When you accept a credit card payment, you probably aren’t thinking about how to record the transaction in your accounting ledger. Instead, you’re excited to make a sale or book a service. Accounting with Stripe (or another payment processor) is a problem for your future self.
If that’s you, don’t just think about accounting when it’s time to submit reports for tax purposes or pass off information to your bookkeeper. You can do three things now, especially if you use Stripe for your credit card payments.
Clean up your list of products in Stripe
When is the last time you looked at the list of products sold on your website? Or how they connect to your Stripe account? If it’s been a while, cleaning up your list of products is important for two reasons:
- Stripe has a Revenue Recognition feature that will tell you when you’ve earned revenue. If you have a subscription-based product (think a membership or education offering), you can’t recognize the revenue when you make a sale. The same applies if you sell a product–you shouldn’t recognize the revenue until the product is sold.
This feature only works if Stripe knows what types of products you are selling. Take the time to go into your Stripe account and set rules so it knows how to treat revenue you earn. For more information, visit the Stripe documentation center.
- Another accounting-based reason to clean up your lists of products is to have a clear record of your cost of goods sold (COGS). The cost of goods sold is the measure of how much you spend on your products before you sell them. It’s a key component of determining your profit. And the cleaner your list of products is (coordinating records in Stripe), the easier it is to do your books.
Reconcile your Stripe coupons and gift cards
Once you create rules in Stripe, make sure that you create one for gift cards as well. In terms of accounting, gift cards are a liability. This means that you can’t recognize the revenue of selling a gift card until its used. You’ll want to make sure that Stripe knows not to report this revenue as recognized upon purchase. Otherwise, you may overreport assets and underreport liabilities.
Your coupon history is another item to consider cleaning up and determining how to share with your accountant or bookkeeper. This may seem strange, but quantifying how much revenue you lose to coupons should be an expense. Typically, this would be a line item in your income statement, and having a clear way of reporting it or a coupon strategy can help your bookkeeper.
Stripe Accounting: Automate your reporting
While this work might sound daunting, this strategy takes future work off of your plate. Connect your Stripe account to your accounting software with a third-party platform. Stripe contains a lot of data about your business, and you need to make sure your accountant or bookkeeper can use it.
If you use Stripe and Xero, products like Bankfeeds connect your two accounts, ensuring that your data passes through each system in real-time. This means that your record-keeping is up-to-date within moments of making a sale, ensuring that your Stripe accounting is accurate 24/7.
When these three strategies are combined, your Stripe accounting will be easier than ever. If you’re ready, start your free trial of Bankfeeds.