Most of the ecommerce sellers are happy when they finally make it online.
What’s next they start receiving their first order, then second and then it grows. The whole experience of going online seems good. Then they may face a speed bump when the seller receives his first online payment.
Expectation meets Reality:
The amount which sellers receive does not match with his online dream expectations. The first thought which comes to his mind is that the marketplace has done a mistake in payments. Are you sure you are receiving the right amount due to you from marketplaces? Are you sure you are recording all your orders and corresponding payments? If not, do you know where you need to optimize and where you need to cut down?
Why tallying receivables remain a pain point for sellers?
- It’s a tedious, complicated task, more so in case of high sales volume
- Accommodating a big list of fees and charges like service tax, listing fee, fulfilment fee, logistic fee, which are subject to change any time
- The rate card varies from product category to product category, from marketplace to marketplace
- Lack of transparency on marketplace’s end
- 2-3 months productreturns window period after collecting from buyers
- Frequent policy changes
Importance of Payment Reconciliation
A key aspect to determine the financial health is payment reconciliation, i.e. using two sets of records to ensure figures are accurate and in agreement, thus arriving at the profit/loss figures.
Just like technology revolutionized many an aspect of conducting business, books and registers used for maintaining accounts gave way to computer software like Tally, Quickbooks etc. for payment reconciliation.
By automating marketplace account reconciliations, you get the following benefits:
- Reduce loss due to returns:
No doubt, returns are a troubling aspect of ecommerce. With multiple policies, keeping track of returns and associated charges becomes a herculean task. However, with advanced dashboards and reports, you can channelize tracking of instances like:
Marketplaces don’t charge sales commission for returned products. Sellers can claim refund from marketplaces under seller protection plan if they receive a damaged return from logistics partner. Sometimes, customer asks for a return after remittance for the same is received by seller. In this case the marketplace deducts money from the next remittance cycle.
2) Estimate cost of investment in each marketplace:
A business is profitable only when your returns are higher than what you have shelled out from your end. Obviously, even the ecommerce channel will take time to generate returns. But with varying payment cycles of marketplaces, it becomes all the more essential to know you are getting the worth of what you are spending. For example, sellers are part of promotional campaigns run by marketplaces. So an analysis of the remittance report will show the remitted amount to be less that the selling price of the goods sold. With reconciliation software, you know of the amount stuck in each remittance cycle.
3) Pay Tax Liabilities on time:
Tax liabilities can be calculated based on the invoice sent by marketplaces. These tax invoices are generated at the end of the month or sometimes at the end of the quarter. The same TDS for the invoices need to pay the tax authority before the 6th of every month. A reconciliation report should always show the amount to be refunded back to the seller, in case the seller claims for a refund.
What Options are there for Sellers for Payment Reconciliation?
- No personal record, rely on marketplaces’ seller panel:
This works for sellers who sell on 1-2 online marketplaces and sell limited products. Big ecommerce firms’ seller panel is often sufficient for few merchants as it provides all order details, all return details, weekly disbursement reports, and all pending dues. Marketplaces also send regular alerts through sms’ and emails.
- Ecommerce and reconciliation softwares:
With the growth of ecommerce industry in India, the need for ecommerce-specific products and services too have gone up. Merchants who sell on multiple ecommerce sites and receive high number of orders on a monthly basis choose to outsource their tasks including payment reconciliation to multi-channel order and inventory firms like Browntape, Trackmypayment, LPRecon, etc. Such third-party ecommerce service providers help to keep track of payments from various marketplaces, paid/unpaid order stats, and unreasonable/extra deductions.
New tech start-ups that provide reconciliation solution exclusively have mushroomed as well. Then there is ERP & Accounting software Tally used by Chartered Accountants across the country.
- Manual record keeping:
If you don’t wish to or can’t afford to spend on paid software, then keeping a manual record is your safest bet. Most sellers use spreadsheets like Microsoft Excel to maintain payment reconciliation record.
Use formulas and functions like Pivot Table & VLOOKUP in the excel sheet to insert order details and track marketplace payments.
The aim of a seller should be to minimize the gap between the expected payment and actual payment received. The only way it can happen is by spotting discrepancies immediately while updating book of accounting.