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
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.
With Net Settlement, Ignition automatically creates the QuickBooks Bank Deposit that reconciles each payout to $0 — the same step gross-settlement would require you to build by hand, for every payout, every day.
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 tab / Apps → QuickBooks 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.
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
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: The bank rules in this article are only suitable if the Undeposited Funds account in QuickBooks is being used solely to record payment of invoices from Ignition.
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 both Ignition and QuickBooks.
2. The payment is held temporarily
Before the money reaches your bank account, QuickBooks places it in Undeposited Funds. This is a temporary holding account for payments waiting to be deposited.
Once the invoice is paid, QuickBooks records the money in Undeposited Funds.
3. Your payout reaches your bank
When Ignition sends your payout, it appears in your QuickBooks bank feed as a bank transaction.
4. Ignition reconciles everything automatically
As soon as the payout arrives, 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.
Things to know
$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.
Refunds and Reversals
A reversal is any time money moves back the other way — a refund, a failed payment, or a disputed charge. Under Net Settlement, reversals are handled automatically wherever possible.
Refunding the invoice in Ignition
After the invoice is refunded in Ignition, the Undeposited Funds account in QuickBooks shows all the transactions that make up the invoice: the invoice amount, the payment fees, and the net amount.
At this point, the refund is not yet reconciled, because the negative payout hasn't been received in the QuickBooks bank account yet. The payout usually takes around a day to arrive. Once it lands in the QuickBooks bank account, the next step happens.
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.
Note: Each payout batch creates a single Payment Fees and Surcharges expense that represents the total processing fees for all payments included in that payout.
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.
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
Chargebacks are the one exception. If a client disputes a payment:
Ignition records the dispute and notifies you
No accounting entry is created automatically in QuickBooks
If the dispute is ultimately lost, you'll need to record the appropriate adjustment in QuickBooks