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Quicker Online Store Cash Flow And A QuickBooks Accounting Hack

I thought some history of credit card processing would be a good base to build this post upon.

Going back as far as 9000 BC one could use cattle, camels and fish as currency.

You had to spend the fish fast.

Cowrie shells, gold and silver nuggets leading to Chinese deerskin notes and Native American wampum beads.

The Manhatten Wampum bead myth

“In the Dutch National Archives is the only known primary reference to the Manhattan sale: a letter written by Dutch merchant Pieter Schage on November 5, 1626, to directors of the West India Company, which was instrumental in the exploration and settlement of “New Netherland.” In the letter, he writes, “They have purchased the Island of Manhattes from the savages for the value of 60 guilders.” (There is a surviving deed for Manhattan and Long Island, but this was made well after this initial Manhattan purchase, when the Dutch had already been inhabiting the island for several decades.) 

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As far back as 5000 years ago Mesopotamians used clay tablets but found them to be impractical for their wallets and purses.

Melting down tons of copper was not a much better option as you needed a horse and cart full of copper to go shopping at the renaissance mall.

In the 19th century, merchants would use “credit coins” and “charge plates” to extend credit for local farmers and ranchers, providing credit until their crops and livestock were sold.

Growing up in the 20th century long before Internet, payments were primarily made in cash or with a paper check.

In1946 guy by the name of John Biggins, a banker created the”Charge-it” card.

Purchases were forwarded to Mr. Biggins bank who reimbursed the merchant and chased the customers for payments.

This was coined the “closed loop system.”

Five years later, New York’s Franklin National Bank issued its first charge card.

Charge cards like the Diners Club card and American Express emerged but banks found a gravy train with consumer cards providing revolving credit with Bank of America leading the charge <-pun, in 1958.

Franklin’s marketing plan was to mail out thousands of cards arbitrarily to folks in California.

In 1966 MasterCard was born out of a group of banks forming the Inter-Bank card Association (ITC)

Bringing us to “now,” the buffet of payment processing choices is large enough for kings celebration.

  • Credit Cards
  • Mobile Payments
  • Bank Transfers
  • Ewallets
  • Prepaid Cards
  • Direct Deposit
  • Cash

Cities are trying to ban cashless business. ” Good luck with that.

What’s even more remarkable is the exponential explosion of companies and methods for processing money online.

Here are a few that I found, I’m sure there are more

Due
Stripe
Dwolla
Apple Pay
Payoneer
2Checkout
Amazon Payments
Square
Payza
Skrill
PayPal (237 million people have active PayPal accounts)
Braintree
Venmo
Visa checkout (20 million active customer accounts worldwide)
Google wallet
Masterpass
ACH (a U.S.-specific payment method) increased by more than 1 billion in 2017 for the third year in a row)
Ali Pay (China)
WebMoney
iDeal (the Netherlands)
Giropay (Germany)
Sofort (Austria, Belgium, France, Germany, Italy, and Spain)
eNets (Singapore)
Boleto Bancaio (Brazil)
Paysafe
SEPA Direct Debit (500 million Europeans)

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Begin Quicker Online Store Cash Flow And A QuickBooks Accounting Hack

Every article you’ll read and all the questions you  see on LinkedIn about merchant processors sound like:

“What’s the best merchant processing rate I can find?”

“What are all those fees and will they keep me PCI DSS compliant?”

Editor’s note – We currently use PayPal exclusively online for credit card processing (and PayPal Express).

Square is used in the brick & mortor (wood) store to differentiate cashflow easily, you know the company run by Jack Dorsey who also runs Twitter

One of the many benefits of processing credit cards with PayPal is that we do not store customer credit card data.

Zero worries about a data breach.

Also, 100% of our data is “in the cloud” across multiple servers globally.

The worst that could happen should we be subject to a “ransomware attack” would be replacing all or part of our IT infrastructure.

When talking about merchant processors you’ll hear terms like “interchange rates”, “card not present” (It’s a website how the hell can a card be present?) “tiered/bundled” which is all well and good but at the end of the day, they all come from the position of deceit.

What is so deceiving about Chase Paymentech, one of the biggest banks in the world they, have to be transparent don’t they?

No, Chase Paymentech is actually Orbital white-labeled for Chase, that’s the first lie – there are others.

Groupon is a huge company everybody knows them just got into the credit card processing business – why would they want to lie to you – don’t they want to earn your business?

Did you know that they are not a credit card processor, just an aggregator and they only have one merchant account themselves?

It uses Global Payments to process credit cards on behalf of its users. 

Yes a small lie but the other lie is when you sign up they promise you 1.8% plus $.15 per swipe BUT it goes to 2.2% if you don’t use Groupon coupon marketing promotions.

Their bookkeeping is also very sloppy (first-hand experience) but that’s another story.

A couple of years back I spent an evening noodling some numbers and put together my gross costs of credit card processing.

Something like a dozen merchant processors all at the same sales pitch “we will save you money” and guess what?

Our overall costs to process credit cards including PayPal remained very consistent at just under 3% so no one ever really saved us any money. 

What sets them all apart?

How fast can I get my money?

This is especially true if you do any drop shipping.

Whether you save $.15 or $.30 on a credit card transaction is not nearly as important as when does the most recent batch hit my bank?

For the rest of this discussion, we will assume we’re talking about e-commerce transactions using the four major credit cards and PayPal. 

We bank at Chase and used to use Chase Paymentech for credit card processing.

We batched out around 10:30pm and got our money usually by 4 or 5 in the morning EXCEPT American Express which took an additional three business days.

So I want you to remember this term “One Point.”

“One Point” merchant processors will fund American Express the next business day.

Usually at a slightly higher rate but then again American Express customers tend to spend big so you want that money quickly.

This means if you’re a dropshipper you can send your PO to your vendor the next day with a credit card number to maintain a high level of customer service. 

We retired Chase Paymentech who was replaced by Elevon.

Elevon sent American Express charges into Chase the next business day.

Payment Gateways – in spite of all the high-tech systems merchant processors possess they are unable to collect money directly from a website.

You need to have a payment gateway sitting in between your website and your merchant processor.

Authorize.net is the 900-pound gorilla which we have used for many years.

Their system will take all of the money you’ve collected for the day and “batch” it out after keeping it for five or 10 hours prior to depositing the funds in your bank.

They charge a fee and I forget if it’s monthly or percentage but if you do use a merchant processor you do need to use a payment gateway.

One more cog in the money collection machinery and one more expense that you really don’t need.

When merchant processing goes sideways – expect it

How onlne credit card processing works

I used to switch off between Paypal Payments Pro and authorize.net throughout the day.

If I needed some quick working capital I send all the money to PayPal which I can then expense out with the PayPal debit card. Because I can’t pay things like rent and electricity bills using a credit card without incurring a fee I send money to my account at Chase for conventional bill paying.

Another underlying issue is capital.

PayPal offers a small line of credit and also offers PayPal Working Capital where you can borrow X amount of dollars and pay it back with a percentage of every transaction.

We currently have a six-figure line of credit with them.

Never sent in any paperwork.

Never shook a hand.

I posted this ditty on the SpinSucks Slack community

I’m about to put you out of your misery as I have solved this problem 10 years ago.

The problem is “how to get data into QuickBooks online in an organized fashion from his online store.”

Do not synchronize your online shop with QuickBooks.

Do not synchronize anything with QuickBooks.

Do not try to get your sales numbers from QuickBooks.

Keep your sales numbers in from your shop in spreadsheets, I prefer Google Sheets in GSuite because of their ubiquitousness.

The problem is not just QuickBooks.

QuickBooks wants you to synchronize with PayPal and/or your bank(s).

The problem is both institutions provide bad data.

When you download completed transactions from PayPal youll see that none of the debit card transactions have data in the “name” field.

PayPal developer support helped me figure out that all debit cards transactions and PayPal use the “subject field” to identify the vendor of the card.

Another huge issue with PayPal “completed transactions” download is duplicate and negative/positive transactions.

We take all of our online money via PayPal including credit cards.

Editor’s note –

Ironically two years after the breakup of PayPal and eBay, eBay is “suggesting” that eBay sellers use “eBay payments.”

So now instead of getting our money instantly as we did in PayPal we patiently wait 4 days to drop into our bank where we really don’t want to go.

Thank you, Devin, we still don’t like you.

End Editor’s note –

That yields between about 25,000 transactions annually not counting ACH (bank) transactions. 

Duplicate transactions must be plucked out of the download

I brought this to the attention of PayPal developer support and received the following response.

“Thank you for contacting Merchant Technical Support.

Unfortunately, the problem you’re experiencing is being caused by some technical issues with the PayPal system. Our engineers are currently working diligently on a solution to this problem. I am going to assign this ticket to our internal engineering ticket so that when the problem is resolved, you will be notified of its completion right away. 

This ticket will remain in an “On Hold – Internal” status until you’re contacted about the resolution. 

I apologize for the inconvenience and thank you for your patience!

Sincerely,

Roy

Merchant Technical Support

PayPal, Inc”

Thus we know what we are working with.

In short, you have to “massage” the master spreadsheet(s) by breaking it down into at least 3 new sheet credits (with fees)/debits/transfers.

Assuming you clean everything up credits are pretty easy plus you pick up your fees which a handle as a simple end-of-the-year single journal entry for the year crediting “sales” and debiting “credit card processing fees” so as to not under-report income and factor in the cost of collecting money.

Transfers are tedious but self-explanatory.

An additional column is added to expenses where I insert the “chart of accounts” going through the whole year talking about 3 to 5 hours assigning all the transactions a COA.

Once I have the spreadsheets complete I upload each individual spreadsheet into QuickBooks Online using Transaction Pro which I rent for 2 months.

Once I’m done with uploads I give my CPA a heads up who will reach out with further questions if needed – feel free to reach out [email protected] for more granular answers

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