Ignition is introducing Net Settlement, a new method for processing payment collection fees. This change simplifies your payment reconciliation process by deducting payment fees immediately from each client payment, rather than consolidating them into a single monthly invoice.

This article explains how net settlement works, how it differs from gross settlement, and guidance on what you need to know and the steps to set up even more accurate and streamlined reconciliation.

When you collect payments from clients, Ignition batches them together and pays them out to your bank account. Payment fees are then added up and billed to you once a month.

This is currently how your payouts are processed.

Net settlement is our new payment fee processing method, where your payment fees for each payment collection are processed separately and immediately on each payout, rather than compiling them each month on your Ignition invoice.

This means that you will no longer pay fees at the end of the month. Instead, they will be deducted from each payment collection.

If you were previously on gross settlement, the calculations of your payouts will occur immediately when you move to net settlement. Note that the calculation of your payment fees remains exactly the same.

You will receive email communications advising that your account will be moved.

Moving to net settlement by providing the precise post-fee calculation amounts, which simplifies reconciliation and improves accuracy.

Switching to net settlement simplifies reconciliation and improves accuracy because Ignition will provide the exact post-fee calculation amounts that will be matched to your nominated expense account (if you have a connected accounting software).

Please note: When you move from gross settlement to net settlement, you will need to set up an expense account in your connected ledger for account reconciliation.

When your account is moved to net settlement, your next Ignition invoice will still include gross settlement transactions that happened prior to moving net settlement since the start of their billing cycle.

For example, if your billing cycle started on Jan 1 and you are migrated to net settlement on Jan 15, all transactions that happened from Jan 1 until net settlement enablement on Jan 15 will show up on your next Ignition invoice with gross settlement.

These payment transaction fees will be the final gross settlement charges on your account, and every transaction fee onward from there will be charged separately per transaction as per net settlement calculations.

If you have Xero connected with Ignition, you will be prompted to set up and select your expense account for payment transaction fees.

Navigate to your Settings → Payments tab / Apps → Xero tab to do this and select Account mapping.

Under the Account mapping section, you will see Sales, Ignition payment fees, and Stripe Capital financing costs (only if you are eligible for Stripe Capital).

Select the accounts you would like for the Sales and Ignition payment fees, and click Save.

Once your Ignition payment fees account has been selected, Ignition will continue to automatically match your payments every time you are paid.

Pro-tip: Click the "Sync" button at the top of the Account Mapping modal before selecting accounts. This ensures the dropdown lists reflect the current Xero chart of accounts.

Here is a video tutorial that guides you on the process above for Ignition customers that do not have a ledger connected.

If you are surcharging your clients, you must consider the amount that you will surcharge.

If your client’s payment processing fee ends up higher than the Ignition payment fee, then your client will only be charged enough to cover the Ignition payment fee.

Example:

If your surcharge rate is 2.5% but Ignition charges you 2%, then your client will only pay the 2% surcharge fee.