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How to treat PayPal fees

I have 120+ global subscribers in my society. They pay an annual subscription fee of £25. Most, but not all, pay by PayPal, which deducts a fee that varies but is about 3.5%. The others pay by Bank transfer or even by cheque.

I am unsure how to treat the fee for the subs paid by PayPal. As a society, we accept the reduced revenue since we find PayPal makes it easier for members to pay, and hence we have less hassle chasing members for their sub.

What suggestions does anyone have about how to treat these fees? I want them to be allocated as an overhead to a separate nominal account. I have read the knowledge base but the section on PayPal fees doesn’t help.

Hi, if not already done, create a paypal holding account in your bank account section.
In that account you record all sales which were paid through paypal and all paypal fees (invoiced to a supplier called paypal or so. Each week or month or whenever you get the money from your paypal account to your bank account, you record a payment out transaction with the amount you get from paypal and tag it as a “transfer between bank accounts” and select your bank account.
If you use auto bank feeds, then it is best to tag the amount paid from Paypal from your current bank account and select again “transfer between bank accounts” and click on paypal holding account.

Hope this helps

2 Likes

Thank you so much for suggesting this solution.

I think I understand what you are proposing. However, the way I am working now is that I track each individual payment from every member, and record their name and payment amount. I adjust the tag for every transaction to do this, tagging the subscription itself to a new nominal 'subscriptions received". I do this for transactions that arrive directly through the Bank account, but PayPal subscriptions have this annoying separate transaction for the fee.

I want to keep doing it that way because I can then identify every subscription separately by member which helps me in reporting. It does mean that I have a lot of clients but that is OK.

Does that make sense? I can send a couple of clips.

I am not sure what you try to archive. But they way I descripted the paypal handling is the way it works. Let me try to be a bit more clear.
For example: A customer pays £25 subscription fee and uses paypal to pay you. If you don’t have the paypal feed, you enter those £25 as money in in your paypal holding account within quickfile manually. If you have the feed then this will show up automatically in your paypal holding account. Tag those £25 to the customer who paid it by creating an invoice under his/her/their name.
For useing the paypal service, paypal charges you, lets say £1 for the £25. If you have no feed enter this amount as a money out transaction. If you have a feed then this will show up automatically. Tag the £1 to a supplier purchase invoice. The supplier is Paypal.
When paypal transfers your money (£24) to your current bank account, enter the £24 as a money out transaction in your paypal account and tag it as a transfer between accounts. This will create a £24 money in Transaction in your current bank account. All accounts should be fine now. If you have a bank feed for your current bank account then don’t enter the £24 in your paypal account. The feed will bring it in to your current bank account and you can tag it from there as a transfer between accounts.

Hope this helps

1 Like

Thank you again and thanks for taking this time.

This is more helpful and you were smart to spell it out using an example.

The only thing that is different from the way you describe is that I let the money lie in the PayPal account because I am too lazy. As well, most PayPal subs arrive on one single day when our system sends out the first automated notification. So all the individual PayPal transactions have shown up in the automated feed immediately. They are tagged manually or, hopefully, automatically.

When I finally get around to it I transfer the current PayPal total to the Bank account, and that transaction shows up as a single large amount.

So, not much different from the way you describe.

One thing I would like to do is have the PayPal fees “go away” - i.e. simply be an overhead we carry and which can be reported on as a single amount.

But I think I am close to what I want, so thanks.

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