For any ecommerce business, it’s important to keep track of the payment received and expenses incurred. The best practice is to cross-check, which means verifying the payment received and expenses incurred against each order, which is payment reconciliation. The concept involves keeping a track of expenses and payments against orders to ensure accurate bookkeeping.
Why you need payment reconciliation?
Unlike the traditional markets, you don't receive payments directly from the customer in ecommerce. There are multiple service providers involved in fulfilling and delivering your orders to your customers such as marketplaces, payment getaways, shipping aggregators, and more. Service providers like Amazon and Flipkart collect payments from the customer on your behalf. If you sell using your own website, you need to use payment getaways and shipping aggregators to fulfil your orders. Each service provider comes with its own fee structure, commissions, payment terms, penalties, and other charges. Without an effective reconciliation process, it's easy to lose track of your payments.
Below reasons will highlight why payment reconciliation is complex in ecommerce:
The customer does not pay you directly. The payment is collected either by the service provider. Since there are multiple service providers involved, reconciling payments from multiple parties becomes difficult.
Each service provider has its own settlement cycle with different settlement terms. For example, Amazon makes payments within 7 days of order delivery to your customer.
Payment collected isn’t always equal to the invoice amount. This is because the service provider charges multiple fees which are deducted at the time of settling the invoice. For example, Amazon deducts the commission fee while settling the invoice. Reconciliation gets even more complex when refunds are created.
One payment report will include payment against multiple orders. It becomes very difficult to map each payment with the corresponding order.
Service provider represents any stakeholder with whom you are doing business and payment transaction is involved. It can be either a marketplace like Amazon, Flipkart or any other service provider like a payment gateway partner or a courier partner.
How will Eshopbox help in payment reconciliation?
Eshopbox will help you to keep track of the
Fees charged to you
Payment received from the service provider
When you upload your service providers payment report in Eshopbox, Eshopbox will reconcile your payment received against each order. Eshopbox will also reconcile each fee charged against the order. Using Eshopbox payment reconciliation, you will be easily able to identify:
Orders for which you have received payment
Orders for which you are awaiting payment
Orders on which fees charged are more than provisional fees
Orders for which your payment is overdue
Eshopbox reconciles payment for the following sales channels:
How does it work?
Below workflow will help you understand how Eshopbox reconciles your payment:
1. Configure fees
The first step is to configure your agreement with the service provider in the Eshopbox workspace. In this step, you need to configure each fee charged by the service provider.
2. Configure payment cycle
You need to configure the service provider’s payment (remittance) cycle in Eshopbox. The frequency at which payments are made to you would be based on your agreement with the service provider.
3. Book payments
The service provider will provide you with a payment report at periodic intervals. You need to upload this report in the Eshopbox workspace. This report will contain information of:
Payment received by you against each order
Payment refunded to the customer against each return order
Fees incurred by you against each order
Fees reversed to you against each return order
If you will not upload a payment report from the service provider, Eshopbox will mark it overdue when the due date is crossed.
4. Reconcile expenses
Eshopbox will match the provisional fee with the actual fee deducted by the service provider, and assign it one of the following fee statuses:
If the fee deducted by the service provider is the same as the provisional fee, the fee status changes to ‘Reconciled’.
If the fee deducted by the service provider is more than the provisional fee, the fee status changes to ‘Disputed’.
If for any reason Eshopbox is not able to calculate the provisional fee and the service provider has deducted this fee, the fee status changes to ‘Failed'.
5. Reconcile payments
Eshopbox will match the expected payment (invoiced amount) with the actual payment received from the service provider, and assign it one of the following payment statuses:
If the payment received is equal to or greater than the provisional amount, the payment status changes to ‘Paid’.
If no payment is received for an order, the payment status will be ‘Awaiting payment'. If the payment received is less than the provisional amount, the payment status will still be ‘Awaiting payment’ with a partial payment tag.
If you receive payment and then the same amount is refunded, the payment status changes to ‘Refunded’.
To illustrate, let’s consider the scenario illustrated below: