PayPal and Old School Bookkeeping

Many online vendors who use PayPal, mistakenly assume they also have to use Quicken or Quickbooks for their bookkeeping. While PayPal has done a very nice job of integrating these two popular products into the transaction reporting of their site, I am not sure this is always the best option for every online seller. I am going to point out two other bookkeeping options that may be better suited to your business.

First you need a quick history lesson. Before almost everything about bookkeeping
became computerized, it was a manual process. Businesses kept what were known as sub-ledgers. A sub-ledger might record all of your sales transactions for a month. At the end ofthe month, you would total your sub-ledger and transfer that total as one line into your general ledger. Both of the tips I show you today will essentially go back to creating a sub-ledger,
although we will be using the computer.

I will also tell you how going “old school” and having a sub-ledger may
give you a powerful marketing tool.

Option 1. PayPal has
a wonderful reports section. When you are on the My Account tab in PayPal, hover over the tab for History. You should see a drop down menu and towards the bottom of that menu is the link for Reports. Click on the Reports link and you will go to a screen that summarizes your PayPal account transactions. In the middle of that page is a link for Monthly sales report. After clicking this link, you will select the month to view, typically the prior month and select View Report. What you should see now is a very nice clean summary by day of your monthly sales for the previous month. You can even download this report in a pdf, comma delimited or spreadsheet format. I suggest you pick whatever format you are most comfortable working with. Name the file something like “July-2009-PayPal-Sales”. You will notice at the bottom of the report are totals. If you are using a bookkeeping program, such as Outright, open your bookkeeping program and record the total of the amount received column under the income tab. Then under the expense tab, record the total of the payment fees column. You may want to create a separate category for PayPal fees to keep track of the cost to your business for using the service. If you have any refunds on your report, you need to enter these amounts the same way except enter them as a negative number by putting a minus sign in front of the number.

(tip: the minus sign works in Outright, but if you use a different bookkeeping software check to make sure it will accept negative values)

Option 2. Option 2
works very much the same as option 1. It actually requires an extra step, but I will tell you why I think that step is worth the minimal effort. Return to your My Accounts tab in PayPal and hover over the History tab again. Above the Reports link is a Download History link. Select this link and you will see options to download your transaction history.

From this page you can download your PayPal transaction history for any time period you select, keep it simple and download all of the prior month. If you download to a comma delimited file, you can open this in any spreadsheet program like Excel, Google Docs or Open Office. You will have the same columns in your spreadsheet that you had in your monthly sales report. You use the same process as in Option 1 to enter your income and expense.

(tip: select the last day of the month you are
reporting as the transaction date for your entry in your bookkeeping software)

Here is the one additional step, you will have to enter formulas to total your columns, and calculate the amount to put into your bookkeeping records.

As promised, here’s the payoff. You now have a very powerful database of all of your PayPal sales transactions for an entire month. There is even an option to download All Activity, which will give you customer names, email addresses, shipping information, what they purchased and the date and time of the purchase. Using the database functions in most spreadsheet programs, you can sort this information any number of ways. You can even graph how many widgets were sold between 2 and 3 am on Saturdays. That is pretty powerful marketing information to have.

PayPal is by far the most popular online payment option used by e-sellers today.

As of 2009, PayPal reports that it has approximately 70 million active users.

For 2008 they transacted over $60 billion and expect that to double over the next 3 years.

According to Paymentsviews.com,
merchants who add PayPal see sales increase up to 14%. Now you also know how to integrate PayPal with your bookkeeping and improve your marketing at the same time.