Payment Processor Reconciliation

Overview

PSPs (PayPal, Stripe, Square, Adyen, Braintree) net out fees, refunds, chargebacks, and disputes before depositing to your bank. The bank sees a single net number; your books need the gross. Every reconciliation problem comes from this gross-vs-net gap.

Core principle: For every PSP payout to your bank, you must be able to explain — line by line — what gross sales, fees, refunds, and adjustments add up to that exact net amount. If you can't, something is wrong.

The reconciliation equation

Gross sales (in period)
  − PSP fees
  − Refunds issued
  − Chargebacks / disputes
  − Reserves held
  ± Adjustments (currency, rounding)
  = Net payout to bank

If left ≠ right, find the line that breaks it before adding a plug entry.

Workflow

Step 1: Pull the 3 source documents

For the period being reconciled, get:

1. Bank statement — the deposits from the PSP
2. PSP payout report — Stripe Dashboard → Payouts; PayPal → Reports → Activity Download
3. Accounting record — QBO/Xero PSP clearing account transactions

Step 2: Match payouts 1:1 to bank deposits

Each PSP payout = one bank deposit (usually 1-2 day delay).

If a payout is missing from the bank: check (a) PSP reserve hold, (b) account-on-hold notice, (c) routing change.

Step 3: For each payout, break down the gross

In Stripe: click the payout → "Show details" → CSV export.

Each payout row should be one of:

• charge (gross sale)
• refund
• adjustment (chargeback, dispute, currency conversion)
• application_fee / stripe_fee
• transfer (account-to-account)

Sum each category for the period. The sum should match the payout amount.

Step 4: Reconcile to accounting

In QBO/Xero, your PSP should appear as a clearing account (current asset). Workflow:

1. Customer pays via PSP → debit Clearing Account, credit Revenue
2. PSP charges fee → debit Fee Expense, credit Clearing Account
3. PSP issues payout → debit Bank, credit Clearing Account
4. End of period: Clearing Account = funds sitting in PSP not yet paid out (should reconcile to the PSP's "Balance" on that date)

If your books are recording net deposits as Revenue, you're losing 2.9% of revenue visibility — and your COGS/margins are wrong. See references/journal-patterns.md for the correct entries.

PSP-specific gotchas

See references/psp-quirks.md for the full list. Top 5:

Stripe

• Instant Payouts have a 1% fee on top of the 2.9% — easy to miss
• Stripe Tax auto-collects sales tax; that goes to Sales Tax Liability, NOT Revenue
• Disputes show as $-15 in payout for the dispute fee, then $-original_amount when lost
• Connect platforms have nested fees (application_fee + Stripe fee)

PayPal

• PayPal Working Capital loan repayments come out of payouts — looks like a fee but it's debt service
• Currency conversion uses PayPal's rate, not market — track the spread separately
• eCheck payments take 3-5 days; show as pending then clear

Square

• Instant Deposit has 1.75% fee; standard deposit is free but 1-2 day delay
• Square Capital loan repayment is a hold-back %, not a fixed amount

Multiple PSPs

• If you use 2+ PSPs, never co-mingle them in one clearing account. One clearing account per PSP.

The reconciliation report (Claude's deliverable)

After reconciling, produce this format:

# PSP Reconciliation — [PSP Name], [Period]

## Summary
- Gross sales (PSP): $X
- PSP fees: $X (Y% effective rate)
- Refunds: $X
- Chargebacks: $X
- Reserves change: $X
- **Net payouts: $X**
- **Bank deposits matched: $X**
- **Unmatched: $X**

## Unmatched items (require investigation)
| Date | PSP txn ID | Amount | Notes |

## Journal entries posted
[List]

## Anomalies
- [Refund rate this period: X% vs. trailing 3mo avg Y%]
- [Effective fee rate X% vs. expected Y%]

Red flags

Investigate immediately:

• Effective fee rate > 4% on Stripe → probably card-not-present + international cards; check pricing tier
• Chargeback rate > 1% → risk of PSP account hold
• Refund rate > 10% → product or fulfillment issue
• Reserve growing → PSP risk team flagged you; call them
• Payout missing > 3 days → account issue, call PSP immediately
• Currency conversion losses > 2% of FX volume → negotiate or switch FX provider

Quick reference