Most UK businesses we onboard at PushDigits are using at least two payment processors, and many are using four or more. Stripe, PayPal, GoCardless and Adyen are the most common combinations, each with a different commercial model and a different accounting workflow. This guide is a practical comparison of how to handle each in the ledger.
Stripe
Stripe is card-first, with a strong subscription engine and an extensive API. It charges a percentage per transaction plus a fixed pence amount, with higher fees for international cards and for currency conversion. Our detailed Stripe reconciliation piece covers the workflow in depth. The headline points:
- Use a Stripe clearing account between customer payments and bank deposits.
- Recognise gross revenue, fees as separate expense, refunds as revenue reduction.
- Reconcile the clearing balance to the Stripe dashboard at each period end.
PayPal
PayPal is structurally similar to Stripe (clearing account, gross recognition, separate fee posting), but with a few distinctive quirks:
- Hold balances: PayPal can hold funds for risk reasons, especially for new merchants. The clearing balance will include held funds that are not yet payable to the bank.
- Multi-source funding: Customers can pay by PayPal balance, card or bank, each with different fee structures.
- Cross-border fees: International transactions attract higher fees and currency conversion charges.
- VAT invoicing: PayPal's VAT invoicing has historically been less detailed than Stripe's. Businesses need to extract activity from the PayPal reports and reconcile to their own VAT records.
Tools such as the PayPal integration in Xero or Dext can pull transaction data, but PayPal's data model is less clean than Stripe's and manual oversight is typically required for accuracy.
GoCardless
GoCardless is a direct debit specialist, predominantly for recurring B2B SaaS and subscription businesses. The model is different in important ways:
- Lower fees: Direct debit fees are materially lower than card fees, especially for larger transaction values.
- Slower settlement: Direct debits take several working days to clear, with multi-day delays between collection and bank receipt. The clearing account is therefore more significant.
- Reversals: Customers can reverse direct debits for up to eight weeks under the Direct Debit Guarantee in some circumstances, which means revenue should not be treated as fully secured until the reversal window has passed for high-risk customers.
- Failed payments: Mandates can fail and need to be re-attempted. Failed-payment fees apply and should be tracked separately.
GoCardless integrates well with both Xero and QuickBooks. The clearing account approach mirrors Stripe, with the additional discipline of tracking pending versus settled transactions across the settlement period.
Adyen
Adyen is enterprise-tier and increasingly used by larger UK SaaS and e-commerce businesses. Its commercial model is interchange-plus rather than blended (you see the underlying card scheme fees plus an Adyen markup), which is generally cheaper at volume but produces a more complex fee structure for the ledger. Adyen's reporting is detailed but requires more configuration than Stripe.
- Interchange-plus fees: Each transaction has multiple fee components: interchange (passed through), scheme fees and the Adyen markup. The ledger needs to handle multi-component fees per payout.
- Settlement currencies: Adyen can settle in multiple currencies. Multi-currency clearing accounts are typically used by clients running pan-European operations.
- Reporting flexibility: Adyen produces extensive reports but they require finance configuration to map to the desired ledger structure.
Choosing the right processor mix
From an accounting perspective, fewer processors is always cleaner. From a commercial perspective, businesses often need multiple processors for different customer segments or geographies. The pragmatic approach is to:
- Pick a primary processor that handles 80%+ of volume.
- Use specialist processors only where the commercial case is clear.
- Standardise the clearing-account methodology across all processors.
- Reconcile each clearing account monthly without exception.
VAT considerations
UK VAT treatment of payment processing fees varies by processor entity and jurisdiction. Stripe (Stripe Payments Europe Ltd) and Adyen (Adyen N.V.) typically issue invoices from EU entities subject to the reverse charge for UK VAT. PayPal's invoicing entity also depends on the contract. GoCardless invoices from a UK entity. The VAT treatment affects Box 1, Box 4, Box 6 and Box 7 in the VAT return and should be confirmed with current Stripe, PayPal, GoCardless and Adyen invoicing for your business.
How PushDigits helps
We set up payment processor accounting for SaaS, e-commerce and subscription businesses, including the clearing account structure, VAT handling and reconciliation workflow. See our bookkeeping and VAT pages, or contact us.