How to set up PayPal for WooCommerce and manage accounting processes
Kaci Carson
November 03, 2023
Managing your WooCommerce accounting is crucial to maintaining best practices in running your business. If you run an online store with WooCommerce, accepting PayPal as a payment method is a great option for many because it is both a trustworthy and secure option, assisting in customer retention among other advantages.
In this article, we’ll walk through how to activate PayPal payments, manage PayPal orders, sync transactions with your accounting software, and handle refunds and disputes the right way. With the right approach, PayPal can become a key part of your online business success.
Benefits of Adding Paypal to your eCommerce store
Using Paypal as a payment gateway option for your store has many advantages. Here are some of the benefits to consider:
- High acceptance rate: PayPal is accepted as a payment method by a vast number of merchants worldwide, making it a convenient payment option for customers shopping at your store.
- Trusted payment provider: PayPal is a well-established and reliable payment provider, known and trusted by customers. This can enhance your store’s credibility and contribute to higher conversion rates.
- Secure payments: PayPal employs advanced security measures, such as encryption and fraud detection, to protect transactions and minimize the risk of payment-related issues.
- Fast transactions: PayPal streamlines the checkout process, enabling customers to complete transactions quickly and conveniently, using their PayPal account or a credit/debit card. This can enhance the customer experience and minimize cart abandonment.
- Multi-currency support: PayPal supports a range of currencies, which can be particularly useful if you sell internationally.
- Seamless integration with WooCommerce: Integrating PayPal with your WooCommerce store is a straightforward process, ensuring a smooth and hassle-free checkout experience for customers.
Understanding PayPal fees
PayPal is a great option for business owners who want to accept payments for their domestic and international sales. However, it’s important to be aware of the fees associated with using this service. For example, domestic sales are charged a fee of $0.30 per transaction, while international sales are charged an additional cross-border fee, which ranges from 0.5% to 2% depending on the currency involved.
It’s important to note that there may be additional fees for certain types of transactions, such as chargebacks or currency conversions. To avoid error, business owners should carefully review PayPal’s fees and charges and regularly review their fee structure.
Activate PayPal Payments in WooCommerce
The WooCommerce + PayPal setup process is simple to enable. Follow these steps to get started:
- Log in to your WordPress dashboard and navigate to the WooCommerce section.
- Click on the Settings option and select the Payments tab.
- Scroll down to locate the PayPal option and click on it to configure the settings.
- Enable PayPal as a payment method on your site by checking the box.
- Enter your PayPal email address in the field provided.
- Choose whether to enable PayPal Standard or PayPal Checkout. PayPal Standard is the default option and allows customers to complete the payment process on PayPal’s website, while PayPal Checkout enables customers to complete the payment process on your site.
- Customize the other settings according to your preferences, such as the payment action and order status
- Save your settings by clicking on the Save changes button.
By completing these steps, your customers will be able to select PayPal as a payment option during checkout. They will be redirected to PayPal’s website to complete the payment process, or they can complete the process directly on your site if you’ve enabled PayPal Checkout.
Manage PayPal Orders in WooCommerce
The process of managing PayPal orders in WooCommerce is simple and efficient. When a customer checks out with PayPal, their order will be created as a normal WooCommerce order with a processing status. Once PayPal confirms the payment, the order status will automatically update to “Completed”. You can view all PayPal orders in the WooCommerce orders page, and details like customer information, billing/shipping addresses, line items and totals.
If there are any issues with a PayPal order or you need to change something, you can manually update the order status or details just as you would with any other order. For example, if you need to change the shipping address or add a product, you can edit the order directly. If a PayPal order was paid but never completed, you may need to manually mark it as “Completed” by changing the status.
Refunds can also be issued directly through WooCommerce, and the refunded amount will be deducted from your PayPal account balance. To issue a refund, find the PayPal order in WooCommerce and click “Refund” under the “Order Actions” section. Enter the amount to refund and confirm. The refund should appear in your PayPal account shortly after.
WooCommerce handles PayPal orders exactly like any other payment methods, so managing your store’s orders remains simple and centralized no matter how customers choose to pay. PayPal integration helps streamline your order fulfillment workflow rather than complicating it. With this information in mind, you can ensure all your WooCommerce + PayPal payments and orders are accounted for properly.
Sync WooCommerce PayPal transactions to accounting software
Integrating WooCommerce with your accounting software is essential for keeping accurate financial records. Accounting platforms such as QuickBooks, Xero, and MYOB are able to integrate with WooCommerce through Amaka’s integration. The integration will retrieve all “Completed” sales orders, including those paid for with PayPal. Relevant sales data such as fees, discounts, shipping, and taxes will be captured and synced.
PayPal deposits payouts into your bank account on a regular settlement schedule rather than instantly processing each payment. Hence, the integration will sync WooCommerce data into temporary clearing accounts in your accounting software so that your financial data is up-to-date. A clearing account is made for each payment method, in this case, it’s named the PayPal Clearing Bank Account.
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How to efficiently reconcile your WooCommerce store’s PayPal transactions
After PayPal payouts are deposited into your bank account, you need to go through a reconciliation process. This involves comparing the transactions in your bank to the ones from WooCommerce to ensure there are no discrepancies. Before you begin, you need to make sure the bank account that PayPal deposits payouts into is connected to your accounting software through a bank feed.
PayPal will deposit the total amount paid on orders, minus their transaction fees. The integration will separate fees when syncing data from WooCommerce, meaning it will match up to the payout amount. To reconcile, use your accounting software’s reconcile function to confirm matches. Certain accounting software will automatically suggest matches for you.
Reconciling local vs. foreign currency PayPal payments
Paypal transactions between local and foreign currency differ in how they are processed and reconciled. To reconcile transactions of local currency, you need to:
- Remove the temporary balance from the clearing account and post it to a permanent account. Transfer the amount from the temporary PayPal Clearing Bank Account to the permanent business bank account in your accounting software.
- Then, to reconcile PayPal fees, you need to create a payment in the temporary PayPal Clearing Bank Account. If you’re using Xero or MYOB this can be done using the ‘Spend Money’ function. If you’re using Quickbooks Online (QBO), this can be done using the ‘Expense Transaction’ function.
For foreign currency, once a transaction is made it will show in the Paypal Clearing Account in the currency it was paid in. To reconcile transactions of foreign currency, you need to:
- Remove the temporary balance from the clearing account and post it to a permanent account. The integration will create an account in your accounting software called Undeposited Paypal Funds. Transfer the amount from the temporary PayPal Clearing Bank Account to the temporary Undeposited Paypal Funds account in your local currency.
- Then, transfer the amount from the temporary Undeposited Paypal Funds account to the permanent business bank account in your accounting software.
- Finally, to reconcile PayPal fees, you need to create a payment in the temporary PayPal Clearing Bank Account. If you’re using Xero or MYOB this can be done using the ‘Spend Money’ function. If you’re using Quickbooks Online (QBO), this can be done using the ‘Expense Transaction’ function.
Please note, the integration does this process for native WooCommerce Payments automatically. Data is matched to the bank feed, and temporary amounts and fees are automatically synced to the appropriate accounts.
Reconciling frequently is vital due to the nature of PayPal’s settlements spanning various dates. Through consistent reconciliation, you gain a transparent view into how much revenue PayPal contributes and ensure you account for each transaction accurately. However, the process requires actively maintaining connections between PayPal, your accounting software, and WooCommerce.
Key takeaways on WooCommerce and PayPal accounting
WooCommerce and PayPal together provide a powerful feature to your WooCommerce site that will attract many PayPal users because of its reputable and easy to use checkout gateway. With this information in mind, you’ll be able to successfully add to your WooCommerce storefront and manage your accounting with ease, ensuring best practices, and take your business to the next level.
What’s next?
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