Your bank deposit is not your whole sales record

Follow one payment from the client to the bank

Suppose a customer pays $1,000. A payment provider deducts a $30 fee and sends $970 to your bank. You now have three related records: the sale or invoice, the provider’s transaction and fee statement, and the bank deposit. Looking only at the $970 deposit loses the explanation of what happened to the other $30.

The bookkeeping task is to preserve that relationship. How and when an amount enters a tax return depends on the accounting method, transaction and applicable rules. The exercise here reconciles money movements; it does not calculate taxable income or decide whether an expense is deductible.

Use a settlement bridge

For a single currency and a consistent settlement period, a basic bridge can start with customer receipts, subtract refunds and provider fees, then account for funds retained or released by the provider. Compare the resulting expected payout with the actual bank amount.

For example: $1,000 received, less $50 refunded and $30 charged in fees, leaves $920 before reserve changes or other adjustments. If the bank received $900, the unexplained $20 needs investigation. It is not automatically another expense.

Use the free payout reconciliation tool to work through those amounts. Timing differences, foreign exchange, opening balances, disputes and transfers may explain a difference. The tool is deliberately a cash-settlement check, not a tax calculator.

Why a December payout can include November money

A settlement-level check and a monthly account reconciliation answer different questions. The free payout tool checks one settlement. For a whole month, begin with the provider's opening balance and finish with its closing balance. Otherwise money already sitting with the provider can be mistaken for a new customer receipt.

Consider a fictional USD provider account with $200 available at the start of December. During the month it receives $3,000 from customers, pays $150 of refunds, deducts $90 of fees, moves $100 into a separate reserve, releases $40 from an earlier reserve and pays $2,500 to the bank.

If the separate reserve opened at $70, it closes at $130: $70 + $100 − $40. Total money still held by the provider is therefore $530, consisting of $400 available and $130 reserved. Those reserve transfers do not create extra customer sales or fees in this example.

Check how your provider defines its reported balance. If it already includes both available and reserved funds, subtracting a reserve again would understate the total. Match dates and settlement references before treating a difference as an error. This example is a cash movement bridge, not a revenue-recognition policy.

A currency difference is not automatically a bank fee

Suppose a provider shows a USD 920 payout and a bank shows PKR 255,000. Subtracting those two figures does not identify a fee: they are different units. First obtain the actual conversion rate and any separately disclosed charges. Record the original currency amount, conversion details, settlement date and bank credit together.

If the provider confirms a conversion of USD 920 at PKR 280 per USD before a separately deducted PKR 2,600 charge, the bridge is PKR 257,600 less PKR 2,600, producing PKR 255,000. This is a hypothetical arithmetic example, not a market exchange rate or a conclusion about who charged a real customer.

If the statement does not supply that breakdown, request it instead of labelling the entire difference “tax.” A tax withholding needs its own evidence. A conversion spread, provider fee, bank charge, reserve and withholding are different items and may require different accounting treatment.

Avoid the common double count

Moving $970 from your provider balance to your business bank account is a movement of existing funds. Recording the customer receipt and that internal transfer as two separate sales would overstate the sales trail. Label the transfer and connect both sides.

Similarly, do not label every bank credit as customer income. Owner funding, loan proceeds, refunds from suppliers and transfers can look similar on a statement while representing different events. Identify the underlying transaction before choosing an account category.

If a single payout bundles many sales, keep the settlement report listing those sales and its payout reference. A spreadsheet with only the bank credit and a guessed description leaves the reviewer unable to trace the individual transactions.

Keep evidence in a repeatable folder structure

• Sales: invoices, contracts and records showing the amount and source of receipts.
• Provider activity: full transaction exports, fee reports, refund records and settlement references.
• Banking: statements for every account involved, including transfers between accounts.
• Adjustments: reserve notices, dispute correspondence and exchange-rate or conversion details.
• Review notes: unresolved differences, their proposed explanations and who will confirm them.

The IRS allows a recordkeeping system suited to the business, provided it clearly supports income and expenses. Keep underlying evidence as well as the spreadsheet; a typed total does not replace invoices, receipts or statements.

Close the month with a question list

Set aside a regular review session. Match receipts to settlements, settlements to bank credits, and fees to provider statements. Investigate open items rather than plugging the difference into “miscellaneous expense.” Keep refunds linked to their original payments and distinguish unreconciled timing items from actual losses.

For multiple currencies, reconcile each currency first and then document conversions. This article does not prescribe an exchange rate or a currency-translation method for tax reporting. Give that question to the preparer with the original-currency amounts, transaction dates and conversion evidence intact.

The goal is a payment trail another person can follow without having to guess what each deposit means.