1. Important: Please read our guidelines and tips for new players before posting, particularly if this is your first time. If looking for answers, start with a search of past topics.

What document when sending collected payments my clients?

Discussion in 'Money matters' started by davidclm, Aug 18, 2012.

  1. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    I want to run eshops on behalf of my clients. I will collect the payments via my paypal account. Then at the end of the month I intend to send the money to my clients' bank accounts (minus the fee for running the website)
    Now what kind of documents should I send them? Some kind of a credit note?
    I would really appreciate your help!

    David
  2. kathiemt

    kathiemt Well-Known Member

    Messages:
    1,064
    Likes Received:
    336
    Trophy Points:
    83
    Hi David, and welcome. Make sure you introduce yourself at the introduction thread.

    Now, I have to ask, why would people want to pay you to manage their payments for them via your Paypal account? Why would they not have their own? There's nothing to it, to setting up a Paypal account.

    I've set them up for a few clients and then hand them over to them for their use. I sometimes monitor the activity, depending on whether I'm actively involved in their sales (that is, posting out books or other orders) but generally the client has control of the account themselves.

    Perhaps I'm missing the point, but in my way of thinking, you're opening yourself, and your clients to problems because you have to verify the funds you've received on their behalf and they have to take your word for it.

    And how are you going to make any money out of it?
  3. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    Hello Kathie and thank you for your response.

    The reason is that my clients are not much computer literate and will not bother learning what paypal is or how it works. All they want is an order & money in the bank. With no intervention from their side at all.

    I am just not sure how these transactions should be recorded in my accounting.

    Thank you in advance for your help!

    D.
  4. tonyk

    tonyk Well-Known Member

    Messages:
    1,240
    Likes Received:
    360
    Trophy Points:
    83
    I can't really see there being much of a market for this to be honest.
  5. Divert To Mobile

    Divert To Mobile Well-Known Member

    Messages:
    2,633
    Likes Received:
    1,199
    Trophy Points:
    113
    I would think the process would flow like this

    1.You send end customer receipt for the goods bought and for the funds transfered to you.
    2.you will need to send an order to the supplier for the goods they are sending to your customer.
    3.the supplier should send you an invoice for what they have sent + pod
    4.you then send payment to the supplier less your fees along with
    5.receipt for services rendered.

    its a bit messy but it will track everything that happened.

    Steve
  6. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    Hi Steve,
    yes, that's what I was thinking. The problem is the point no 3. make my client to send me an invoice. That won't work.

    I am sure there must be a way of doing this. For example a payment processor ( i.e. paymate, paypal...) works this way. They collect money from end users and pass them to the supplier. In this case the supplier certainly don't send invoice to the payment processor. Any idea how this is recorded in their books?

    David
  7. Greg_M

    Greg_M Well-Known Member

    Messages:
    1,096
    Likes Received:
    694
    Trophy Points:
    113
    My experience of using ecommerce stores is limited and I'm no accountant but here's my 2 cents, I'm assuming the store owner does all the physical handling of product.

    1. as said previously, probably automated by the store or payment processor.

    2. order to supplier (site owner?) ... how do you do this if they're IT illiterate? Ring them? Send a paper order? ... I'll assume they can handle email.

    3. problem? not sure why you need an invoice at this step, appears to me it's an issue for store owner ... order just keeps bouncing till it's filled, it's a confirmation of an already listed transaction not another sale.

    4. you send a statement of filled orders (confirmed by your bank deposits) for the billing period, plus invoice for your fee based on confirmed orders.

    Maybe I'm wrong but I'd assume everything in the middle is just a series of transfers between accounts (like a bank statement) to and from a master account.

    Your income and costs are only related to your fee for service and costs running the master account and sites, all other book keeping is the store owners issue, isn't it?

    Sounds like fun, hope you sort it, out or an accounting guru steps in, hope you don't find you need a banking license.

    Cheers
  8. kathiemt

    kathiemt Well-Known Member

    Messages:
    1,064
    Likes Received:
    336
    Trophy Points:
    83
    Honestly? The clients are better off having websites set up for them and their own merchant accounts or Paypal accounts so that purchases go right to them, no middle man handling their funds. You could charge a fee for monitoring their sites and letting them know of orders or something if they don't have the ability to do that but I really don't see how beneficial it would be for funds to go into your own Paypal account and then into theirs. And there might be tax implications there, don't know and you'd need to check.

    One of my clients isn't very internet/IT savvy at all. But he can read his email. His orders go to him by email and he sends off the product (a printed book). I set up his website, helped him get set up on Paypal and he remembers to log into Paypal about once a month to transfer the funds to his bank account.

    I got paid for creating and setting it all up, and then get paid for occasional maintenance when needed. I've had two other clients since that I'd done similar for, each one has published a book that they get orders for online.
  9. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    maybe a better example here: http://www.etsy.com/

    etsy acts as a marketplace for their clients (sellers). etsy collects money, takes certain % of the sales and send it to sellers.

    My question is how do I record this in my accounting (me being in a position of easy here).

    Thank you!
  10. SamanthaE

    SamanthaE Active Member

    Messages:
    186
    Likes Received:
    88
    Trophy Points:
    28
    Hi There,

    As an alternative to this model (which is fraught with many things other than recording payment e.g. chargebacks) I think that perhaps you should consider asking the clients if you can become a reseller of their products.

    Perhaps you can sell the products on consignment so that you don't keep any stock.

    This way your business process would be

    1. List the item for sale;
    2, Someone purchases item and you raise invoice to them (reocording as income)
    3. Payment is made into your paypal account
    4. You place order for goods with supplier and get them to post it
    5. Supplier sends you an invoices for the goods (recording as cost of goods sold)
    6. You transfer funds from paypal into your business bank account
    7. You pay supplier for goods;
    8. Transaction complete

    Of course, you would then have to negoiate a great price for the goods and postage with the supplier, but they would have been losing a percentage of sales for your fees anyway.

    This solution will lead to a lot less headaches - because with your other model there is a lot of reconciliation and paperwork involved every single day.

    But if you are absolutely deadset with your other model, I suggest you spend the money up front on a great lawyer to get your agreements airtight (because when it comes to money people are very different) and a great accountant to ensure you have the right structures in place.

    Good Luck
  11. kathiemt

    kathiemt Well-Known Member

    Messages:
    1,064
    Likes Received:
    336
    Trophy Points:
    83
    Oh, so you're setting up a market place? I hadn't understood that at all. Have you actually joined Etsy to see how they operate?

    They don't actually send you the payments, you get it direct and you are billed monthly for a % of the fees. So they must have a monitoring system that allows them to know how much to bill the client but they don't receive the funds. I have my Paypal account linked up with my Etsy account and receive the funds direct. I would say it's all in how the software is created for the website.
  12. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    yes, at etsy you have a choice: using your own paypal account or using their direct checkout (http://www.etsy.com/help/article/2024 - "Direct checkout enables shops to accept credit card payments through Etsy.") that's what I am after. there are more marketplaces like that that collect the payments and then send them to their sellers (i.e. www.goodsmiths.com).

    I am just not sure how they can send the money to their sellers without any invoice.

    David
  13. davidclm

    davidclm New Member

    Messages:
    6
    Likes Received:
    0
    Trophy Points:
    1
    ... found one more example: a real estate agency collects money from tenants and sends the money to the property owner. how is this recorded in their accounting?
  14. Kennethti

    Kennethti Well-Known Member

    Messages:
    381
    Likes Received:
    264
    Trophy Points:
    63
    Real estates set up trust accounts where the money is held on trust and on behalf of their clients. These trust accounts are subject to extremely stringent oversight and a breach of the rules can warrant a revocation of a license. They will record a receipt of monies and they will also record any outgoings but it's not an expense and it's not a sale - it's practically money in transit.

    I agree with kathiemt in saying that if you are setting up a website and e-shop for your clients then it is probably best that a separate paypal account is set up for them. This will solve any problems that may arise if they choose to stop using your services but still want to continue the e-shop.

    etsy is a little different in the sense that they are a marketplace type website, similar to e-bay. In that sense most of their clients do not have credit card processing facilities and so to make it easier etsy assists them with processing payments via credit card.

    There are both legal and accounting issues with your proposal - it's not a simple question to answer. Have you sought professional advice?

Share This Page