As a QuickBooks ProAdvisor, we often hear feedback from clients and ProAdvisors that it’s difficult to reconcile books when a client uses PayPal. On April 23, 2018, Intuit launched a new Application that addresses these issues. The new PayPal integration tool is available in QuickBooks Online. PayPal is a tool that can be used to collect from your customers and pay your vendors, and it can use your bank account, credit card accounts, and your PayPal balance. This makes it unique but challenging when this information is pulled in as a feed. It causes a lot of confusion because of the unique flexibility PayPal offers.
Your first step is to go through the steps to add: Connect to PayPal App for QuickBooks Online. It’s pretty self-explanatory to do the connection.
During your setup process you will see this screen:
We recommend you accept these settings and click next. Each month you will reconcile your new PayPal Bank in QuickBooks with your PayPal statement. The next step is to decide how far back to go. Importing transactions in the initial setup, you can go back up to 18 months.
Similar to reviewing transactions in your bank account, your next step is to go to your PayPal account to edit the transactions and then add to QuickBooks O. You can enter deposits straight to a specific account, or you can enter them as a Sales Receipt. Here is an example of a deposit, someone paying via PayPal where you can code it directly.
The next example is a sales receipt. If one doesn’t exist, it automatically enters PayPal Sales. However, correct the receipt to match your codes for QuickBooks support and click save.
The new feature in this app is the fact that details come over in the bank feed. When PayPal charges a fee, the amount is automatically recorded to “PayPal fees” and shown in the details of the transaction. The total sale is one line item; the PayPal fee is a deduction and the two items net to match the actual deposit. Ultimately this makes reconciling smoother than before as the net deposit will now reconcile to the PayPal statement without manual adjustments.
Below is the actual deposit of the sale above but net the fee.
This fee is automatically coded to a new expense account called PayPal Fees. If you want to change the name, just edit it in the chart of accounts.
Here is how the above transactions will be reflected in a Profit and Loss Statement:
If you have already entered an invoice, it will also try to find and match to an existing entry.
Finally, when PayPal is transferred into or out of your bank account or Credit Card account, treat it accordingly, as a transfer in QuickBooks Online.
This new application provides detailed information into the feed including gross sales, transactions fees from PayPal, and net sales. Previously this information was missing and had to be inputted manually. Before you accept the information, you are given a chance to review and edit the data before you record in QuickBooks, similar to how you handle other banking transactions. However, unlike regular bank connections, the details from PayPal will be available, such as what you sold through PayPal and what you paid for, as well as PayPal transaction fees. All this results in more detail and accuracy for your transactions in QuickBooks.
You’re all set and ready to go! If you’d like further details on managing your PayPal transactions using new Connect to PayPal app, check out the Connect to PayPal FAQ.