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 and provides guidance on what you need to know and the steps to set up even more accurate and streamlined reconciliation in QuickBooks.
💡 Learn more about net settlement migration, handling surcharging & more here.
Net Settlement
With Net Settlement, Ignition deducts the payment fees for each payment collection immediately from each payout, rather than adding them up 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.
With Net Settlement, Ignition automatically creates the QuickBooks Bank Deposit that reconciles each payout to $0. Under gross settlement, you'd build that step by hand for every payout, every day.
Video walkthrough
How does invoice reconciliation work?
If you have QuickBooks connected with Ignition, you will be prompted to set up and select your expense account for payment transaction fees.
Navigate to your Settings → Payments or Settings → Integrations → QuickBooks 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 reconcile your payouts every time you are paid.
If you keep the default, Ignition creates the Ignition payment fees account in QuickBooks when it records your first fees. It's normal not to see the account until your first Net Settlement payout.
To use your existing merchant fees account instead:
In QuickBooks, create or edit a service item.
Tick I purchase this product/service from a vendor, and set its expense account to your merchant fees account.
In Ignition, click Sync in Account mapping and choose that item.
If the dropdown is empty, click Sync.
Setting up bank rules in QuickBooks
You will need to create two bank rules in QuickBooks. These rules route Ignition payouts to Undeposited Funds so that Ignition can automatically create the matching bank deposit and reconcile everything to zero.
To create a rule, go to Accounting → Rules → New rule.
How to set up rule 1 - Money In
Create a rule with the following settings:
Rule name | Undeposited Funds – Ignition Payouts |
Apply this to transactions that are | Money in, in All bank accounts |
Include the following | All |
Condition | Bank text contains |
Transaction type | Transfer |
Account | Undeposited Funds |
How to set up rule 2 - Money Out
Money goes out when refunds or other reversals in a payout are larger than the payments it includes. The payout is then negative, and the difference is taken from your bank account.
Follow the same flow (Accounting → Rules → New rule) and create a second rule:
Rule name | Undeposited Funds – Ignition App Money Out |
Apply this to transactions that are | Money out, in All bank accounts |
Include the following | All |
Condition | Bank text contains |
Transaction type | Transfer |
Account | Undeposited Funds |
Please note: you can use these rules even if your Undeposited Funds account also holds payments from QuickBooks Payments or other sources. Ignition only links its own payments, fees, refunds and payouts into each bank deposit, and the rules only pick up bank transactions that contain IGNITIONPAY.
Already have an older IGNITIONPAY rule? If it records payouts as a Transfer to Undeposited Funds, it's the same as Rule 1: keep it and add Rule 2. If it records them any other way, for example as a deposit to an income account, edit it to match or delete it. QuickBooks applies the first rule that matches.
How payments are reconciled
1. Your invoice is paid
You send an invoice through Ignition.
The invoice is synced to QuickBooks
When your client pays, Ignition marks the invoice as paid in Ignition straight away. Ignition records the payment in QuickBooks once the payout that includes it is complete, so the invoice can show as unpaid in QuickBooks until then.
2. The payout is completed
Once the payout is completed, Ignition records the payment in QuickBooks against the invoice, dated the day of the payout. This marks the invoice as paid in QuickBooks.
The money is held in Undeposited Funds, where Ignition later reconciles it against your payout.
Ignition also records the payment fees for the payout as a single expense paid out of Undeposited Funds:
The vendor is IGNITIONPAY.
The memo is "Payment fees - payout [date] (Ignition)".
The expense is coded to your Ignition payment fees account.
If your clients paid surcharges, they appear on the same expense as a credit line.
3. Your payout reaches your bank
When Ignition sends your payout, it appears in your QuickBooks bank feed as a bank transaction, and your bank rule records it as a Transfer between your bank account and Undeposited Funds.
4. Ignition reconciles everything automatically
Once your bank rule has recorded the payout as a transfer, Ignition automatically creates a Bank Deposit in QuickBooks that matches:
the client payment
any processing fees
the net amount deposited into your bank account
This deposit balances to $0, allowing QuickBooks to automatically reconcile the payout.
Please note: Ignition records the payment fees for each payout as a single Payment Fees and Surcharges expense.
Payouts happen daily, so you'll see up to one fee expense a day.
Things to know
Paid in Ignition first, then in QuickBooks: an invoice can show as paid in Ignition but unpaid in QuickBooks until the payout is completed. This is expected.
$0 Bank Deposit: Ignition automatically creates a Bank Deposit that matches the payment, fees, and payout, allowing the transaction to reconcile without affecting your bank balance.
Reconciled (R): the payment is marked as reconciled once the Bank Deposit is created.
Multiple rows: QuickBooks may show the same Bank Deposit as multiple rows. This is a display quirk, not duplicate deposits.
One fee expense per payout: Ignition records the payment fees for each payout as a single expense to the vendor IGNITIONPAY. Refunds and failed payments in the same payout appear as their own separate entries. Payouts happen daily, so you'll see up to one fee expense a day.
Payouts from before your switch: payouts that started before you moved to Net Settlement aren't reconciled automatically. Reconcile them the way you always have.
Refunds and Reversals
A reversal is any time money moves back the other way such as a refund, a failed payment, or a disputed charge. Ignition handles refunds and failed payments automatically. Disputes work differently, see Chargebacks and disputes below.
Refunding the invoice in Ignition
As soon as the refund is completed, Ignition records it in QuickBooks as an Expense against Accounts Receivable for the full payment amount, taken out of Undeposited Funds.
The Undeposited Funds account in QuickBooks then shows all the transactions that make up the invoice: the invoice amount, the payment fees, the net amount, and the refund.
At this point, the refund is not yet reconciled. Ignition takes the refund out of your next payout, so that payout arrives smaller than the payments it includes. It usually arrives in around one business day.
On a day when your refunds and reversals add up to more than the payments you collected, the payout is negative and the money is taken from your bank account instead. Your Money out bank rule handles that case.
The payment fee on the original payment isn't returned when you refund it.
The payout transaction is received (not yet processed)
The payout transaction has now been received in the bank account, but Ignition has not yet processed and reconciled it, so the refund has no "R" in the tick column.
Ignition creates the bank deposit
Ignition sees the incoming payout bank transaction and creates a bank deposit, striking everything off to $0 and adding the "R" to the tick column.
Batch payout with a refund
This example shows how Ignition reconciles a payout that includes multiple paid invoices, payment processing fees, and a customer refund.
Before reconciliation
Five invoices have been paid by clients.
Payment processing fees totalling $73.96 have been applied across the five invoices.
No invoices have been reconciled yet.
No refund has been processed at this stage.
Please note: Each payout batch creates a single expense that represents the total processing fees for all payments included in that payout. (One fee expense a day)
The payout includes a refund
The payout contains:
Five paid client invoices.
One client refund of $1,500.
Both the invoice payments and the refund are included in the same payout.
The payout appears in your bank feed
When the payout is received in your connected bank account, the bank transaction reflects:
The total of the five paid invoices.
Minus the $73.96 in payment processing fees.
Minus the $1,500 customer refund.
At this point, the transaction has not been reconciled, so it does not yet display the reconciliation indicator.
Ignition creates the bank deposit
After the payout transaction is matched, Ignition automatically creates a Bank Deposit.
The bank deposit includes:
The five customer invoice payments.
The payment processing fees expense (vendor IGNITIONPAY)
The customer refund.
Once the deposit is created and matched to the bank transaction, the reconciliation is completed and the transaction is marked as reconciled.
The payout is fully reconciled:
All five customer invoice payments are accounted for.
The payment processing fees are recorded as a single expense.
The customer refund is included in the same payout.
The bank deposit matches the payout amount exactly, resulting in a balanced reconciliation.
Failed payments
If a payment is later reversed by the bank:
Ignition automatically reverses the payment in QuickBooks
Any returned processing fees are reflected automatically
The invoice is returned to unpaid so it can be collected again
No manual bookkeeping is required
Chargebacks and disputes
If a client disputes a payment, Ignition notifies you. The invoice stays marked as paid in Ignition while the dispute is open.
Disputes aren’t reconciled automatically in QuickBooks. Once a dispute is resolved, check Undeposited Funds and your bank feed, and record any adjustment the outcome needs.
If you lose the dispute, Ignition may already have reversed the payment in QuickBooks with a Disputed payment expense. Check for it before recording anything, so the payment isn’t reversed twice.
If you win the dispute, the returned funds aren’t reconciled automatically, so match them in QuickBooks yourself.
The payment fee on a disputed payment isn’t returned.If a payout doesn't reconcile
Ignition reconciles a payout once your bank rule records it in QuickBooks. If a payout still isn't marked R a few days after it reaches your bank feed, check that:
both bank rules exist, and the payout was recorded as a Transfer between your bank account and Undeposited Funds. Ignition skips a payout that's recorded as a deposit or an expense.
the bank text matches. If your feed doesn't show IGNITIONPAY, update the condition on both rules to the text you see.
the transfer in QuickBooks is for the exact payout amount and is dated the day the payout reached your bank.
no other transfer in Undeposited Funds has the same amount within the same few days.
every invoice in the payout was synced to QuickBooks.
the payout was sent after you moved to Net Settlement.
If all of these check out, contact our Support team.
No bank feed, or no bank account in QuickBooks? Add the bank account in your chart of accounts. Then record each payout yourself as a transfer from Undeposited Funds into that account, for the exact payout amount, dated the day it reached your bank. Ignition then finds it and creates the bank deposit. If your bookkeeping is in QuickBooks Desktop, Ignition can't reconcile there, so reconcile from the payouts export instead.