How To Integrate a Payment Processor App with Your QBO

If you are researching payment processors and accounting systems for your e-commerce startup, this blog is for you. In our experience, the trick is to find a combination of accounting software and processing system that: 1) works well together, 2) costs the least amount of money, and 3) is convenient for your clients to facilitate more sales.

We usually suggest our clients start by researching processing systems first, as processing fees are one of the biggest expenses in e-commerce. Once you decide on a processing system, you can then look for an accounting system that integrates well with your processing system. Most of the e-commerce businesses we work with use QuickBooks Online because it integrates with a myriad of apps, is easy to use, and has solid customer support. Since QBO is a very popular software (although pricey), you can always find a bookkeeper who is familiar with it and can jump in without a steep learning curve.

What to Look for While Selecting a Payment Processor:

• Cost-Effectiveness: As we mentioned above, any business needs to focus on keeping costs low. Low transaction fees will increase your business's bottom line. Just think: if you sell $100,000 worth of goods and the processor company charges you a 4% fee, that’s $4,000 out the window, even before other business expenses. The lower the processing fee, the better it is for your business.

• User Friendliness: A simple payment process helps keep customers engaged and reduces abandoned purchases.

• Security: Choose a processor that prioritizes data protection and can detect fraudulent activity. Otherwise, you will end up with a lot of credit card fraud disputes that may sink your business.

  
  

Popular Payment Processors Although there are many payment processors, we highlight some top ones that we most commonly see in our accounting practice:

1. PayPal: PayPal offers quick and secure transactions. Transaction fees are on the higher end, but consumers prefer PayPal because it provides extra purchase protection and doesn’t require entering payment information as long as the user is logged into their PayPal account on their phone or desktop.

2. Shopify Payments: Integrating directly with Shopify, this software offers a seamless setup, easy management through a unified dashboard, and affordable processing fees. Shopify makes their money on monthly fees for their platform.

3. Stripe: Stripe offers some of the most affordable processing fees, is easy to set up, and has multiple extensions and integrations with various selling platforms. Due to its extensive integrations and ease of use, Stripe is the go-to payment processor for many online businesses. One downside is that, in the case of a refund, Stripe won’t return the original transaction fees and charges extra for international cards.

4. Square: Square provides various payment structures, including subscriptions, direct debits, and installments. Its processing fees are similar to Stripe’s, but the platform is mostly geared towards physical locations with POS systems.

   
   

On a side note, when setting up your e-commerce business accounts, please make sure you use the correct EINs for your business if you are an S Corp, partnership, or corporation. Do not use your Social Security number. I am sure you heard of a 1099-K filing requirement, under which the payment software is required to send you a 1099-K form. If the form is issued under your personal SSN, you will have to reconcile this discrepancy on your individual tax return. If this is not done properly, you may later have to deal with the IRS, explaining that the additional taxable income was already reported elsewhere and that you should not be paying tax on it twice. It’s better to set up your payment account correctly from the very beginning.

Payment Processor Integration for QBO in E-commerce

Coming back to choosing the accounting system and its integration with payment processing systems: How necessary is this integration? What if my accounting system does not integrate? Well, in the good old days, when QuickBooks Desktop and Quicken were still prevalent accounting software, bookkeepers managed to classify revenue without such integrations. The truth is that accounting is based on bank statements, and if the accountant sees that the money came from a revenue source on the bank statement, they will categorize it as revenue accordingly.

Integrations between payment processing software and accounting systems minimize the accountant’s involvement, automate categorization, and reduce the inherent risk of manual labor. Integrations save accountants time, especially if you have high sales volumes. For the business owner, this means less money spent on accountant wages and more cash remaining in the business. On the other hand, all integration apps charge fees for their services. But with high sales, the fixed fee for the app will always be less than the accountant’s wages.

Here are several good apps that we see our e-commerce clients use in their operations:

• PayTraQer: This helpful app connects QuickBooks Online to popular payment processors like PayPal, Stripe, and Square. It automatically moves transactions, fees, and refunds between these systems, so your accounting stays accurate. PayTraQer is easy to use and keeps your financial information safe and secure. You can also choose how to categorize transactions and set up automatic syncing to save time.

  
  

• Zapier: Zapier is a useful tool that connects QuickBooks Online to many other apps, like payment processors, online stores, and customer management systems. It's great at creating automated "Zaps" tasks to make your work easier. You set up a Zap to automatically add your sales information from your e-commerce store to QuickBooks every time you make a sale. If you need a tool that can do more than just move data between apps, Zapier is a great choice.

  
  

• Sync with Square: Sync with Square automatically adds your Square sales, refunds, fees, and payouts to QuickBooks Online. You don't have to spend time manually checking your numbers. Sync with Square updates your books in real-time, so your information is always accurate.

  
  

Factors to Consider When Choosing the Right Payment Processor App

When choosing a QuickBooks connector app, consider how easy it is to set up and customize and how secure it is. For small businesses, a simple setup is essential. Look for apps with clear instructions and user-friendly interfaces. Customization options are important, as you could have different accounting needs. Check if the app lets you map data to specific QuickBooks accounts.

Look for reviews on platforms like the Intuit App Store, Trustpilot, and G2 Crowd. Ask for user feedback on various forums.

Common Challenges When Integrating Payment Processors with QuickBooks Online 

Here are some common challenges you might face when connecting your payment processors with QBO, along with tips on how to handle them:

• Data Sync Errors: Sometimes, bank transactions don’t show up in QuickBooks. This can happen because of a glitch in the connector app, connection issues, or incorrect settings. Missing transactions mess up your records and make it hard to reconcile your accounts. Another common issue is duplicate transactions, caused by misconfigured settings or the app syncing the same data more than once. Duplicates inflate your numbers and cause problems when balancing your books. Data sync errors are a very painful and time-consuming accounting problem that we encounter, and it takes a lot of manual time to fix. To check if this problem affects you, we suggest regularly reviewing your e-commerce transactions in QuickBooks and comparing them to the source (like PayPal or Stripe). Many apps have settings to prevent duplicates, so make sure these are turned on. If you do spot the sync problem, check your app’s settings to ensure everything is appropriately configured. Then, make sure the app has permission to pull all your transaction data. Keep an eye on your syncs and manually run them if needed. If problems persist, contact the app’s support team.

  
  

• Compatibility Issues: Some processors may not directly integrate with QuickBooks or may offer limited functionality. Therefore, you should verify compatibility or consider trusted connector apps before committing. Data format problems, particularly with international transactions, can cause syncing errors related to currency and tax details. These errors can often be fixed by adjusting settings or using apps that allow data mapping. Moreover, software updates to QuickBooks, payment processors, or connector apps can sometimes break the integration. It’s important to keep all systems updated and consult support resources when issues arise.

  
  

Security Concerns: Weak security can expose your business to hacks, fraud, and unauthorized access. Strong data encryption, like SSL or TLS, helps protect your financial data during transfers. The key is to choose apps that comply with global standards for payment card security. Implementing robust user authentication, such as multi-factor authentication (MFA), and regularly updating passwords can further safeguard your accounts. Having reliable data backups and a clear recovery process is essential to protect against data loss or breaches. These backups help restore information if needed. You should quickly seek reliable technical support as and when needed to protect your business and customers.

Setting Up Automated Rules in QuickBooks for E-Commerce Stores 

Once the initial set up is completed and you start reconciling your transactions, you can employ automated bank rules. Automated rules allow you to pre-define how certain transactions should be categorized when they appear in the feed or are imported from your payment processor. For instance, a rule automatically assigns all PayPal fees to the “Payment Processing Fees” expense account or categorizes recurring subscription revenues to a specific income account. That's how you free up time of your accountant and automate the accounting process.

Final thoughts

Payment Processor Integration for QBO is a powerful way to make your business efficient. The other issue you need to address is tax compliance. Taxes are complex, with many moving parts. If you ever need help with tax planning, tax preparation, or setting up your accounting, please keep us in mind. We have assisted hundreds of S Corp business owners with their taxes and accounting issues. You are welcome to check out our services here.