Usually the amount that you receive from Stripe or Paypal doesn’t match the full invoice total. The difference is due to Stripe or PayPal deducting their transaction fees before transferring the funds to your bank. For instance, if your client’s invoice is for £200.00, you might only receive £195.00 — the missing £5.00 is their processing fee.
How should I record these fees in Xero?
It’s important to reflect both:
- The full value of the sale (to match your invoice), and
- The transaction fee as a business expense.
What are the best ways to reconcile payments that include fees? You have 3 main options:
Option 1 – use the bank feed!
Xero integrates directly with Stripe and PayPal. These connections automatically pull in transactions and separate out the fees, making reconciliation much simpler. Just connect them as a bank like you would any other bank feed…
Just in case that isn’t an option…
Option 2: Use a Clearing Account (ideal for high volume or recurring payments):
- Set up a temporary account in Xero (a clearing account) for your Stripe/PayPal receipts.
A clearing account is a bank-type account in Xero (but not a real bank account) used for matching and reconciling transactions like Stripe or PayPal.
- Go to Accounting > Advanced > Chart of accounts.
Click Add Bank Account (yes—even though it’s not a real bank).
Enter the name (e.g. “Stripe Clearing Account” or “PayPal Clearing Account”).
Choose “Other” as the account type.
Do not connect it to a bank feed.
- Mark invoices as paid into this clearing account.
- When the actual bank deposit appears, transfer the amount to the clearing account and record the deducted fee as an expense.
- The Stripe or PayPal Clearing Account will end £0.00 if everything is accounted for properly.
Option 3: Split the transaction directly in the bank feed.
- Open the bank transaction in Xero.
- Use “Find & Match” to link it to the related invoice.
- Click “Adjust by amount” to enter the fee separately as a small payment, coded to an appropriate expense account like “Stripe Fees”.
If you need help with this, or with other advice, then please get in touch with our accounting team.