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Accounting for Businesses Using “Buy Now, Pay Later” (BNPL) Services
Plan your expenses and deductions strategically each year
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Maintain accurate and organized financial records for easy reporting
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Talk to a tax professional for expert guidance
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Use accounting and tax software to make management easier
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Buy Now, Pay Later (BNPL): What Small Businesses Need to Know
Introduction
From Shopify checkouts to B2B purchases, Buy Now, Pay Later (BNPL) services like Afterpay, Klarna, and Affirm are reshaping how businesses handle sales and expenses. Whether you're offering BNPL to your customers or using it to finance your own purchases, it introduces new dynamics in accounting, tax reporting, and cash flow planning.
Let’s break it down—from both ends of the transaction.
If You're Offering BNPL to Customers
BNPL platforms allow customers to spread out payments—but you get paid upfront (minus fees). Still, it’s not quite the same as traditional credit card sales.
Here’s how to handle it in your books:
- Recognize full revenue at the time of the transaction.
- Deduct BNPL platform fees (typically 4–6%) from your revenue—not COGS.
- Reconcile partial payouts, especially if payment is split over time.
- Track BNPL transactions separately for better performance analysis.
Pro Tip:
Set up a dedicated income category in your chart of accounts—something like “BNPL Sales”—to compare this channel against your regular sales volume.
If You're Using BNPL to Make Business Purchases
Businesses aren’t just offering BNPL—they’re using it, too. Some platforms now allow BNPL for operational purchases, such as equipment, software, or inventory.
Here’s how to account for it:
- Record the full expense (or capital asset) at the time of purchase.
- Log the BNPL arrangement as a short-term liability on your balance sheet.
- Separate interest or service charges from the product cost for better financial clarity.
- As you make payments, reduce the liability accordingly.
BNPL & Cash Flow Management
BNPL can boost conversions and ease upfront costs—but it impacts your liquidity.
To stay ahead:
- Update your cash flow forecasts to reflect delayed income or staggered expenses.
- Focus on net cash received, not gross revenue, when planning budgets.
- Monitor repayment schedules, especially if you're juggling multiple installments.
Sales Tax Implications
Important:
Sales tax is due on the full purchase amount at the time of the sale—not as each BNPL installment is collected.
Be sure to:
- Report full taxable income in the correct sales period.
- File sales tax returns based on the total order value, not net cash received.
Final Thoughts
BNPL is more than just a payment trend—it’s a financial model with real accounting consequences. Whether you're leveraging it to increase customer conversions or using it to manage cash flow, accurate tracking and smart categorization can turn BNPL into a growth lever, not a financial headache.
Need help integrating BNPL into your accounting systems?
Let Go Peak Accounting guide you with customized solutions that ensure every transaction aligns with your bigger financial goals.