Reconciling Paypal

It is hard to believe, but a little more than 10 years ago, most of us didn't  know what PayPal was. Now, it is recognized as one of the leading payment solutions options in the world; serving the guy selling baseball cards in his basement, large retail stores like LL Bean and charities collecting donations across the globe.  If you are a small business owner, you can find a never ending supply of articles, blogs and business forums talking about how PayPal, or other similar products such as Google Wallet, will increase your sales, anywhere between 14% and 18%.

While it seems definitive that PayPal, or e-commerce payments, are here to stay, the waters seem to be murky around how to handle this account when preparing a businesses financial records. A question I get asked often is: Should my PayPal Account be in QuickBooks?

The answer (for me?) YES While not a bank, PayPal has many features of a transactional bank account (or a checking account). Therefore, like a checking account, it should be reconciled on a monthly basis.  This also means, if you are a QuickBooks user, your PayPal account should be an account in QuickBooks. Why? I offer three main reasons:

1. It is the cleanest way to ensure that all income earned and expenses accrued are accurately and thoroughly accounted for.

2. It allows for proper creation of a Balance Sheet - if you have a balance of cash in your PayPal account you want that to show up as an asset to your business

3. It ensures that there are no errors within the transactions themselves

Admittedly, PayPal does not make it easy. While they will send you a monthly statement, it is certainly not as "pretty" as the one you get from a bank. Additionally, when you look in your history, you will be inundated with holds, temp holds, authorizations, release of holds....Ugh! Even for this former banker, it can be a bit confusing. I have seen one transaction show up 4 times in a history. This makes the running balance in your PayPal history unreliable, and balancing the account tricky.

However, there are some simple tools you can use, to make it easier. Go to the Report Center and use the Monthly Financial Summary Report - it is clear, concise and will help you stay on top of your account.

We are in the final quarter of the year. So now is the time to dig in and clean things up; allowing you to close out 2012 strong and start 2013 with a simple, easy process!

Don't have the time? Give me a call! I will be happy to make this Task My Job!

8/10/2018: Update: PayPal now allows syncs with bank feeds in

online. Making this job much easier!