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Confused about Paypal "receipt" vs "invoice"

by perneali45
16 replies
Hello, fellow Warriors!

I'm interested in opening a merchant bank account, so I can accept credit card payments, without Paypal.

Part of the process is the KYC (Know Your Customer). This is the due diligence the bank will have to perform on me, before they accept to work with me.

I have heard that banks consider online businesses as high-risk (no clue why).

Up to this point, I have been selling information products and software, online, via Paypal. And yes, I do this in the "make money online" industry, which is under a lot of scrutiny (and rightfully so). Still, my customers seem to be happy.

Is there a specific way I can structure my KYC submission, so there's a higher chance the bank will accept it and let me open a merchant account?

Thanks in advance!
#business #confused #customer #invoice #kyc #mmo #paypal #receipt
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  • Profile picture of the author perneali45
    Hello, fellow Warriors!

    I sell software and information products online.

    All this happens automatically. At any given time, I have no idea if a customer buys as an "individual" or as a "company."

    My understanding is that:

    - Individuals get receipts for their purchases.

    - Companies get invoices for their purchases.

    ... right?

    I know each purchaser receives a Paypal email after they buy.

    So, is that "email" a "receipt" or an "invoice"? Or neither?

    And what if a customer buys with a credit card via Paypal, without even having a Paypal account?

    Sorry if this is a dumb question. Creating value and sharing it with people is 2nd nature to me - but I seriously struggle with the "business" part of the equation.

    Thanks in advance!
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    • Profile picture of the author Oziboomer
      An Invoice is a detailed list of what item or items the purchaser has purchased.

      A receipt is a record of the payment.

      It doesn't matter whether the purchaser is an individual or company you should be issuing invoices and in most cases it is ok to show on that invoice how the item was paid making it both an invoice and a receipt.

      How do you do keep a record of your accounts or run a business without issuing invoices?

      Best regards,

      Ozi
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    • Profile picture of the author perneali45
      Thanks for the answer, Ozi!

      Up to this point, I have been doing small volume. That's why I haven't looked into all the business "details". I now want to grow and of course make sure everything is legit.

      My initial question still remains: Is the Paypal email the customer receives considered to be a "receipt", an "invoice", "both", or "neither"?

      You mentioned I should be issuing invoices. If using Paypal (which I am) do I need to do anything else than what Paypal automatically provides to the customer? Keep in mind all products I sell are instantly downloadable (nothing to ship).

      Thanks again, and sorry if my questions are super basic.
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    • Profile picture of the author Kay King
      Keep in mind all products I sell are instantly downloadable (nothing to ship).
      Someone clicks a 'buy now' button - go to paypal and pay - and then are redirected back to download the product???

      There is no INVOICE involved if someone pays and then receives the product.

      The email the customer receives is a RECEIPT from paypal for the payment the customer made.

      Another point you should know - the customers 'order number' is not the same as the 'number' the seller receives. Those numbers are part of paypal's business process. If you need to locate a paypal payment, you would use the customer's paypal email address...not the receipt number he received from Paypal.
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    • Profile picture of the author Randall Magwood
      The only way i can see you issuing an invoice to a customer for your instant download product(s), is if a particular person emailed you back-and-forth with questions - and then decided that they wanted you to send them an invoice to pay because it would make them feel safer from ordering from you.
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    • Profile picture of the author perneali45
      Thanks for the replies.

      But what if someone puts several instantly-downloadable products in their online shopping cart and then they buy (once) via Paypal?

      Should they then receive a breakdown of what they bought?

      - - - - - - - - - -

      You bought:

      - Product 1 ($19)

      - Product 2 ($27)

      - Product 3 ($59)
      - - - - - - - - - -

      And would the above be an "invoice"?

      What is the PURPOSE of having an invoice for tangible goods in the first place... and why would that not be needed in intangible goods as well? LOL - all this is so confusing to me.

      The main reason I'm asking is this:

      I want to start a company and also open a corporate bank account. This will require I give some information about my financial activities.

      One of the questions I was asked by a lawyer who wants to help is "What is Paypal? And do you create invoices?"

      This lawyer mainly deals with big firms who have merchant accounts, etc. I admit their question did stump me.

      Thanks!
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      • Profile picture of the author SARubin
        Well, in any of my businesses here's how I've always looked at it...

        A receipt is a record of the payment .
        So I'd consider your example here to be a receipt


        Originally Posted by perneali45 View Post


        But what if someone puts several instantly-downloadable products in their online shopping cart and then they buy (once) via Paypal?

        Should they then receive a breakdown of what they bought?
        - - - - - - - - - -
        You bought:

        - Product 1 ($19)

        - Product 2 ($27)

        - Product 3 ($59)
        - - - - - - - - - -

        And would the above be an "invoice"?

        An invoice is a detailed record of products sold, or services performed that I send to the client after the work is done. And then they pay me in 15 or 30 days. (or whatever time frame we agreed on)

        So a receipt is an itemized list of what you've just paid for.
        And an invoice is like a bill that shows what was done and the amount owed.

        Don't know if everyone else looks at it the same way, but that's how it's always worked for me.



        Originally Posted by perneali45 View Post


        The main reason I'm asking is this:

        I want to start a company and also open a corporate bank account. This will require I give some information about my financial activities.

        One of the questions I was asked by a lawyer who wants to help is "What is Paypal? And do you create invoices?"

        This lawyer mainly deals with big firms who have merchant accounts, etc. I admit their question did stump me.
        Now here's a weird idea for you (just putting it out there)...


        If your lawyer is asking the question, why don't you ask your lawyer to clarify the question for you? after all... you're paying for his time and expertise, right?
        And he'll probably send you an invoice for services rendered (or if you've already paid, then you'll get a receipt as a record of payment )


        So you might as well get what you're paying for.
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    • Profile picture of the author perneali45
      The lawyer is a friend. They ain't asking me for money.


      Thanks!
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    • Profile picture of the author Kay King
      But what if someone puts several instantly-downloadable products in their online shopping cart and then they buy (once) via Paypal?

      You can ask 'what if' for years (some here do exactly that) and never DO anything.



      I want to start a company and also open a corporate bank account. This will require I give some information about my financial activities.

      One of the questions I was asked by a lawyer who wants to help is "What is Paypal? And do you create invoices?"

      When you start a company you'll find many of the 'what if' questions sort of answer themselves as you go through the process.


      If you have a lawyer who does not know what Paypal is - and you plan to take online payments....PAY a lawyer experienced in ecommerce issues.
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      • Profile picture of the author Oziboomer
        You are now getting into the area where you really need the advice of an accountant especially if you are thinking of setting up a company and a corporate bank account.

        The tax system where my business operates can get very complex quickly when it comes to obligations to meet government requirements.

        The basic requirements were to generate a quote that could then become a Job which could then become an Invoice.

        At any stage any step could be skipped but the important document was the invoice because that was where the tax was going to be applied and become liable.

        For example you could issue a quote and then the quote could go straight to an invoice.

        You could issue a jobsheet which then was eventually invoiced.

        You could issue an invoice.

        From a cash auditing tax perspective they maybe interested in receipts because that often shows the method of payment and in the past any tax authority would look at "cash payments" as opposed to electronic or other payment methods that generated a paper trail.

        With most payments now being electronic the opportunity to abuse the system to avoid paying tax has been reduced.

        When it comes to what documentary evidence you need to produce to meet your local government taxation requirements you need to get professional advice.

        If you don't already have an accountant I would suggest that would be the first professional along with a lawyer to engage BEFORE setting up a business.

        You would be surprised how much easier it is once you are getting qualified advice.

        In regards to your business bank account set up that really comes AFTER you set up the legal and accounting structure for your business.

        Take the time to form those relationships first and then when it comes to applying to open a business account you'll rock up with all the right information and exude confidence in the fact you know you have professional advice backing you from the beginning.

        Best regards,

        Ozi
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  • Profile picture of the author Oziboomer
    It won't matter what you put on your application because the merchant provider will make an assessment based on the transactions you are already doing.

    They will normally adjust the rates they charge based on the risk they decide and that can be related to both the age of the business and the type of transactions you process.

    The reason they consider online business to be a higher risk is usually because there is no card holder present at the point of purchase.

    In the past someone would need to present a card and then sign at point of purchase.

    Then swipe through terminal and sign to verify.

    Then swipe through terminal with PIN ( and sometimes sign)

    The chip in terminal with PIN

    Now touch or tap.

    Online the verification is only virtual so a higher risk to the banks and there is a higher number of fraud transactions.

    Hence online transactions are higher risk and therefore attract higher fees.

    If they think your business is higher risk then the fee will be higher and there maybe a period of restriction on access to funds paid by purchasers.

    Often the amount withheld can be 25% or more to cover the risk of fraudulent transactions.

    As you move forward remember once you have a record of good transactions with low chargebacks and low incidence of fraud you can renegotiate rates to reflect that historical data the merchant provider will have.

    Understand they may withhold a large portion of your sales until they are satisfied with the level of risk.

    It won't matter much what you say on any application.

    Best regards,

    Ozi
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  • Profile picture of the author perneali45
    Thanks for the answer, Ozi - very helpful!

    I seem to be confused about something:

    Does a "corporate bank account" also include a "merchant account" by default? Or are these things separate?

    I do need to open a "corporate bank account" so I deposit money there, even if they come through Paypal.

    But I *also* need a "merchant account" so I can accept credit cards as well (without Paypal).

    I have been told that, in order for me to open a corporate bank account, I will need to prepare the KYC. What do you think?

    Thanks again for yor extremely detailed previous answer - I trully appreciate it.
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    • Profile picture of the author Oziboomer
      A corporate bank account won't come with a merchant account.

      The bank may try to sell you on the service as an add on but that is usually for businesses who need a terminal to process transactions in a shop.

      Usually these types of merchant accounts expect you will process a large percentage of transactions through a terminal and they allow you to process a certain number via the phone or mail order for example. This is because there fees are a lot lower than the online merchant processors.

      Online you are going to need a "Payment Gateway" - PayPal has a version to this which where I am is called PayFlow Pro.

      We had always got by with a payment gateway called Eway which we used to process credit cards including American Express and we just also offered the basic PayPal standard as an option for customers to choose if they wanted to pay via PayPal.

      Recently we upgraded to the Payflow Pro (monthly fee) and also have the PayPal Express checkout.

      There are reasons for this but it won't help to discuss them here.

      If you have been using a personal account with Paypal and the bank account where those funds are going to is only your personal bank account there will come a time when your PayPal account gets limited if you are doing business type volumes through that account.

      This usually comes as a shock - it certainly did for us when it first happened - but they do this to then force you to verify you are running a business and not money laundering.

      At that point the money you have in PayPal is frozen until you provide the right documentation.

      This is why I would recommend registering a business name and setting up a business bank account.

      If you are just starting out I would not recommend getting a merchant account to process credit cards as there is usually either a flat annual fee + transaction fees or there can be monthly fees and other fees.

      My business has a terminal to process cards in a shop so I need a merchant account to have that terminal.

      But nowadays PayPal and Square etc issue card readers so you can do those type of transactions on either your mobile phone or with a small device.

      The merchant account is usually seperate from the payment gateway.

      Paypal will process both Mastercard and Visa as it is without you needing a merchant account.

      If however you want to process American Express you will need a merchant account with American Express. Then you give your merchant account details to PayPal and they will process Amex cards via your merchant account.

      Everything is pretty simple to set up but I would suggest if you cannot justify the fees then just stick with the basic PayPal.

      However, I would suggest you get a business bank account and register a business name and set up other legal requirements to run a business where you are based.

      Then make sure you have your PayPal account set as a business account.

      This might save you hassles if you start putting through larger volumes.

      Bear in mind if you are going down the route of a Payment Gateway your website need to be PCL compliant with right security in place. Also need to have clearly defined policies showing on your website in particular in relation to "Returns".

      Best regards,

      ozi
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  • Profile picture of the author perneali45
    Ozi...

    Not many people would take the time to give such a detailed answer. You are a gentleman and a scholar.

    Ok, got it: I need a "corporate bank account" and then a way to accept credit cards.

    You have already helped a lot so there's no need to help further. That said, here's what I'm still confused about:

    1) The Paypal PayFlow Pro page says "Accept credit cards online using your merchant account" - so it appears they actually do require a merchant account.

    2) I'll still need to find a way to structure the KYC for the corporate bank account.

    3) I guess the next logical question is:

    "Which system allows someone to sell instantly-downloadable products world-wide, by accepting credit cards, and can also be integrated with an affiliate management system - except for Paypal."

    Stripe or Square ain't available in my country.

    I may have to open a separate thread for this.

    Thanks!
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  • Profile picture of the author agmccall
    Paypal payflow pro is a merchant account, I used it for years when I had a eccommerce site. If you can not get accepted or are banned from paypal then you are probably not going to be able to get accepted to any other merchant account. You might just want to go to your local bank and do it right there.

    By the way, if you use a paypal business account your customers can pay with credit cards and do not have to have a paypal account

    al
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  • Profile picture of the author Princess Balestra
    Anothah winna from the Boomster.


    tbh I had 'receipt' down as random guy touches on your ass in WalMart an' 'invoice' as thanks so much for optin' in to life in the post-DarkAges era; plz msg yr legal guy's details ovah.
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