The Covid-19 pandemic has significantly affected startups worldwide. It has also changed how customers perceive brands and marketplaces. And, because Direct-to-Consumer (D2C) channels meet customer and business needs effectively, over 800 conventional brands in India have recently gone direct to customers. Further, new-age D2C brands such as Bombay Shaving Company, Mamaearth, BoAt, Pepperfry, Country Delight, etc. are challenging traditional brands such as LG, Havells, and Piaggio.
India’s D2C sector had a total valuation of $44.6 billion in 2021 compared to $33.1 billion in 2020. As per reports, the total D2C market value is forecasted to grow threefold and reach $100 billion.
Expected to add approximately 200 million customers by 2025, it is a profitable industry and offers lucrative opportunities to grow business faster. But, when you ask an eCommerce business owner about their biggest pain point, it’s likely they’ll say accounting.
Payment reconciliation is one such pain point that most sellers find overwhelming. If you love accounting, give us a high five because it’s rare.
That is not all. As your eCommerce business grows, your transactions will become more complicated. Sales, returns, commission, banking fees – all monetary movements will need to be monitored, analysed, and controlled or else it will lead to revenue leakage.
Without a proper accounting process, you can be quickly overwhelmed, especially if you receive payments from multiple marketplaces that might be using a different payment cycle than yours.
Do you know how the lack of efficiency with respect to managing your books can lead to huge revenue loss? We’re going to tell you; before sharing some best practices for eCommerce reconciliation.
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What is eCommerce reconciliation?
Reconciliation takes centre stage in every accounting practice. But, it becomes a critical issue for some business models, especially those with loads of transactions. The eCommerce industry is the most obvious example where a high volume of transactions is common.
Payment reconciliation in eCommerce is a critical process that ensures the accuracy of your financial reports regarding commissions and payments from various marketplaces. Every eCommerce platform has its own commission structure, which can vary from 8% to 15%. For instance, let’s say you sold a product worth Rs. 700 via Amazon, and it charged you an 8% commission, the final payment that should reflect in your account is Rs. 644. However, if it pays you Rs. 600, the payment reconciliation in eCommerce process begins. You will request a monthly transaction report from the platform and match it with your books and bank statements to figure out the Rs. 44 discrepancy.
A successful month-end close depends on reconciling every balance sheet account, including payment reconciliation in eCommerce. Many startups believe that recording transactions is enough to complete the reconciliation process. Still, that’s just the beginning. Any issues with maintaining and recording your books of accounts and comprehending payment processing from eCommerce platforms can lead to accounting discrepancies, which can be a major problem. That’s why it is recommended to have an accounting expert who can keep your books accurate and help you overcome reconciliation challenges with ease.
Payment reconciliation in eCommerce is essential to ensure the accuracy of your balance sheets. Failing to perform this process regularly can lead to significant accounting discrepancies that can affect your business’s financial health. With eCommerce platforms becoming a significant source of revenue for many businesses, it’s crucial to have a robust payment reconciliation in eCommerce strategy in place. Working with an accounting expert who understands the intricacies of payment processing from eCommerce platforms can help you overcome any reconciliation challenges and ensure that your books are accurate.
So, what are the challenges you may face as a D2C business owner?
As more and more eCommerce businesses leverage cloud accounting systems, they overcome the most common challenges of payment reconciliation. You no longer need to keep paper receipts to track your business expenses and payments. However, a few things remain the same, especially in eCommerce transactions.
Dealing with multiple channels
As an eCommerce business owner, you would probably advocate for the pros of having a multi-channel approach. But, your perception might change rapidly when you learn that it hinders account reconciliation.
Keeping track of payment from different channels along with merchant fees can be the biggest hassle, and perhaps the least favourite part of even those who love accounting. Since each channel has a different approach, it aggravates the problem and makes it challenging.
The commission nightmare
Another challenge that pinches most eCommerce business owners is that each platform charges different commissions. It adds extra hassle to the reconciliation process as you need to specifically account for those fees at the end of every accounting period.
If you don’t do so, a large part of your revenue might get slashed. Additionally, it leads to major accounting discrepancies, such as estimating the amount of tax that you owe.
Volume versus value!
Compiling the transaction data is yet another challenge that needs to be overcome to ensure proper account reconciliation. Even if you have just a small doubt, you will need to go through consumer, sales, vendor and product data to validate that transaction.
Though there are automatic accounting systems that can do this in a minute, they will only provide you with numbers. Identifying the source of transactions in such a case might become complicated and time-consuming.
The most difficult part – refunds
Improper refunds are another reason why your bank balance never corresponds to your financial records. Sadly, refunds are quite common, especially in the eCommerce industry. But they are important; thus, it is crucial to record them accurately.
For proper payment reconciliation, it is essential to record each sale and keep the sale and refund records aligned. What makes it even more complicated is that some vendors might charge you an extra fee for issuing refunds, and all this needs to be recorded properly in your books.
I’m sure you will try your best to overcome these challenges. However, if you’re still facing these reconciliation complications, below are some quick tips to avoid them.
Best practices you can implement for smooth and hassle-free eCommerce reconciliation
The eCommerce industry has always been at the forefront of technological advancement, and the digital shift has significantly impacted back-office operations. It is most likely that you will have an automatic eCommerce transaction reconciliation system, which is a popular ecommerce payment reconciliation software. But, do you think it works efficiently for payment reconciliation in ecommerce? Let’s find out the best practices to reconcile e-commerce transactions with ease.
With huge volumes of transactions to deal with, more often than not, it will be extremely difficult to track and enter everything in your books of accounts. This is where ecommerce payment reconciliation software comes in handy. It automates the payment reconciliation in ecommerce process, saving time and minimizing errors. So, it is recommended to invest in good ecommerce payment reconciliation software to ensure smooth and accurate reconciliation.
Apart from ecommerce payment reconciliation software, there are other ways to combat these challenges. One of them is to create a reconciliation checklist that will help you keep track of everything that needs to be reconciled. Additionally, you can also make use of accounting experts who can assist you in identifying discrepancies in your books of accounts and resolving them efficiently.
In conclusion, payment reconciliation in ecommerce is an essential process that must be performed regularly to ensure the accuracy of your balance sheets. Using ecommerce payment reconciliation software, creating a reconciliation checklist, and seeking assistance from accounting experts are some of the best practices to reconcile e-commerce transactions with ease.
Reconcile periodically
There may be several situations where you have transaction issues or are charged twice by the bank during the process of buying, selling, and shipping the products or services. Check that your bank account matches your accounting software or book records (which will show you any issues you have) or just ensure that every credit and debit has been executed correctly.
Do this on a monthly basis so you can figure out what’s causing the imbalance and respond fast and correctly. At the conclusion of each month, accounting software allows you to run the reconciliation report automatically.
Manage your returns and chargebacks efficiently
If you’re selling your products on a platform like Amazon that allows returns, you’ll need to categorise them as Sellable, Damaged, Customer Damaged, Carrier Damaged, or Defective. This not only allows you to watch the progress of your items and client satisfaction, but it also ensures that your inventory is not expensed twice.
When a credit card issuer asks you to return monies paid to a customer’s credit card for some reason, this is known as a chargeback. You should also keep track of it as a cost or fee.
Use Excel sheets and Vlookup formulas
If you don’t want to pay for software or can’t afford it, keeping a manual record is your best chance. To keep track of payment reconciliations, most sellers utilise spreadsheets like Microsoft Excel.
In the excel sheet, insert order details and track marketplace payments using formulas and techniques such as Pivot Table and VLOOKUP.
You can use VLOOKUP to search your spreadsheet for specific data. You could, for example, search for a certain item’s price if you have a list of products with prices.
When you need to find items in a table or a range by row, VLOOKUP is the tool to use. You can look up a product’s pricing and the commission paid/charged by the partner, for example.
Count on automated tools
Despite the fact that e-commerce transaction volumes have skyrocketed in recent years, only a few businesses have established comprehensive systems that can predict fraud and decrease risk by authenticating all transactions from various online marketplaces and payment service providers.
If you have to manage multiple points of sale at the same time, things might get a lot more complicated. Furthermore, transaction traceability between different POS and PSP service providers is difficult to follow and analyse. As the processes and regulations become more complex and time-consuming, this may have a detrimental impact on the company’s profitability.
eCommerce management software such as UniCommerce and eVanik can simplify your accounting activities and eliminate revenue leakage by addressing all transactional reconciliation and matching issues. With fully automated reconciliation, you can easily detect breaks and discrepancies as soon as the MTR report is available.
Payment reconciliation is an important aspect of every organisation’s financial management and finance process. Account reconciliation, like its companion, has a number of processes to it, all of which benefit from automation. If you are curious to know how you can simplify this process, connect with Brego Business today. We are a leading accounting firm in Mumbai. We can help you design and deploy a well-thought-out eCommerce reconciliation process. Schedule a free consultation now!
As an ecommerce business owner, you understand the importance of accurate financial reporting. Payment reconciliation is a crucial step in this process, ensuring that all payments made to and from your business are accounted for accurately. However, with a growing number of payment channels and transaction types, manual payment reconciliation can become complex and time-consuming, making it a prime opportunity for revenue leakage.
This is where ecommerce payment reconciliation software comes in. By automating the reconciliation process, ecommerce reconciliation software helps to reduce manual errors and ensure that all transactions are accounted for accurately. Additionally, the software helps to identify any discrepancies or discrepancies in a timely manner, allowing you to take the necessary steps to resolve the issue and prevent further revenue leakage.
At Brego Business Accounting Services, we understand the importance of accurate payment reconciliation for ecommerce businesses. That’s why we offer ecommerce reconciliation services to help our clients streamline their payment reconciliation process and prevent revenue leakage. Our team of experienced professionals will work with you to customize a solution that meets the specific needs of your business, and our software integrates with a wide range of payment systems, including PayPal, Stripe, and Shopify.
By choosing Brego Business Accounting Services, you can rest assured that your payment reconciliation process is in good hands. Our team of experts will work with you to identify and resolve any discrepancies, and we provide ongoing support and training to help you stay on top of your finances. Contact us today to learn more about how we can help you prevent revenue leakage and achieve financial success with our ecommerce reconciliation services.”
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