Best Practices for Ecommerce Payment Reconciliation
While a huge proportion of the sellers trust marketplace payment practises to compensate them for the sale of the product, not many have an effective mechanism in place to check the glitches in the marketplace’s payment system.
Typically, orders through a marketplace such as Flipkart or Amazon may reach the seller in the order of 1,2,3 and 4, but the payments may be received only according the particular sales channel’s payment cycle. These payment cycles are subject to change according to the time of the year and the situation in the marketplace. The marketplace pays the seller a lump sum amount at the end of the cycle which reflects the transactions concluded within the period of that cycle. It also deduces certain commissions, service charges, taxes and penalties according to specific cases. It is because of this that it becomes difficult to keep track of whether the individual product going out of the warehouse has been accounted for in the payment.
For sellers listed on multiple marketplaces, it can become quite overwhelming to keep a tab on how much money they are supposed to get from the marketplace and when. This becomes a major problem when the money coming in is supposed to be routed back into the business. For example, if the payment cycle from your marketplace and the payment cycle for your logistics provider or wholesaler are not in sync, it can spell a lot of trouble for you. Having a sturdy system that handles all your payment reconciliation is quite necessary for the emerging seller in today’s ecommerce scenario.
Marketplace Payment Practices and How to Get Past Them?
In order to understand if the payment has been made, sellers must take into account the deductions that the marketplace makes before paying the seller. Following are examples of the types of deductions that marketplaces like Flipkart or Amazon make:
Commission: If the seller is selling through Amazon, then Amazon will cut a commission for itself for marketing and selling the seller’s product.
Payment/Closing fee: The marketplace may also have additional charges like ‘closing fee’ on each product.
Shipping charges: Nowadays most of marketplaces provide shipping services to their sellers and deduct the shipping charges from the payment due to the seller for the sale. Often sellers experience that inadvertent errors in the recording of the product leads to the marketplace overcharging for shipping.
Storage/Warehousing fee: If the seller chooses to avail the storage services of the marketplace, then an extra fee of ‘storage or warehousing fee’ may be applicable.
Discounts: Discounts can either be offered by the seller directly, or by the marketplace. The marketplace is entitled to deduct the discount before making the payment to the seller. In turn, the seller must be careful to see that the marketplace does not deduct from what’s due to him, value of the discounts offered by the marketplace.
Statutory Taxes: All applicable statutory taxes, including service tax applicable on shipping services etc., will also be deducted by the marketplace before remitting the payment to the seller.
In addition to the above, at times the marketplace may have missed out on paying for some orders, which are also known as ‘unremitted orders’.
Setting up a payment reconciliation method
There are three main ways you can set up a payment reconciliation method.
A. Marketplace Seller Panel
Your dashboard as a seller on every marketplace will have a record of the items you have sold and the payments you have received. Therefore, if you are only listed on a single marketplace, the seller panel is perhaps the easiest way to keep a track of your payments. This method gets extremely complicated once you try to scale up though. Every marketplace has its own method and schedule of disbursing and visualising payments, and with hundreds of orders coming in daily, things can soon get out of hand.
B. Excel Sheets
Excel has been the accountant’s best friend for ages, and it is an extremely flexible tool to devise a singular payment reconciliation method. Data can be exported from multiple sources and visualised in a lot of creative ways within excel. The fact that you can write code and design specialised functions to do your tasks means that it offers an exceeding amount of control over data storage and analysis. But there is a flipside to this. Excel sheets can be difficult to handle, tedious and an unsafe way of storing data in the long term. They can also get extremely confusing extremely quickly, especially if you are not well versed with the software.
C. Automated Payment Reconciliation Systems
A seller can use the services of an automated payment reconciliation system like Browntape, which would use pre-optimised processes and design expertise to break down your net payments in various ways. These systems are well aware of the various differences in data storage and visualisation protocol that most major marketplaces adhere to. All your payments from various sales channels are organised automatically using bar diagrams and charts, and you have an efficient payment reconciliation system ready in no time. Moreover, with Browntape, a team of experts is assigned to you which manages your payments and provides valuable strategic insights by analysing the data accumulated.
To know more, get in touch with Browntape. We are India’s leading e-commerce solutions experts, and we are always happy to help.