Marketplace Payment Reconciliation – Easier Said than Done


April 14, 2020
6 MIN READ
Vinculum
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With technology becoming easier, accessible and feasible within the marketplace ecosystem e-commerce turns out to be the first choice for the buyers.

The benefits of e-commerce cannot be undermined or ignored as last year that is in 2019, the retail e-commerce sales worldwide were about 3.53 trillion US dollars while the e-retail revenues could extrapolate to 6.54 trillion US dollars by 2022.

While marketplace payment may look simpler from the outside the reconciliation part undoubtedly is not that simple.

As a seller one might be distressed by pestering problems that come along with e-commerce or e-business.

Let us see what these problems are and what are the possibilities of tackling them but before that let us focus on what marketplace payment reconciliation means and how is it affecting e-commerce.

What is marketplace payment reconciliation?

A marketplace is a location where people meet or gather regularly with the purpose of a business that is selling and buying commodities and when this particular bazaar happens to be present inside your phone just a few touches away, it is then called an online marketplace.

An online marketplace consists of

  • An e-commerce website
  • Third parties that provide product or service information
  • Marketplace operator who processes the transaction
  • The retailer or wholesaler

In this, the transactions made by the consumer are processed by the marketplace operator and then delivered to the participating wholesalers or retailers.

Payment reconciliation makes sure that the amount which leaves an account aligns completely with the amount spent at the end of the transaction.

E-commerce business is such that when a seller or retailer joins he assumes a particular amount of payment for the product or service that he provides after all the possible deductions from the marketplace but as soon as the payment is received the flaws within each level of the marketplace become pronounced.

The proof here is the huge gap between the expected or assumed amount of the payment and the actual payment that the seller receives.

Payment reconciliation is the process of comparing and verifying internal records of payment history with external resources such as bank records which are nothing but linking payments with invoices.

Apart from this there are a number of other ways by which deductions are made in the payment of a seller within the marketplace for example the payment could be subjected to commissions, closing fees, shipping charges, discounts and offers, storage and warehousing, statutory taxes and unremitted orders.

A different kind of problem also arises when the amount of money coming in has to be routed back to the business but the payment in hand is less than the expected amount which was to be routed.

In today’s e-commerce scenario it is highly important to keep a tab on payments and expenditures or the complexities involved can easily ameliorate.

Payment reconciliation is basically about keeping the financial accounts of the retailer healthy as it

  • Summarises the financial transactions of an enterprise
  • Analyses the transactions of an enterprise
  • Preserves records for future reference
  • Compares payment history with bank records
  • Figures out profit and loss
  • Helps to identify areas of improvement
  • Deals with the extra deductions made in the payment, etc.

Even though marketplace payment reconciliations help in a number of ways, the entire process could be exhausting, confusing and tiring for the merchant.

Every marketplace has a unique structural organization of different operations involving layers of deducible charges. These could be either taxes or penalties.

As every marketplace has its own unique timing of disbursing and visualizing payments with numerous orders daily it’s reconciliation thus becomes a tough job to perform every day.

Multiple levels in a marketplace call for proper functioning and operation and each level involves a payment reconciliation.

Payment reconciliation is also affected by the choice of a third party who provides product or service information. There could also be multiple third parties depending upon the service or product being provided further hassling the procedure.

What makes online marketplace reconciliation a tough nut to crack?

  • For a seller dealing with multiple marketplaces at a time it becomes next to impossible to manage all the individual payment records, each involving various layers of deductions
  • For high sales volume the task becomes more tedious
  • Multiple layers of ever-expanding fees in the marketplace
  • Variable rates of product and services depending upon the chosen third party
  • Unclear and uncertain nature of the marketplace
  • Unpredictable and unfair nature of the penalties
  • Often changing policies and rules either by the transaction operator or by the third party
  • There is sadly a general disregard for the payment of the merchant at all levels of e-commerce
  • The way used to reconcile payment may not be safe always and there might be some probability of glitches
  • If payment reconciliation is being done with the help of excel sheets the need of an expert is automatically required
  • Lack of proper knowledge about marketplace payment reconciliation among the sellers.
  • Chances of fraud in the reconciliation process
  • Sellers not being able to stick to the SLA or service level agreement of the marketplace

The target is to achieve a balanced cash flow at the transactional level hence the reconciliation must be proper. There are many ways to recognize incoming payments systematically.

The entire operation must be in sync with the payment cycle so as to tackle inefficiency and maintain accuracy. The process must be timely and not be delayed because it could lead to piling up of one transaction over the other.

While the solution is to make marketplace payment reconciliation a service itself but it comes with its own set of difficulties.

In this business a single mistake can cost a consumer. Thus it becomes important to ensure a quality client experience which is difficult to achieve but certainly is not impossible.

Although online marketplace payment reconciliation is highly tiresome and demanding it should be employed to ascertain expected profits and ensure that the unnecessary losses are avoided as much as possible within its sphere.

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