Taking payments through a platform built on Stripe Connect? Here's what it means for FreeAgent

A lot of the software small businesses use to take payments runs on Stripe behind the scenes. Community platforms, booking tools, ticketing sites, newsletter platforms, club management software. During setup, you're asked to connect a Stripe account or create a new one, and from then on your sales flow through it.

That setup is called Stripe Connect. It affects what turns up in your Stripe account, what lands in your bank, and what you need to record in FreeAgent.

What Stripe Connect actually is

Stripe Connect is Stripe's product for platforms that take payments on behalf of other businesses. The platform is one Stripe account, and each business using it has a connected account of its own.

How much of that account you can see depends on how the platform has set things up:

• Full Stripe Dashboard: you log into Stripe like any other Stripe user and see every payment, fee, refund and payout.
• Express Dashboard: a lighter version of the Dashboard where you can manage your details and see payouts to your bank.
• No Dashboard: the platform handles everything and shows you its own reporting instead.

If you can log into Stripe and see your payments, the account is yours. The money from your sales goes into your Stripe balance, and Stripe pays it out to your bank.

Where the platform's fee comes from

Platforms that charge a percentage of each sale usually collect it through Stripe as an application fee. When a customer pays you, Stripe takes its processing fee, the platform takes its application fee, and the rest goes into your balance.

Stripe's own example uses dollars: a $10 charge with a $1.23 application fee and a $0.59 Stripe fee leaves $8.18 in the connected account. The $1.23 goes to the platform.

The charge's balance transaction in Stripe breaks both fees down separately, so you can always tell what Stripe took and what the platform took. Your bank statement only shows the payout.

Not every platform charges one. Circle takes between 0.5% and 2% depending on your plan, while vcita charges nothing on top of Stripe's fee and bills you through your subscription instead. It's worth checking your platform's pricing page so you know what to expect in your Stripe account.

Refunds don't always return the platform's fee

When you refund a customer, Stripe doesn't automatically refund the application fee. The platform has to choose to refund its fee as part of the refund. If it doesn't, you lose that amount.

So a £100 sale refunded in full might leave you out of pocket by the platform's cut, even though the customer got everything back. If your platform's terms don't say what happens to their fee on refunds, it's worth asking them. Either way, your books should show the refund and the fee as two separate things. More on refunds in handling Stripe refunds in FreeAgent.

You may end up with more than one Stripe account

Some platforms ask you to connect the Stripe account you already have. Others create a brand new Stripe account for you during setup. If you use more than one platform, or you already took payments through Stripe before, you can easily end up with two or three Stripe accounts, each with its own balance and its own payouts.

Each of those accounts needs reconciling separately. A payout from one won't contain anything from the other.

How FreeAgent's own Stripe feed handles this

When you connect Stripe to FreeAgent, it creates a bank account for your Stripe payments, refunds and fees, and imports matching payouts each morning. FreeAgent's help docs are clear that it only imports payouts in your FreeAgent base currency, so a EUR payout into a GBP FreeAgent account is skipped. Where a payout is imported, you split the bank transaction yourself to account for the fees.

FreeAgent's documentation doesn't mention application fees at all, so expect to account for the platform's cut by hand. We've written up what FreeAgent's Stripe integration does and doesn't do in more detail.

How ClearingHouse handles it

ClearingHouse is installed as a Stripe App, so it works with any Stripe account you can log into with the full Stripe Dashboard, including ones a platform set up for you.

• Every fee is its own transaction. When a charge carries both a Stripe fee and a platform fee, ClearingHouse records each one as a separate expense in your clearing account, using the description Stripe gives it. Both go to Bank & Finance Charges.
• More than one Stripe account. You can connect several Stripe accounts to the same FreeAgent company, each with its own settings and clearing accounts.
• Every currency. ClearingHouse creates a clearing account for each currency in your Stripe balance, so a EUR balance is tracked in EUR.
• Payouts. Each payout is explained as a transfer from the clearing account to your bank, once it shows up in your bank feed. More on how payout reconciliation works.

Getting started

If you take payments through a platform built on Stripe and keep your books in FreeAgent, start by logging into Stripe and looking at the fee breakdown on a recent payment. That shows you exactly what your platform takes.

If you'd rather not record every fee and payout yourself, ClearingHouse takes a few minutes to set up.