in the future we will swap $90 into £ and then transfer it to company bank account.
My queries:
Is is ok to create the American based website as the purchaser for invoices and then detail name and address details of actual purchaser in description.
How do I convert the $10 fee into £. Do i just use the rate on QF?
When I exchange $ to £ the PayPal fees are horribly high compared to rate on QF Do I just complete a manual journal to balance QF £ with actual £ in company bank account.
This should be fine. The main thing is that you would have a backing document with further details from the marketplace itself. The same concept could apply to eBay sales for example.
In fact, you could just put a description as “Weekly Sales w/e 26/01/2018” for example, and combine all weekly sales rather than using a new invoice for each sale.
When you tag a transfer from a USD to GBP bank account, QuickFile will prompt you for the equivalent GBP value.
With a sale on PayPal, there are a few things to consider. Firstly, where possible, use their exchange rate rather than the one on QuickFile as this is the one that’s been used for the transaction.
The other thing to consider is the PayPal fee itself. In short, you would have 3 bank entries for every 1 real one. There’s more on this here:
Just one point to clarify is that when the website send the net $ to my PayPal account they cover the Paypal fee, I just have to pay the $ PayPal fee for the company to receive the gross $ into their account.
As they are an American company the PayPal fee is taken in $, so there is no Paypal conversion fee from $ to £. So how do I convert say $10 which is a mixture of 5% website selling fee and remainder being the PayPal charge for accepting the $ payment into £?
Ok, so just to confirm, let’s say you earn $10 through this site with a PayPal fee of $1 ($11 in total). The company you sell through actually sends you the $11 to cover the PayPal fee too?
If I’ve understood correctly, ultimately, what you need to do is split what you receive down into the various amounts. So create a PayPal USD holding account with the amount that hits your PayPal account (gross). Then have money out transactions for the PayPal fee, the selling fee and your transfer.
For example:
$10.00 - Selling Price
$1.00 - PayPal Fee (also paid to you by the marketplace)
$0.50 - Selling Fee (charged by the marketplace)
Leaving you with $9.50 to be transferred as GBP (because they gave you $11 to cover the PayPal fee too)
You would have something like:
$11.00 IN, tagged to the sales invoice for the sale of the item to the customer
$1.00 OUT, tagged to a supplier invoice for PayPal
$0.50 OUT tagged to a supplier invoice for the marketplace
$9.50 OUT tagged as a transfer to your GBP bank account
Our company sells an item for $100 inc postage through market place.
The market place accepts the $100 into their Paypal account.
The market place take $5.00 (5% commission) from gross amount.
The market place also deduct the Paypal fee they’ve had to pay to receive our money (3.4% + $0.30) $3.70
So our company is left with $91.30 net.
Market place then send the $91.30 to our company Paypal account, as $ and have the fee set to “sender pays fee” so no additional Paypal charge for us. We initially leave this money as $ sitting in our Paypal account.
So my query is on the sale date, we have paid $8.70 in market place fees and Paypal fees. Is the cross currency rate on QF the correct one to use for this set of fees?
In that case, assuming the marketplace would invoice you for their $8.70 fee (in total), you would have something like the following:
$100.00 IN tagged to a sales invoice
$8.70 OUT tagged to a purchase invoice for the marketplace
$91.30 OUT tagged as a transfer to the GBP account (or leave it there if it remains in the PayPal account)
The process is the same as other payment providers, the fee is just handled differently. Instead of paying anything to PayPal, you’re paying it to the marketplace.
Unless it’s specified differently elsewhere (e.g. on a bank statement), then I would use the QuickFile exchange rate, which is taken from xe.com. Given that they would invoice and charge in USD, I wouldn’t imagine that they specify an exchange rate, so I would say using the XE rate is fine.
Do I just complete a manual journal to balance QF £ with actual £ in company bank account.