Reconcile Bulk Payments Received from a Payment Provider Using a Clearing Account

Katia Lyubenova

September 04, 2018 12:21

To make the most of the billing automation that OfficeRnD supports, we'll often advise you to connect OfficeRnD to an accounting system and to a payment gateway.

This enables a smoother billing operation where members can be automatically invoiced and charged. The invoices will be synced with the accounting system and thanks to the payment gateway their payment status will be automatically updated when the payment transaction completes.

We are often asked what's the best way to reconcile payments in Xero or QuickBooks when those payments are initiated from OfficeRnD. In this article, we'll show you one possible approach. However, we recommend that you discuss this with your accountant or bookkeeper to find out the best method for your organization.

Reconcile bulk payments received from a Payment Provider

When you connect OfficeRnD to a payment gateway such as Stripe, you will soon realize that the payment gateways transfer the charges they collected in bulk transactions in your bank account. Each transaction includes payments of multiple invoices and excludes the processing fees. This makes the reconciliation process slightly more complicated.

One approach to reconciling the transactions is to open side by side Stripe, OfficeRnD, and the accounting system and review the payments date by date to match them.

An alternative solution is to use a clearing account. This approach enables you to use the clearing account to match both sides of the transaction - the payment recorded by OfficeRnD and the charges the amount transferred by the payment provider to your bank account. Read on to find out more about this approach.

Note: By default, QuickBooks will use the Undeposited Funds account to receive payments online. Click here to read more about this.

Step 1: Create a Clearing Account

A Clearing Account is an account you use to move money from one account to another account when you cannot move the money directly. This account normally has a balance of $0.00 because you always take out the same amount that you put in. It may also be called a Barter or Wash Account.

Step 2: Configure the Accounting Integration Settings in OfficeRnD to Allocate the Payment Records to the Clearing Account

When OfficeRnD initiates a payment transaction which succeeds, the system creates a payment record in the invoice in Xero/QuickBooks. The payment record is allocated to a payment account per the Payment Account mappings in the integration settings in Settings/Integrations.

When you use a clearing account, make sure to map the Payment Integration payment operations to the clearing account when integrating OfficeRnD with Xero/QuickBooks Online. This way OfficeRnD will automatically record the payment charges in the clearing account.

For example, when integration OfficeRnD with Stripe and Xero, you can create a clearing account in Xero and name it Stripe Clearing Account. Here is how to map the Stripe payments to the clearing account when configuring the Xero integration:

Step 3: Reconcile your bank account

When the bulk receipt from the payment processor appears on your bank reconciliation in Xero or QuickBooks Online, move it to your clearing account.

Step 4: Check the balance in your clearing account

From time to time, check the transactions in your clearing account. The total of payments applied to your customer invoices on a particular day should match the bulk receipt you transferred in your bank reconciliation. Any remaining balance in the account will be usually customer invoices where you haven't received the payment in your bank account yet.