Completing the eCommerce payment circle
By Ralf Gladis, CEO, Computop
An order arrives: the best thing that can happen to an online retailer. However, if they manage their accounts receivable processes themselves, it can quickly become quite complicated. Especially if they are trading cross-border.
The efficiency of an eCommerce site depends not just on the customer-facing front-end, but on how well the merchandise management, order and payment processing is handled in the back-office. Every stage from taking the customer’s order, accepting their payment, shipping and delivering their product, managing inventory, and processing returns has to work in tandem.
Not least is the smooth running of the accounts receivable processes. Are they integrated into the system landscape or is the accounts data only transferred to it via an interface? If so, what happens to chargebacks and how do incoming payments and open items in the customer account come together? It is precisely these transfer points that hold the greatest potential for complications, which can then quickly result in expensive manual reworking, not something that any eCommerce retailer wants to be hampered with.
Linking payment and accounting is a logical step. It is the payment flow that is to be recorded and which constitutes the tax liability. That’s why more and more eCommerce retailers are shifting their accounts receivable processes to their payment service provider, especially those for whom cross-border trading is a core part of their offer.
The link means that in practice, the payment processor automatically creates a customer account when a new customer makes a payment transaction. Depending on the payment method, incoming payments are monitored or reconciled with confirmation by the selected payment method. In the case of purchase on invoice or prepayment, the reminder is sent after a fixed period of time, and if desired, the risk of non-payment can even be covered without the involvement of factoring or collection. Of course, the customer receives their invoice automatically with the correct payment confirmation or request. On receipt of payment, settlement is automated, the open position is closed and the accounting is updated. Select payment service providers will also support retailers who no longer want to monitor and reconcile the EPA files of different payments and acquirer connections.
As well as improving payment processing efficiency, the other advantage of outsourced accounts receivable management is that it can have an even greater impact on returns, removing the need to issue credit notes or cancellations which are often still processed manually in retail operations today. A solution that combines both payment service provision with accounting, can automate accounting chargebacks and payments to customers if they return goods. This is even possible across different sales channels, so that if a customer orders online or via mobile, but wants to exchange or return their items in-store, they can receive their money back on the same card or via the same payment method they used for the original purchase, including posting to the customer account. In today’s multichannel environment, this is what customers expect and it should be what all retailers are able to provide.
In the context of the multichannel environment, retailers should be aware of the different exchange rates and currencies in the markets they are selling to. Payment service providers are able to convert almost all payment methods automatically. Advanced PSPs let the customer choose between Direct Currency Conversion (DCC), which gives retailers the option to adjust the currency conversion dynamically and the option to carry out the conversion before the customer makes the purchase and not at checkout. The merchant benefits from a stable exchange rate throughout the transaction process, including subsequent returns or credits. Automated reports on transactions made and revenues generated also facilitate accounting.
In addition to multi-currency, the software that eCommerce retailers are using should also be able to support the sales tax regulations and keys demanded by different countries. Debtor management should process the tax codes of all countries in which the retailer operates, or is likely to operate in the future, to ensure the correct posting of all sales, including those that are cross-border.
One final point – to help with management of accounting documents, it is useful to have just one single file which can be transferred directly into the general ledger or transferred to the tax consultant. Not only does this save effort and cost for the retailer it also enables them to focus on their core business without being distracted by complex accounting procedures.
Armed with an efficient, fuss-free payment and accounts receivable solution in the back-office will give eCommerce retailers the infrastructure they need to keep processes lean, cash flowing, and customers happy while they build their business.
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