Question

Paypal Reserve Hold

Forum|Forum|5 years ago
January 29, 2021
2 replies
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We have used Paypal as our payment processing agent for years. We process hundreds, if not more than a thousand, payment transactions per month. We input each transaction manually into quickbooks (because that's what we do!). We have quickbooks enterprise. Paypal has just started withholding a percentage "reserve hold" on every payment transaction. They will "hold" the amount for 90 days and then release it. My question is: how do I enter the reserve hold on each payment transaction? I'm not sure what will happen in 90 days when they release each amount. Has someone else dealt with this and already have the procedure set up in quickbooks? I don't want to set it up and find out in 90 days that Paypal will do something I don't expect and now I have to go back and change the hundreds of transactions that I entered incorrectly, because I am not sure of how Paypal will handle the release of the "reserve hold".

We do NOT enter paypal fees on each payment transaction. We just enter one entry at the end of the month for Paypal’s fees. But this “reserve hold” sounds like it will be a rolling hold, released after 90 days, so each amount will need to be tracked. I’m not sure how to handle this in quickbooks. Anyone else dealt with this?

QuickBooks Enterprise Suite

Rubielyn_J

Let me provide some information about the Paypal reserve Hold, @JM_hollings.

An account reserve is an amount of money that is held in your PayPal account. This is used to cover potential financial risks such as payment reversals like chargebacks and claims. PayPal uses three types of reserves: rolling reserves, minimum reserves, and jumpstart reserves.

You create a reserve funds account in QuickBooks Desktop (QBDT). The setup depends on how you treat this in your books.

I'll guide you how:

Go to the Lists tab.
Select Chart of Accounts.
On the Account drop-down arrow, click New.
Select your Account Type.
On the Account Name field, enter Reserve Funds.
Enter the necessary information and then Save & Close.

To learn more about QuickBooks and Paypal integration, feel free to check this out: QuickBooks & PayPal.

If you've got other QuickBooks concerns. Feel free to leave a reply below. Have a great weekend.

J

JM_hollingsAuthor

Thanks for your response. I know how to create an account. That isn't the issue.

I actually just entered the first day's receipts with Paypal withholding funds into their "reserve hold". I created a “Reserve” item account to include on each invoice and added the "hold" amount to the invoice using the Reserve item account. I applied customers’ payments to the invoices and each of those customers now has an outstanding balance equal to the amount of the “reserve hold”. IS THAT THE CORRECT WAY TO HANDLE THIS? This is a 90 day hold, I will have hundreds and hundreds of customers with small outstanding balances. These customers don’t owe us any money, Paypal does. So, I don’t think this is the correct way to do this.
Or, do I just make a daily “invoice” to Paypal for the total that Paypal withheld for the day and hope that in 90 days when the rolling hold is released that the amount held by Paypal today is the same amount they release on day 90, and then apply that as a payment to that Paypal invoice?

Has anyone else dealt with entering individual “reserve holds” on hundreds of transactions? How do I set this all up without creating more work for myself than needed. Thanks.

S

Sunnee

I find the process for a reserve funds account in Quickbooks Desktop as a result of a customer case in PayPal or Shopify so convoluted. Also, I don't find a field to even create my own account e.g., reserve funds. When funds go on hold by PayPal or Shopify, I just enter it as a Refund for that particular order and create a journal entry for the fee, which is usually $15 with Shopify. And then if I have a case settled in my favor, and because that dollar amount is going to appear in my bank account days, weeks or months after the original hold was put in place, I just create a new order for the same customer with notes to explain for future reference. I also make a journal entry when the funds are put on reserve for the known fees and then create a deposit if I win the case for that amount (this only applies to Shopify as they take the $15 and will either keep it if the vendor loses the case, or give it back if the vendor wins the case). Basically, I just handled it like money in/money out permanently/or money bank in. I found this really made my bookkeeping clearer when reconciling my bank account since many times the case lasts from one month to another and when I know the outcome, my bookkeeping steps are always the same and totally wrapped up quickly and my income and expenses are always accurate. One last thought, PayPal is terrible for actually sharing what the dollar amount of the fees are and I haven't found any way to know what they are/were for a case since they charge a fee whether you win or lose. When I am moving money from PayPal to my bank account I just total the sales amounts and their merchant fees, subtract those merchant fees from the sales amount total and assume that the remainder is the correct case transaction fee. I don't know why PayPal doesn't include those reserve funds on our Activity page just like they do a sale or a refund....why don't they report to us vendors as a case is opened and funds are put on reserve and call it 'reserve funds' since we don't have access to it any more than we have access to a refund. Then when it is resolved in the favor of the vendor they should create another Actvity entry to indicate the funds are available. Seems so simple and clear to me....but I'm not an accountant.

MaryLandT

Yes, you can create an invoice to PayPal and wait for 90 days for the payment. JM_hollings.

I still suggest consulting your accountant for specific instructions on how to handle reserve entries. Doing this will help ensure you have accurate records of your book.

If you don't have one, you can find an accountant near you.

I'm adding this link for future guide: Get started with customer transaction workflows in QuickBooks Desktop.

Get back to me if you have follow-up questions about managing invoices. I'll be right here to provide the information you need.

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