I need to know how to handle PayPal Temporary Holds. I have read another old post where it states the following.
Temporary Holds: You need to create a ‘PayPal Reserve Holding Reserves’ bank account and tag the rolling/holding reserves as a transfer to/from the new holding account. When PayPal release the funds and after tagging as a transfer from the new holding account, the balance will be £0 on the new account if all the funds held have been released, the holding account will also keep track of the reserve funds held by PayPal.
What I don’t get is if you do this then do you have to keep checking to see if PayPal have released the payment and if they have then do you then have to tag the payment back to the PayPal account. If so that is not good as that is very time consuming and messy if you have a lot of temporary holds on payments each month.
Can someone clarify what the situation is with this, thanks.
Can you please explain the scenario whereby this hold will be applied by PayPal? This should allow us to determine how to handle this on the accounts side.
Ebay and Paypal buyer protection cases are the main ones for this, i.e. customer purchases an item, item doesnt arrive or they say it hasnt, they complain to ebay or paypal.T
hen depending on which one the complain to a case is open to try to deal with it, this then if the transaction is not more than 45 days old, either paypal or ebay,
again depending on where the case was opened will put a hold on the transaction, i.e. they will take the money from
your paypal balance till its resolved, nomally if the customer isnt satisfied or you cant provide a tracking number/proof of delivery the money is given back to the customer, regardless of them having it or not.
Since ebay and paypal side with the buyer without hard evidence that you have send it, since without buyers ebay as a selling platform dont work lol.
We have been ripped of by many members for this, there are even forum groups on how to get something for free on ebay.
I alone have been left out of pocket this year up to £1000+ as the seller still has to pay packaging, shipping costs, or return shipping if buyer refuses the package.
See screenshot for an example, although there are many other reasons for holds, such as paypal fraud checks, depending on buyer country etc.
OK that’s interesting!
So if PayPal are just holding funds while they carryout an arbitration process, then really all you need to do is tag it in and out of a dedicated holding account, i.e. somewhere you can track the balance of any funds on hold.
So yes (as per the original post) setup another bank account ‘under the merchant account header’ called something like “PayPal Funds on Hold” and just tag it from the main PayPal account to this merchant account (as a bank transfer). When it’s released just tag it the other way.
I don’t think it’s anything you will need to manually check? The feed should import the original hold and the reversal, so it should just be a case of tagging each. I know there are numerous filters on the feed to eliminate a lot of the noise with PayPal statements, they’re often far too detailed for general bookkeeping purposes. I’d need to check if holds are getting filtered out @Marcus_West it would be handy to know the date upon which the hold was applied so I can check this?
I could not explain this better myself, and yes eBay are terribly unfair in siding with buyers over sellers.
I am not sure how many entries it makes for one transaction. You have the original purchase, so money in, then if it is held it shows as a negative, so money out, so then back to being even. Then I assume that if the payment is released it will just show as a new money in again, if that is the case why would the hold need tagging at all?
It doesn’t, if it goes out then back in it’s largely irrelevant from an accounting perspective, so just delete the two entries.
The only exception to this I guess is if PayPal hold the funds then rule against you and issue a refund. I don’t know if that’s a common occurrence but if it did happen I suspect there would be a refund on the feed anyway.
Unfortunately is is a very common situation. I assume it works like this. Money in from sale. Money on hold so shows as negative, effectively cancelling out the transaction. But if it then shows a refund if they decide against you are not negative what ever amount the refund is for, which surely then would make your figures wrong?
I can’t get me head around how it really works and will have to take a real good look at it.
Marcus, Paypal produces a 1 or 2 page financial report of the total sales etc for every month end.
I use that monthly report for the entries into the accounts and it includes Disputed activity section, here is an example of that section:
Dispute Activity -79.00 DR
Chargebacks & Disputes -236.78 DR
Dispute Reimbursements +157.78 CR
All you need enter is the “£79 Debit” above as a sales refund
If the total Disputed is a “credit” amount it is already included it the total
Sales Activity on that same monthly report
Yes I see how that would work if you don’t use the PayPal feed, but I do use it and it does not seem to be that simple. I will show you what I have found out regarding this when using the feed.
Here is an example of a transaction involving a hold in my PayPal Feed.
14/10/2014 - Dario Deter Deppe (81N45463F3375452J) -36.90
03/10/2014 - TEMPORARY HOLD: 2UC17204S8337821M -36.90
28/08/2014 - Dario Deter Deppe (4V985739NW8271815) 36.90
So as you can see the feed imports the sale of 36.90, then there is a eBay dispute or what ever and the feed imports the hold on the funds as a negative figure. At this point the transaction is cancelled out so effectively 0, but then eBay decide as always that the buyer should receive a refund and the feed imports the refund as a negative. The end result seems to be that my PayPal is now going to be down 36.90 and will not balance with my actual PayPal account balance because the feed shows 2 negatives of 36.90.
I assume it will do the same if eBay sides with the seller and releases the funds then the feed will import another 36.90 and now you would be over 36.90 instead.
If anyone can confirm I am right on this then please let me know, and is there any way to fix this issue?
The HOLD is irrelevant for accounting purposes it’s only there for the benefit of PayPal to stop you withdrawing any disputed funds.
In the above example this could be solved by just deleting the entry on the 3rd October for the actual hold. In future we could look at adding an optional setting to not import HOLDs.
Glen is correct, if you look at paypal ‘All activity (with balance)’ you will see one of the -36.90’s has no effect on papals balance, its totally ignored so the imported Temporary Hold’s need deleting in quickfile
You will also notice other transactions that do not effect the balance as they are only for information.
Thats why I do not use imported transactions and use the monthly financial report for its totals.
I totally understand this now. i have now also decided to use the reports like you and add just the bulk figures for the particular month rather than using the feed, as it’s much neater and guaranteed accurate.
That’s great! I would personally do the same, the feed can be a bit of a minefield to reconcile in some cases.
I have to agree, the temporary holds are a bit of a pain.
For example, I recently had a sale of £53.99 and it subsequently went into hold - both transactions shown OK.
However, when the payment was eventually released to me, it appeared in paypal but not in quickfile, In the past, I’ve just made a transaction to balance the books, because I didn’t know what was causing it. It’s not like it’s an uncommon scenario though, is there any way of importing these ‘released’ temporary holds?.
If you want to PM me the exact dates upon which the holds were applied and then reversed, I am more than happy to discuss this with a developer. Having actual working data will help us to devise a better long term solution.
I do use the paypal feed as 99% of my business is through eBay/Paypal.
I find that it runs quite smoothly but over the months, I have noticed slippage in the amount reported by QF as my PayPal total and my actual PayPal total.
I have been just accepting this as until recently the difference was always 34 pounds and a few pence.
I think the slippage is most likely caused by TEMPORARY HOLDS but I am not certain and I have no idea how to fix it.
A couple of days ago I had a payment put on hold so I deleted the on hold entry from QF as I had refunded the purchase and both the original payment and the refund were imported into QF as expected.
the problem is that since then the slippage has grown and now my slippage is around 50 pounds… strange seeing as the on hold payment was for 15 pounds and some pence…
any advice please?
I can give dates for my most recent problem transaction.
the original transaction was for #15.96 on 2/3/2015 . placed on hold on 24/3/2015 . purchase refunded 28/3/2015
One thing you could do is adjust out the difference by entering a new transaction on the account. If it’s a debit post as a PayPal supplier expense, or a credit post as generic income.
Temporary Holds and subsequent releases in PayPal can be very time consuming to isolate on more complex accounts. If the amount is trivial the above may be a good option. If you have any doubts it’s always worth checking with your accountant.