Platforms such as Amazon, Flipkart, eBay, etc. are significant marketplaces to sell your products because of their reach and customers. However, retailers often find these marketplaces frustrating from a financial point of view. eCommerce businesses face the problem of payment reconciliation from time to time. When these minor unremitted orders and payments are erroneously ignored, online sellers often find themselves at a loss of money.
There are cases of deductions, returns, etc. are also other leaks that eCommerce retailers often fail to plug.
Let’s look at different aspects of Payment Reconciliation and other common profit leaks in your eCommerce business. Before that, here is a quick description of what payment reconciliation is.
What is Payment Reconciliation?
Payment reconciliation is a bookkeeping method that compares internal financial sales records with bank statements to ensure that accounting data is accurate.
Aspects of Payment Reconciliation
Most often, online retailers do not have a practical accounting and reconciliation process in place, and hence are completely reliant on online marketplaces. This makes the payments and reimbursements hard to track. The main aspects of payment reconciliation are:
- Timing: In a typical non-COD (Cash On Delivery) order, the eCommerce sites will ship your money within 7-8 days. Although COD orders can take as long as fifteen days, the problem retailers face here is that the payment they receive might not be in the same chronology as the dispatched orders. Manually, it is difficult to match the amount received to its corresponding order, and it poses a challenging problem to verify and validate the payments.
- Deductions: Deductions are one of the significant profit leaks in eCommerce. Although some deductions are fixed for all eCommerce sites like taxes, some vary from platform to platform like discounts and shipping. These are some of the standard marketplace deductions on every purchase:
- Commission: The online marketplace charges a commission on every purchase of your product owing to marketing, website hosting, etc. The commissions are not fixed and vary on the cost of your product.
- Payment/Closing fee: These are additional charges levied by the marketplace.
- Shipping charges: Most eCommerce platforms undertake shipping services for your products. These charges are deducted from the payment by considering the weight and other factors. Sometimes, wrongful recording of weight may lead to overcharges and increases your shipping fee.
- Storage/Warehousing fee: The retailer also has the option to choose the warehouse or store the online marketplace. These charges will also be deducted from the payment. There are cases where extra charges for picking and packing will be levied, which is another cause for profit leaks.
- Discounts: There are two types of discounts. The first is the discount offered by the sellers themselves. In this case, the eStore can deduct the discount amount before making the final payment. Second, is the discount offered by the marketplace during promotional events. In this case, the sales channel can not deduct a discount from the final payment.
- Statutory Taxes: These taxes are common to all platforms and depend from country to country. In India, taxes such as GST will be applied to the product and cut from the seller’s payment.
- Unremitted orders: At times, the marketplace misses out on paying for some orders. For short durations, unremitted orders aren’t that big a concern. Sometimes, the platform’s orders might not be paid for more than one or two months. It is essential to follow up in such cases and, if forgotten, may lead to a loss in profits.
- Returns: On very few occasions, the buyer might have purchased wrong or defective orders. In such a case, the payment done to the retailer is reversed, and the order is sent back. If the order is not shipped back to the retailer or the retailer forgot to account for the purchase, there is a significant loss faced by the seller as he loses out on the money and the product.
It is vital to notice the pain points of traditional payment reconciliation, or what happens when you do not have a proper payment reconciliation tool in place:
- Reconciliation will be a time-consuming and complex task when transaction volume is high.
- In the case of multiple listings, it becomes further difficult to account for payment, price difference, and inventory.
- Deductions vary with policy changes, and it becomes challenging to track these and account for them.
- Lack of transparency in the online marketplace payment accounting and reconciliation process.
All things aside, there is a straightforward way of solving these pain points of payment reconciliation.
Online retailers can automate their omnichannel reconciliation process by investing in a robust automated payment reconciliation system. This helps in further streamlining the reconciliation process and ensures complete payment transparency.
Key advantages are:
- Allowing you to easily reconcile your accounts.
- Ensuring the accuracy of your eCommerce transactions.
- Giving you a better understanding of your online and offline payments.
- Get your historical data reconciled with the retro reconciliation tool to give you a better understanding of your P&L.
- More insight and visibility into every payment by matching the orders and the payments
- All your payments are done through a central channel and hence save you a lot of time.
- Track the extra marketplace deductions through the platform so that you face minimal loss.
These are just the basic benefits of the online reconciliation tool. Automation also brings a lot of powerful features to the table to streamline payment handling.
Ecommerce Payment Reconciliation: How To Handle Payments And Payments Discrepancies
An automated payment reconciliation tool helps you better manage payments and identify discrepancies by providing the following features:
- Identify extra marketplace deductions: Payment reconciliation tools help you track marketplace deductions at the order level. This helps you timely identify marketplace deduction amounts and ensure that corrective measures are taken to avoid extra deductions in the future.
- Generate reports to minimize loss: Automation helps in generating reports which help you track non-sell-able and damaged returns. Check the return reconciliation report on the go and take action to keep the losses to a minimum. You can also use data analytics to your advantage in auditing and payment reconciliation.
- Accurate Legally Compliance Taxation Report: When the tax report is generated on a monthly basis, the automated tax engine provides the exact amount to be paid as tax on sales and also the amount to be claimed as sales returns. The breakup also helps in filing for the tax for that particular time frame.
Automating your payment reconciliation can help you gain visibility of your cash flow and payments. Having a robust reconciliation system in place provides you with a lot of features and insights. With strong data-backed reports and tracking, you can breakdown every payment down to the atomic level without having to face any problems.
Are you looking for an omnichannel inventory management solution with integrated B2B order management for your eCommerce business? Drop us a line at email@example.com or directly sign up for a demo here.