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Understanding the Need of Marketplace Payment Reconciliation Systems


August 12, 2021
6 MIN READ
Vinculum
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E-commerce’s global landscape continues to evolve on an annual basis. Technology has removed borders and made it easier to buy and sell services and products online. It is becoming more accessible for people even in the remotest corners of the world. A significant part of this massive success of e-commerce can be accredited to the simplicity of marketplace payment reconciliation systems.

What is a Marketplace?

A marketplace is where people congregate or regularly assemble to conduct business, such as selling and buying commodities. And when such activity takes place online, it is referred to as an online marketplace. This online marketplace may include an e-commerce website or any online services that offer consultations of all kinds.

Changing face of the Ecommerce Industry

According to industry estimates, worldwide e-commerce retail sales are anticipated to exceed US$3.4 trillion by the end of 2019 and US$4.9 trillion by 2021. However, at the same time, the coronavirus pandemic has wreaked havoc on nearly every business and sector imaginable, with the retail industry being particularly worst impacted. This predicament has persuaded most companies to go online since it is the only solution capable of saving the industry amid crisis. And with that comes the problems of marketplace payments.

Need for Marketplace Payment Reconciliation Solutions

To avail of any of the online marketplace services, customers do pay via transaction systems online. Orders from an online marketplace like Flipkart or Amazon often arrive in the sequence of numbers (1,2,3). But payments are collected according to the payment cycle of the specific sales channel. These payment cycles can vary as per the time of year and the market conditions. Each marketplace has its intricate commission structure, shipping charges, payment terms, fees, return policies, penalties, and other expenses. After processing such deductions, the remaining payment amount is then sent to the participating wholesalers or retailers. The main question is are these payments reaching the seller?

Irrespective of what you sell online, you will need the means to keep track of what is due and what has been paid. In addition, you may wish to know how much a particular client owes, how much all of your customers owe, or how many payments you’ve received at any specific time. Whenever a transaction occurs, you will need to reconcile both sides of the transaction, i.e., what went out and what came in. While a large percentage of sellers trust marketplace payment practices to compensate them for product sales, few have a reliable method in place to monitor the marketplace’s payment system for flaws. Some of them may still be relying on primitive manual record-keeping using spreadsheets or on paper.

Fortunately, some of these sellers have started incorporating exclusive marketplace payment reconciliation software with the wave of digital transformation. Such software helps them look for differences in the records by matching invoice transactions recorded internally against monthly statements from external sources. They also help in correcting any discrepancies.

Concerns and Challenges

For many organizations, reconciling payments is a source of colossal frustration, especially when consumers make electronic payments with minimal information. It can also be overwhelming when the seller has listed their products and services on multiple sites. Listing on multiple sites also implies that product rate cards differ from one product category to the other and from one marketplace to the other. This also means keeping tabs on a long list of fees that are subject to change at any time, such as service tax, listing cost, fulfillment fee, and logistic fee – all with zero calculation error. Even the extended return and exchange window can also cause payments issues between sellers and the online marketplace.

Apart from the above, sellers and marketplaces engage in a Service Level Agreement (SLA). A service is explicitly specified in terms of procurement time, delivery time, and both parties’ obligations, among other things. If a vendor does not follow the SLA’s service requirements, marketplaces have the authority to penalize them. Though SLAs are essential for establishing acceptable service standards, defining liabilities and obligations, and managing expectations among all stakeholders, the problem arises when the seller is not at fault but is nonetheless penalized.

Advanced Marketplace Payment Reconciliation Solutions

Manual reconciliation of all payments from clients or other sources is not the solution for managing the marketplace payments. Further, there is always the problem of missing data or causing incorrect amounts. Hence, sellers must look forward to employing payment reconciliation software that can expedite and simplify these processes by automatically reconciling and applying payments to the proper account.

There are two versions of this software:

  • Marketplace Seller Dashboard: In this, the marketplace offers its sellers a seller panel, which keeps track of all information related to the products sold and the payments received. So, if you sell on one marketplace, the seller panel may be the most convenient method to keep track of your expenses.
  • Payment Reconciliation System: This leverages an automated system that breaks down the net payments in various ways using pre-optimized procedures and design skills. These systems are fully aware of the different data storage and visualization protocols used by most large marketplaces. This is an adequate payment reconciliation system. All of your payments from multiple sales channels are automatically organized using bar graphs and charts, including deductions like commission rates, shipping charges, and more.

Such systems also provide real-time information for orders, identify their status, and claim payments even for the replacement orders. Moreover, it helps sellers claim and get reimbursements if the marketplace misplaces their products or gets damaged during shipping.

Conclusion

While payment reconciliation is a must for sellers participating in an online marketplace, manual methods can be long, thorough, and prone to errors. Adopting either marketplace seller dashboard or payment system can simplify, streamline and speed up the existing reconciliation processes while reducing reconciliation errors and protecting business profitability. In addition, it will enable the seller to spend less time reconciling and more time focusing on the customers.

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