The emergence of online payment systems has reshaped the way businesses manage their transactions. One such tool that has taken the business world by storm is Stripe. With its simple, straightforward user experience and seamless integration with numerous platforms, Stripe has become a preferred choice for many businesses, from startups to large corporations.
In this article, we will delve into Stripe’s role in bookkeeping and accounting for businesses. We will explore what Stripe is, how it works, the various reports it offers, and how to configure these reports for the purpose of Stripe accounting. Additionally, we will discuss how to integrate this software with your existing accounting applications and answer some frequently asked questions. So, whether you’re a business owner trying to streamline your financial processes or an entrepreneur just starting out, this article will shed light on the potential benefits of using Stripe for your accounting needs.
What is Stripe?
Stripe is a technology company that provides software allowing businesses to make and receive payments over the internet. Founded in 2010, Stripe has become one of the leading online payment processors, boasting a user-friendly interface and robust features that cater to businesses of all sizes.
While Stripe is predominantly known as a payment processing platform, it’s also packed with additional tools and features that facilitate other aspects of running a business. From subscription management and billing solutions to fraud detection and financial reporting, It aims to provide a comprehensive suite of services to manage and grow an online business.
One crucial feature that Stripe offers is its accounting functionalities. Through the platform, businesses can generate financial reports, track payments, manage refunds and monitor their revenue. These features not only ease the task of managing finances but also provide valuable insights into a business’s financial health. By allowing businesses to keep their finger on the pulse of their financial performance, Stripe empowers them to make informed decisions and strategies for growth.
It’s important to note, however, that while Stripe provides robust financial tracking and reporting features, it is not an accounting system in the traditional sense. Instead, The software is designed to integrate seamlessly with existing accounting software, such as Xero, enhancing the overall accounting process by simplifying payment tracking and data entry. In the following sections, we will discuss how Stripe works, the types of reports it generates, and how to configure and customize these reports.
How Does it Work?
When it comes to payment processing, Stripe provides a seamless and streamlined experience. The platform accepts a wide range of payment methods, including credit cards, debit cards, and digital wallets like Apple Pay or Google Pay. Once a customer makes a payment, Stripe processes the transaction, takes a small fee, and transfers the rest to the business’s bank account through daily settlements.
However, Stripe’s functionalities go beyond payment processing. The platform also offers a range of tools designed to facilitate accounting and financial management. Its robust reporting features provide businesses with a clear and detailed overview of their financial activities.
To use Stripe’s accounting features, businesses first need to integrate the platform into their website or app using Stripe’s APIs or one of the many pre-built integrations. Once integrated, the business can then start accepting payments through Stripe and tracking these transactions in real-time.
On the accounting side, Stripe generates financial reports that detail the business’s income, fees, refunds, and other relevant data. These reports can be customized based on the business’s needs and preferences, allowing for a more personalized view of the financial activities. For instance, businesses can choose to generate reports daily, weekly, or monthly, depending on their specific accounting needs.
Additionally, Stripe’s accounting features include an automatic reconciliation tool, which matches the transactions recorded in Stripe with those in the business’s bank account. This tool reduces manual data entry and helps ensure accuracy in the business’s financial records.
Finally, it can be integrated with various accounting software, allowing businesses to export their financial data from Stripe directly into their preferred accounting system. This seamless integration not only saves time and reduces the risk of errors but also provides businesses with a more comprehensive view of their financial situation.
In the next sections, we’ll delve deeper into the types of reports that Stripe generates and how businesses can configure and customize these reports to meet their specific needs.
Bookkeeping and Accounting with Stripe
Understanding and maintaining your financial records is crucial for the smooth operation and growth of any business. With Stripe, both bookkeeping and accounting are made simpler.
Bookkeeping: Stripe automatically tracks every payment, refund, fee, and dispute, making it straightforward to keep your books up-to-date. With each transaction, Stripe creates a record that can be easily accessed and reviewed in your account dashboard. This allows for easy tracking of income and expenses, a fundamental part of bookkeeping.
Accounting: Stripe’s financial reporting features provide an overview of your business’s financial status and performance. Using the balance, payout, transaction, and dispute reports, you can gain a comprehensive understanding of your business’s cash flows, revenue, and any outstanding disputes or refunds. This information is crucial for decision-making, budgeting, forecasting, and overall financial management.
To further simplify your accounting process, Stripe supports integration with various accounting software such as Quickbooks and Xero. This allows you to seamlessly sync your Stripe data with your accounting software, reducing manual data entry and ensuring accuracy.
The choice of using either cash accounting or accrual accounting methods will depend on your business needs and preferences, but will impact the way in which you use your Stripe data in your accounting system.
In cash accounting, revenue and expenses are recorded when cash is received or paid, providing a straightforward view of cash inflow and outflow. This method is often preferred by small businesses due to its simplicity but can only be used by sole traders with an annual turnover of less than £150,000 per year.
On the other hand, accrual accounting records revenue and expenses when they are earned or incurred, regardless of when cash is exchanged. This method gives a more accurate picture of a company’s financial health, as it matches revenue with the expenses incurred in earning it. Accrual accounting is more complex and is often used by larger businesses or those with more complex financial operations. An important consideration for businesses using Stripe data in their accounting but looking to maintain accrual accounting records is that Stripe reports will only show the dates relating to the flow of cash between your customer, Stripe and your business. It doesn’t hold data on when orders are dispatched or fulfilled which is what you will need to use for accrual accounting. This is also an important consideration in respect of ensuring consistent gross margins in your reporting as if Stripe data is used without adjusting, the timing of revenue will not match the timing of the recognition of the cost of goods.
Ultimately, whether you choose cash accounting or accrual accounting, Stripe’s comprehensive record-keeping and reporting features can help to support your business’s accounting needs and help maintain accurate and timely financial records.
Types of Reports in Stripe Accounting
The software offers a comprehensive set of financial reports that can be instrumental in managing your company’s finances and making informed business decisions. The variety of reports caters to the different needs of a business and helps ensure transparency and clarity in financial matters. Here are the main types of reports you can generate using Stripe:
1. Balance Reports: These reports provide a detailed overview of all the financial activities in your Stripe account. They include information on all transactions, including payments, refunds, and fees, and show how these activities impact your available balance. The balance report should be agreed back to your accounting software (e.g. Xero) at month end to ensure that there are no inaccuracies in your accounting data.
2. Payout Reports: Payout reports offer a comprehensive look at the funds that have been transferred from your Stripe account to your bank account. This includes details about each payout’s date, amount, and status (e.g., paid, pending, or failed). These reports can be useful for tying sales data back into cash received in the bank.
3. Transaction Reports: Transaction reports provide detailed information about each individual transaction processed through Stripe. These include the date and time of the transaction, the amount, the payment method used, and more.
4. Dispute Reports: If a customer disputes a charge (also known as a chargeback), Stripe creates a dispute report. This report includes all the relevant details about the dispute, including the reason for the dispute, the status of the dispute (e.g., pending, lost, or won), and any related fees.
5. Monthly Reports: Stripe generates a monthly report that offers a summary of your account’s activities over the past month. This report includes information about the total amount of payments processed, the total amount of refunds issued, and the total amount of fees paid. Once your bookkeeping is completed in your accounting software for the month, you should be able to tie your revenue and Stripe fees in your Profit and Loss Account back to the monthly report.
These reports are accessible via the Stripe dashboard and can be downloaded in CSV format for further analysis or for sharing with your accountant (although it is easier to add them as a user). You can also schedule these reports to be sent automatically to your email at regular intervals.
By leveraging these reports, businesses can gain valuable insights into their financial performance, monitor trends, track growth, and identify potential areas for improvement.
Configuring and Customising Reports
Customising your financial reports in Stripe is a straightforward process, allowing you to tailor your financial information to best suit your business needs.
To customise these reports, follow these steps:
- Login to Stripe Dashboard: Sign in to your account and go to the dashboard.
- Navigate to Reports: On the left side menu, click on ‘Reporting’.
- Select Report: Choose the report you want to customise from the options available.
- Customise: Use the filters and settings to customise your report. You can select a specific date range, adjust the transaction types, or choose a particular payout status.
- Download or View: After customising, you can either download the report in your preferred format (CSV or PDF) or view it directly in the dashboard.
Remember, each report serves a unique purpose, and customising them to match your requirements can provide crucial insights about your business operations, helping you make more informed decisions.
Integrating Stripe with Accounting Software
Integrating Stripe with your existing accounting software can further streamline the financial management process for your online business. Integration means that data from Stripe can be automatically transferred to your accounting software, reducing the time spent on manual data entry and increasing the accuracy of your financial reports. Here are a few examples of widely-used accounting software that can be integrated with Stripe:
Xero: Xero is one of the most popular accounting software platforms for small businesses. A stripe feed is set up in Xero in a similar way to a bank feed. The feed will pull through all sales, refunds, Stripe fees and payouts.
QuickBooks: QuickBooks is another popular choice for small business accounting. Integrating Stripe with QuickBooks enables automatic updates of your sales and expense transactions, eliminating the need for manual data entry.
Here’s a step-by-step guide for integrating Stripe with Xero:
- Go to Xero: Start by logging into your Xero account.
- Navigate to Settings: Once you’re logged in, click on the ‘Settings’ menu at the top of the dashboard, then choose ‘Payment Services.’
- Find Stripe: Under the ‘Add Payment Service’ dropdown, select ‘Stripe.’
- Connect to Stripe: Click on the ‘Connect to Stripe’ button. You will be redirected to a new page.
- Sign In to Stripe: Enter your Stripe login credentials and click ‘Sign in’ to your Stripe account.
- Authorize Xero: After logging in, you’ll be asked to authorize Xero to connect with your Stripe account. Click on ‘Authorize access to this account’ to proceed.
- Configure Settings: You will then be redirected back to Xero where you can configure your Stripe settings. This includes setting the payment service name, choosing the account where you want to direct the payments, and setting the fees charged by Stripe.
- Save: After configuring your settings, click ‘Save’ to finalize the integration.
Remember, if you have any questions or run into any problems, both Xero and Stripe have extensive help sections on their websites, and their customer support teams are always ready to assist.
Importance of Proper Accounting for Businesses
As the digital economy continues to grow and evolve, so too does the importance of maintaining accurate and comprehensive accounting records. Regardless of the size or type of business, effective accounting practices are a cornerstone of success.
When using Stripe or any other digital payment processing platform, it’s crucial to keep your records up-to-date and well-organized. This has several benefits:
Financial Management: Proper accounting gives you a clear view of your financial status. You can easily monitor your revenue, expenses, cash flow, and overall business performance. It helps you make informed decisions regarding investments, budgeting, and other financial strategies.
Tax Compliance: Good accounting practices ensure you’re ready for tax season. Detailed, accurate financial records make it easier to report your income and calculate your tax liability. Mistakes in these calculations can lead to penalties or legal issues, so keeping your accounts in order is essential.
Audit Readiness: In the event of an audit, well-kept financial records can save your business a lot of time and stress. Accurate and comprehensive accounting makes it easy to provide any information required by auditors.
Investor Relations: If your business is seeking investment, accurate financial records are critical. Investors want to see that you have a strong understanding of your business’s financial situation and that you can provide reliable data about your income, expenses, and profitability.
Business Planning: Detailed financial records can provide valuable insights for strategic planning. You can identify trends, measure performance, and make predictions for the future. This data can inform your business decisions and help guide your company’s growth.
In conclusion, proper accounting isn’t just a regulatory requirement—it’s a powerful tool that can help drive your business forward. Integrating a robust accounting software solution with your Stripe account can streamline this process, allowing you to focus on what you do best: running your business.
Contact Elver E-Commerce today at 01942 725419 and see how we can help you with ecommerce accounting.
FAQs
- Is Stripe an accounting system? No, Stripe is not an accounting system. It is a digital payment processing platform that allows businesses to accept payments online. However, it provides detailed transaction data that can be used for accounting purposes, and it can be integrated with many accounting software systems for streamlined financial management.
- Can you do accounting in Stripe? While Stripe itself is not an accounting platform, it does provide comprehensive transaction reports that can be used for accounting purposes. Additionally, it can be integrated with various accounting software like QuickBooks, Xero, and others, enabling automatic data transfer for easier bookkeeping and financial analysis.
- What is Stripe used for? Stripe is used to accept and process digital payments. It enables businesses to accept credit card payments, debit card payments, and other types of digital payments on their websites or mobile apps. Stripe’s features also include subscription billing, on-demand marketplaces, and platforms for businesses and individuals.
We provide Business Advisory Services and professional Accounting for E-commerce Businesses. Get in touch with us! Call us today on 01942 725419.