3 Mins
As technology progresses and the digital accounting world expands, integrating payment platforms with accounting software is becoming integral to reach the virtual space as a business. Modern eCommerce activity can seem overwhelming for SMEs but, as software develops, integrations between payment processors and accounting software are easier than ever.
Why Integrate Your Accounting System with Your Payment Platform?
Integrating payment platforms with accounting software such as Stripe, GoCardless or PayPal is an invaluable use of resources and can streamline the standard day-to-day business activities. An integrated payment platform with an accounting software like Xero allows for bank charges and service fees to be calculated and processed automatically, and can even have Xero pass on the service fees to the business’s customers.
Managing debtors becomes simpler as integrating payment platforms with accounting software allows customers to pay their invoices faster and easier through Xero’s Online Payments function. A customer is more likely to pay promptly if they can do so at the click of a button rather than having to spend their own precious time logging into their online banking to make a payment.
The added benefit of integrating your accounting software with your payment processor is revenue recognition: oftentimes when monies are received through a payment processor, the processor takes a percentage off the top of the funds as their fee for their services. A key mistake we see bookkeepers and business owners making is to assume that the cash received from the payment processor is the total value of their income, despite this sum including charges. Integrating with a payment processor allows your accounting software to gross up your income so that you have a clearer picture of the true value of your sales, along with the total cost to you of using the processor.
The VAT Question
When considering the payment processor fees that follow on from online sales, integrating payment platforms with accounting software ensures that all VAT implications are properly managed. It is important to remember the VAT implications of these charges and how they may differ from each other. With charges and fees, the VAT treatment can vary from fully exempt to fully taxable (or even a combination of the two!). An integration between your accounting software and payment processor can help to ensure that all VAT on charges is correctly captured and reported to HMRC.
Consolidating sales and payment data from across platforms is incredibly useful by integrating payment platforms with accounting software, providing the space for more detailed reporting, analysis and reviews. With the data synced between Xero and other platforms you can have a fuller picture of your business’s performance in one place – an underestimated efficiency when managing your finances. You can build your Xero dashboard to display your preferred details from customer information to budget variances, all with information pulled from your chosen platforms.