In this article, we’ll be looking at the Stripe payment system and how this can be set up and integrated into Xero. That will be useful in that it will save you time having to reconcile both systems manually and will allow Xero to do most of the work for you.
What is Stripe?
“Stripe is a technology company that builds economic infrastructure for the internet. Businesses of every size—from new startups to public companies—use our software to accept payments and manage their businesses online.” – Stripe Website
Stripe is an online payments system that focuses on coding more than finance. Due to this, it works exceptionally well with internet sales and purchases. It contains applications that can help you fight fraud, find and sort your business information and even help you make and receive payments.
You will likely focus on the payments side of stripe initially, though, and it is these incoming and outgoing payments that need to be reflected in your company accounts.
As this software is designed with developers in mind, it is nice that they provide the relevant coding you will need to get started right on their front page if you are so technically inclined. This will cover payments and customers as well as subscriptions and reporting.
If you want to look into this a bit more before deciding to go ahead with the software, you can reach their website via the following link: https://stripe.com/gb
How do you integrate Stripe with Xero?
To connect Stripe to your Xero account, we have included a link to a video explaining this below.
Can’t watch videos? No problem, I’ll explain the process here too.
To get Stripe connected, you’ll need to do this via your Xero Account. You can start in one of two places; either via the ‘Payment Services’ option in your Xero Settings or straight from an approved invoice.
If you are doing this via the approved invoice, just go to invoice options and then online payments. From there, you can sign up for a Stripe account in Xero. Choose ‘get started’ on the credit card option and it will guide you through the process to set up a Stripe account. If you already have a Stripe account, there is an option at the bottom to connect your pre-existing Stripe Account to Xero instead. If not, just enter information when prompted and Xero will then create transactions automatically for the Stripe fees too.
Let Xero create an account for these or click ‘edit’ when asked where Stripe fees should appear in Xero to choose an existing account. Finally, click ‘Connect Stripe to Xero’. You will then receive an email from Stripe to activate your account and complete your setup with them.
If you’ve chosen to set up the Stripe connection via the payment settings instead, don’t forget to add it to a branding theme by clicking ‘manage themes’ and adding it as a credit card. You are now ready to receive payments for the online invoices you send to customers.
When your customer receives the invoice, they just need to click ‘pay now’ then follow the prompts to enter their credit or debit card information. The invoice will then be automatically marked as paid and the corresponding fee transaction will be created in Stripes software. Due to this, reconciliation is easy. In the bank account, you will receive the amount paid for your invoice minus the Stripe fee. As you reconcile the incoming money, you just need to match it against the invoice and make an adjustment for the Stripe fee.
That’s it. Your Stripe account is now set up with Xero.
You can also integarate stripe with other ecommerce platforms – see ecommerce accountants
Stripe & Xero Double entries?
First off, what is a double entry? This is the method by which all the transactions and movements of money are recorded in your business.
Now, you may have heard of the term debit and credit before. Simply, these mean in and out.
For example, say you make a payment from your business bank account for a train ticket. This would credit (come out of) your business bank account and debit (go into) your travel account. This travel account is a theoretical account and doesn’t exist beyond allowing you to record what that money was spent on. The same goes if you receive money from a sale to one of your clients. It will debit your bank account and credit your sales account.
To help you understand how the Stripe integration process works in the background of Xero, the double entries for each stage have been included below to show this.
Each double entry is automatic as you complete the steps and you will not have to enter any manual journals.
Raise a sales invoice and enable the option for a Stripe payment to be made. Once done, this will show under the ‘Online Payments’ section of this invoice.
Double Entry 1:
- Cr Sales £87.50
- Cr Vat £17.50
- Dr Accounts Receivable £105
The customer then pays the invoice. The issue here is that you will receive the money from Stripe minus their fee. As you can see from the example below, the invoice was for a total of £105 but only £100 was received.
Click on ‘Match’ and select the invoice you wish to reconcile by selecting the check box. You will notice the amount paid in is off in this case by £5 which is the stripe fee.
Double Entry 2a:
- Cr Accounts Receivable £100
- Dr Bank £100
Select ‘adjustments’ and then bank fee.
Fill out the bank fee adjustment fields as below and enter the value of the bank adjustment in this example £5 then click on ‘Reconcile’.
Double Entry 2b:
- Cr Accounts Receivable £5
- Dr Stripe Fees £5
Here at Fusion Accountans we specialist Online Accountants helping our small business clients grow through integeration, automaton and streamlining business processes.