When recording income for a marketplace startup, is it typical to use the gross transaction or just the fees collected per payment?


You usually only recognize the commissions as revenues and use the term "Gross Merchandise Value" (GMV) to describe the size of the marketplace (value of all transactions going through the site)

Answered 7 years ago

You would include all those lines in your revenue.

Typically this looks like:

Receipts: [full cash inflows]
Fees: [payouts to vendors]
Gross Receipts: [subtract]

This ALL does into the Revenue category, so that your stated revenue is indeed net of fees, but you can see how it breaks out to understand how money is moving.

That's if the margin there is very slim. If the margin is pretty good, and if you believe you can increase that margin materially over time, you can consider putting those fees into your gross margin instead of in your income.

Answered 7 years ago

From a P&L standpoint, if the revenue comes through your accounts at all, it's good to have a gross revenue line because you'll be carrying a cash balance on your balance sheet from these transactions before you reconcile with the marketplace that would appear high. Every organization is different but consider looking up showing Gross Revenue and then Net Revenue in your income section. Net Revenue is not to be confused with Net Income.

Answered 7 years ago

Unlock Startups Unlimited

Access 20,000+ Startup Experts, 650+ masterclass videos, 1,000+ in-depth guides, and all the software tools you need to launch and grow quickly.

Already a member? Sign in

Copyright © 2020 LLC. All rights reserved.