Introduction

The vast majority of e-commerce sales are processed electronically by credit card or other digital payment tools. Sellers rely on a number of 3rd party providers to support their e-commerce sales including seller marketplaces such as Amazon, payment processors such as Stripe and PayPal and e-commerce platforms such as Shopify and Squarespace.

To properly account for your e-commerce sales, you need to maintain a ledger for each provider that collects funds from your customers. These providers should be configured much the same way you would a business checking account.

You may be tempted to manage your e-commerce sales by booking transactions to an undeposited funds account. However, an undeposited funds account will not adequately address the numerous transaction types (sales, sales related expenses, refunds and reimbursements) nor will it simplify the process of reconciling payout deposits.

The solution is to configure a clearing account for each provider that collects funds from your customers and makes payout deposits to your business bank account. Clearing accounts are configured the same way you would any other bank account within your accounting file. Clearing accounts provide a clean way to manage the ledger from each provider, tracking your itemized sales, sales related expenses, refunds and reimbursements.

How it works

1. Your data is messy. You sell across multiple marketplaces, payment providers & e-commerce sites. The first step is to create clearing accounts for each provider that collects funds.
2. Greenback consolidates and normalizes your sales data including sales related expenses like payment processing fees.
3. Export transactions to each clearing account within your accounting file
4. You will categorize your payouts as transfers from the appropriate clearing account

Identify What Clearing Accounts You Need

You need a clearing account configured within your chart of accounts (COA) for each provider that collects funds from your customers.

Create Clearing Accounts in QuickBooks Online (QBO)

1. Navigate to Accounting >> Chart of Accounts.
2. Select New.

The Account popup window opens.
3. Create a new account with the following parameters:

Account Type: Bank
Detail Type: Checking
Name: Name of your payment provider, such as Stripe or PayPal followed by the word Clearing

The remaining fields are optional. QuickBooks Online may also ask when you want to start tracking your finances from the account. Choose an appropriate date. Unless otherwise instructed, set the beginning balance to $0.

4. Click Save and Close.

Repeat these steps for each integration that requires a clearing account.

Create Clearing Accounts in Xero

1. Navigate to Accounting >> Chart of Accounts.

2. Click the Add Bank Account button.

The Find your bank page opens.
3. Type greenback.com and hit Enter.
4. Select Add it anyway.

5. Create a new account with the following parameters:

Bank: Greenback.com
Account Name: We suggest you use the integration name followed by the word Clearing.
Account Code: optional, complete at your own discretion.
Account Type: Other
Account Number: complete at your own discretion.
Currency: complete at your own discretion.

6. Click Save.
   Repeat this step for each integration that requires a clearing account.

Export Your Transactions

Now that you have clearing accounts configured, you can begin to export transactions from Greenback to your accounting file. For a more detailed guide on exporting your transactions, please check out the Export Data to Your Accounting File articles

Reconcile and Categorize Your Payout Deposits

Because you are containing all of your e-commerce related transactions to individual clearing accounts, categorizing your payout deposits is extremely easy.

Because you have already booked your sales and sales related expenses to the clearing account, you will not treat payout deposits as sales (as this would result in the overstatement of revenue). Instead, all payout deposits are treated as transfers from the appropriate clearing account to your business checking account.