Are you getting paid enough?
Many sales representatives would agree one of the most important factors in the MLS/Agent/ISO and processor relationship is the residual payment. Calculating these payments generally involves a complex, tiered percentage formula. It can be a chore for agents to confirm if they are being paid correctly, but it is often worth this effort.
Typically, agents are given a residual report with lots of numbers and a payout amount. However, most agents aren’t schooled on how to dissect these reports to confirm they are being paid according to contract.
Start with merchant billings
“There are many factors that go into the residual evaluation, but the first place an agent should look is the merchant billing,” stated Emily Karawadra, President of Impact PaySystem, LLC.
Since the merchant’s activity is the basis for what is being collected, determining whether the merchant is being billed according to the Schedule A section of their contract is your first objective. Karawadra urges agents to pay close attention to what fees have – or have not – been charged, and how that parallels to the Schedule A. “Errors between the merchant statement and the Schedule A are more common than most agents expect,” she continued.
Most agents take expert care to ensure completion and accuracy when submitting a merchant’s paperwork. Then, they work hard to get the merchant programmed and ready to accept transactions. Karawadra believes many agents think it is okay to sit back and wait for the residual payments to start coming in at this point, but she advises them to double check these payments for accuracy.
“Countless times, I’ve found the processor is not charging the merchant the fees spelled out in the Schedule A,” Karawadra continued.
Karawadra often sees errors in the pin debit interchange area where this fee gets overlooked and doesn’t get billed to the merchant. She warns agents to watch for this kind of activity, because the agent will have to absorb these fees, and it can drastically reduce their residual payouts.
Another common scenario relates to pass-through fees. If they are built into a contract, these fees should be passing through to the merchant billing; not coming out of an agent’s residual commissions.
Do a thorough audit
It goes without saying you will need access your merchant’s statements, so it is best to make this request at the onset of every relationship. Many ISO portals have comprehensive information on the merchant’s transactions, but may not have a breakdown of the fees, so comparing to the merchant’s actual billings is always best.
To audit your payouts, you’ll need to routinely reconcile between these statement and your residual reports, and Karawadra encourages you to dig deeper when you don’t see the level of residuals you anticipated. She offers the following steps you can go through to conduct a thorough audit:
If you have any trouble matching things up, Karawadra counsels you to request the raw data from the ISO/Processor. They may be reluctant to comply, but in most cases, you have contractual rights to view it.
Zahara Alarakhia, Esq of Payments Law Group, said, “Agents are entitled to residual reporting, but each processor’s reporting system is different. Agents should look to their agreement and ensure any reports provided in connection with residual payments offer sufficient detail to allow them to verify the accuracy of the amount of the residuals paid.”
Evaluating your processor’s raw data confirms how they calculated the residual. If your processor is proactive, they will also provide a key on the calculation formula. It is time consuming, but the effort is worth it. Even the best processors/ISO’s make mistakes and it’s not always an intentional error. Nevertheless, they won’t do the leg work for you, so you will need to audit your accounts yourself.
Notifying Your ISO/Processor
If you have identified an error in your residual payout, you’ll need to notify your ISO/Processor immediately. If the error is theirs, and they are not billing the merchant the correct fees or overcharging you, they will need to rectify it. Also, many contracts only allow agents to go back so many months for back payment. Karawadra urges you to become familiar with this clause of your agreements, keeping in mind you need to do your evaluations on that timeline. If your contract says six months, then it is best practice to do your audits every six months at a minimum.
“In this competitive industry, we have to remember profit margins are slim in most cases,” Karawadra closed. “It is easy to get bogged down with daily duties and miss an opportunity to collect monthly residual payments we may not have received.”
For more information about Impact PaySystem, visit www.impactpays.com.