When it comes to online retailing, Amazon is one of the giants. In May 2020 alone, the platform received over 2.5 billion combined desktop and mobile visits.
We’ve sold on the platform for years and today i want to answer an important question: how does Amazon pay sellers?
In this guide, I’m going to share my knowledge as an Amazon seller and explain how and when you can expect to see funds in your bank account.
If you need more details on how much it actually costs to sell on Amazon, you should read this guide.
Right, let’s get into it.
How Does Amazon Pay Sellers?
Once your seller account has a positive balance, Amazon uses Automated Clearing House (ACH) or electronic funds transfer to send the money to your bank account.
Depending on the bank you’re with, the funds can take up to five business days to clear.
One thing you should know is that your bank statement might show more than one source once Amazon payments start clearing. Let me explain.
For transactions that require buyers to pay on or before goods are shipped, the payments will reflect as Amazon Payments, Inc.
Transactions that only require buyers to pay after their goods are shipped, payments will reflect as Amazon Services LLC.
You will need to provide Amazon with valid bank account details in your seller account settings. Unfortunately, credit cards and portals such as PayPal are not valid payment options.
For international payments we use a service called Payoneer, it’s help us save money against Amazon conversion fees.
The video below explains this in more detail.
Amazon Payments Turnaround Times
If you’re a new seller, you will need to wait 30 days for your first payment.
Thereafter, it all depends on the type of seller account you have. Professional sellers are placed on a 14-day disbursement cycle.
Individual sellers are generally placed on a weekly cycle and in some instances, sellers can even disburse on a daily basis.
If you want to find your next settlement date, navigate to the Seller Central Home Page. From there, click on Payments Summary Box and the number next to Balance. A page will appear that tells you when your next transfer will take place.
Another question that I am often asked is whether the payment processes for Fulfillment by Amazon and Fulfillment by Merchant differ. The answer is, no.
The processes are the same, it’s just the fees that differ per fulfillment method.
If you want to start increasing that bi-weekly settlement amount, here’s how you can sell more products on Amazon.
Amazon Reserve & Unavailable Balance
When you start accessing your settlement reports, you may see a notification about an unavailable balance.
This means that funds have been placed in a reserve.
Reserve funds are withheld to cover charge backs, low seller performance metrics and A-to-z claims.
A previous reserve balance is when funds were withheld from your previous settlement to then be released on your current payment.
For example, your current reserve might be $200, which means at the next bi-weekly payment interval, that $200 will reflect as your previous reserve balance, provided there were no order issues.
Your current reserve balance is also withheld from orders until a week after the latest delivery date.
This means that if your previous reserve balance is $200 on March 15th and you receive an order worth that amount on March 14th with a week delivery window, the reserve will only be available to you a week after the latest estimated delivery date, which would be March 27th in that instance.
This simply means that sellers should factor in those reserve funds when estimating payment values and turnaround times. Cashflow is an importart part of the business, shortly i’ll talk to you about a tool we use to manage it.
If you’re a first-time seller on Amazon, you will have a longer reserve period. Long delivery windows and low seller performance metrics will also warrant a longer reserve period.
If you have high volumes of A-to-z claims as well as low seller performance metrics, you could really be waiting a while for any reserve funds to clear.
Amazon do this to protect their customers.
Any sellers who see a sudden spike in sales may also be flagged and a longer reserve period may be put in place.
So, why did Amazon put reserve balances in place? One word, fraud.
In the past, fraudulent sellers were scamming customers and Amazon. Basically, they were able to load large volumes of inventory at suspiciously low prices, set a long delivery window, collect the money and disappear.
This resulted in angry customers and high refund costs.
Unfortunately, there’s no way to choose how Amazon handles your reserve balance. The best thing you can do is work on improving your seller performance metrics.
Interestingly enough if your seller account was set up before 2016, Amazon won’t hold your funds in reserve. We are lucky that one of our seller accounts was set up before this time…
However the other seller accounts are subject to these rules and it really doesn’t make much of a difference, it’s something you’ll get used to.
How to Improve Performance Metrics
Your performance as an Amazon seller is very important, not only for the sake of your Amazon payments but for your longevity as an Amazon seller.
If your seller performance isn’t up to scratch, Amazon will suspend or close your account. It really is as simple as that.
Here are just a few of the ways that you can improve your seller performance metrics:
- Get orders to your customers faster by selecting Fulfillment by Amazon. It might cost more but the convenience of knowing you don’t need to deal with picking, packing, and shipping is unparalleled.
- If the number of A-to-z claims keeps increasing, look at what could be causing this issue. Perhaps your products are flawed or they’re arriving damaged. When your customers don’t feel like they’re getting what they paid for, you’re going to run into problems.
- If you find that return fraud is the issue, look into tamper-evident seals for your packages. Fraud happens more often than we realize, so any steps you can take to protect your products is an investment.
Improving your performance metrics is a must regardless of your reserve period. If your metrics are overly low over a long period of time, your account could be suspended.
If you want to avoid having to draw up appeals and sit through lengthy account reinstatement periods, make your performance metrics a priority.
If you really want to become the best Amazon seller possible, you are going to have to play by their rules.
Third-Party Tools & Payment Solutions
If you want to make the payment and fee management that much easier, there are a lot of useful tools and third-party solutions available.
Basically, these tools make it easier to track your profitability and more importantly your cashflow.
The right tools will also clearly show you where there’s room for improvement.
As you advance as an Amazon seller you’ll start to understand the importance of KPI’s (key performance indicators), here are a few of the KPI’s we tracking within our Amazon business:
- Refund Rates
- Review Levels
- Cashflow levels
- Customer Complaints
- Inventory Levels
We track the majority of these using software called Sellerboard.
In the video below i show you exactly how we use the software, if you have any questions just leave a comment on the video.
As mentioned earlier on for international payments we set up foreign bank accounts for the relevant currency. To do this we use this Payoneer service.
Avoiding ‘Costly’ Mistakes
So, what can you do to avoid any unnecessary costs that could reduce your bi-weekly settlement amounts?
You’ll need to think about the following:
- Ensure you are sourcing products with the right margins, our minimum for new products is a profit margin of at least 30% and an ROI level of at least 100%.
- Before you commit to a product order samples and compare these to your competition. A lack of product quality will result in a higher level of refunds and this will effect your bi-weekly payments as well as your long term success.
- Manage your Amazon PPC spend. To us a PPC budget is essential, but you need to ensure that you are not wasting money. This is an area a lot of sellers set and forget, trust me this is not the right way to do it.
There are a lot of tools that can help you as an Amazon seller, i mean why would you not take every advantage that’s available to you?
The main tool we use is Helium 10, if you know how to use it you can find profitable products, optimize your listings and stay ahead of the competition.
If you want to keep unnecessary costs to a minimum, make sure that you are only using the tools that you need.
If you are just starting out you won’t need to use every tool at once.
Prioritize the tasks that are going to move you forward and choose the tool that’s going to help you complete those tasks.
Also ensure that your inbound products are labeled and packaged correctly, this will save you money…
If Amazon employees end up having to rework products, you will be charged and you might not even notice.
Returns are another area where sellers can potentially save some money. If Amazon are handling your fulfillment and a customer submits a return due to breakage, you can recoup some of these costs (we use Helium 10 to keep on top of this).
Making Amazon Seller Payments Work for You
Data is going to be your best friend as an Amazon seller.
Keeping records of your fees and understanding what you’re paying for each product will go a long way in journey towards success.
Failing to track this data means you could keep selling unprofitable products for months or maybe even years. Amazon could also be overcharging you for shipping and storage but you wouldn’t be aware of this because you don’t have an eye on fees.
Whilst it’s only natural to want to know when you’re going to be paid, I would recommend focusing on how much you’re getting paid.
We take the time to review and amend all of our fees on a monthly basis.
Thanks for taking the time to read this article, i hope you found it useful!
More useful content coming soon!
Related: The Amazon seller forums you should consider joining.