22.11.21

Managing settlements with merchants on a marketplace

"The Future Shopper Report 2020" showed that 52% of consumers prefer to search for products on famous marketplaces directly, not the search engines. It's not surprising because trading platforms offer various goods so that you can immediately compare prices and see reviews from other buyers. The popularity of marketplaces induces many entrepreneurs to place their products there. For profitable cooperation, a trading platform must have a merchant settlement service. In this article, we will look at the billing system and its role in the operation of marketplaces.
Billing system: problems and tasks
Billing system (BS) calculates prices for the provision of services for each client. It can also store information about the marketplace tariffs and other monetary characteristics. Billing is also necessary for settlements with different service providers.
Top Billing Issues
Some SaaS companies find it difficult to deal with repetitive billing issues. Let's consider the most common ones:
Scalability. Billing companies often have a choice: create a new billing system or use one of the solutions available on the market. Carrying out all the settlement operations on your own seems to be an economically viable option. Still, as the load on the system increases (new subscribers, price changes, etc.), the code becomes more complex. Therefore, SaaS businesses must scale up quickly to have the ability to experiment with pricing, discounts, and trial management.
Loss of income. An involuntary outflow of income occurs when there are not enough funds on the client's account or the payment was unsuccessful due to connection problems. Reminders can help solve this problem. Retrying a transaction and sending a payment rejection message to the customer can significantly reduce inadvertent cash outflows.
Complicated billing. It is worth paying attention to the time of sending and the number of invoices. It is better to do the mailing during the payment period. If a customer has several subscriptions, the best option would be to combine their accounts to make payment more efficient. The automated billing process also includes payment reminders.
Integration. BIlling covers a variety of business functions: sales, reporting, analytics, marketing, and others. They all interact with each other, so they need information about the user's subscription to fulfill their roles effectively. Therefore, you need a single source of reliable information to simplify the billing process - the complete billing system software.
The main tasks of billing
The main task of the BS is the correct and complete client invoicing. The invoice should consider information about the use of services provided by the marketplace. The billing system is responsible for the debiting of money from user accounts.

The billing system stores data about all operations performed by clients: income, expenses, cash balances, tariff plans, services used, bonuses, and discount programs.

Using billing significantly reduces the time for setting tariffs depending on services, products, promotions, and personal discounts. Also, invoices issued by the BS provide the user with the most transparent information about the services and their cost. Billing report data is submitted in a clear language and does not obstruct understanding of the principles of cooperation with the marketplace.
Challenges posed by the billing system to alternative settlement methods
An automated billing system has many helpful features that harmoniously complement each other and have a lot of advantages over self-invoicing. Let's figure it out.
Settlement operations
BS calculates the consumption of services, VAT, bonuses; generates and sends invoices to suppliers; provides a complete report on the platform's productivity and user assessment. The billing system works in two directions:
Prepayment of a fixed amount: debited from the client's account before using the marketplace. If there is a lack of funds, the provision of online platform services will be suspended until the next payment.
Post-payment, or post-payment: provided for the entire volume of services at the end of the previously fixed period of use, according to the specified tariff.
Informativeness
Billing helps to solve the problem of informational customer service quickly. BS provides users with the necessary information about services and their cost in time. It configures notifications and details the reporting data automatically.
Financial services
Financial services are the main feature of the billing system. They control transactions for all payments: from invoicing to managing the client's debt. In addition, they help with the reception and distribution of revenues from various sources. This function greatly simplifies managing the marketplace and saves time for solving other aspects of developing the online platform.
Managing settlements with merchants
Billing helps to manage settlements between the marketplace and merchant/supplier. There are several different ways to monetize. The most common option is to remove the commission from sales. That is, the platform owner receives income from the sale of goods that suppliers place on the marketplace. Another type of income can be advertising on the platform or additional features/tariff plans.

Using BS, the marketplace can create as many service packages as it needs. A tariff plan means the conditions under which a supplier works with an online trading platform. It considers commissions charged to merchants when processing orders. The tariff plan allows you to specify different commissions for categories and subcategories of goods as well as "Category/Subcategory + Brand" combinations.
What should a marketplace billing system do?
The billing system should work both in the prepaid model and in the COD model. It has to provide real-time data for the financial part of the marketplace and the merchant to provide the best conditions for mutually beneficial cooperation. Also, to work with merchants effectively, the marketplace billing system should have several essential capabilities:
Work with both prepaid and postpaid merchants.
Manage the conditions under which suppliers operate in a marketplace.
Control the processing of commission on orders (Retention - Payment - Return of commission following order statuses).
Create accounts for balance replenishment.
Export reports on transactions.
Have a reliable system of notifications for merchants when replenishing an account, debiting fines, reaching the lower balance limit, etc.
Write off fines from the merchant's insurance account without limiting their ability to sell their goods on the online platform.
Service functionality for managing settlements
Various billing services are used to manage settlements. They offer an accounting of all transactions, revenue management, forecasting, favorable transparent conditions, and recording suppliers' financial relations with the marketplace. The marketplace settlement system should have several functional components and help in solving them:
Seller account. When connecting a new seller to the marketplace, their account should be created easily, with no time spent.
Interest. Each transaction is charged a percentage as a commission.
Acceptance of payments. On the marketplace, payments may be accepted in any possible way, but often credit cards are used.
Payments to sellers. As soon as the money is earned and the marketplace withdraws the share, the merchants should receive their income.
Reporting tools. It is vital to provide marketplace merchants with tools for checking payments and percentages.
Why do you need settlement tools between the marketplace and merchants/suppliers?
A service for settlements between the marketplace and merchants/suppliers guarantees the transparency of the services provided, reliability in paying bills and issuing the most suitable tariff plans.

A high-quality and efficient billing system must be highly productive to collect and store data, manage the balancing of funds, set up tariff plans, and provide reports for merchants.
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