By Jeff Fortney
It may be my choice of television shows, or just that I am noticing a trend, but lately it seems the majority of commercials are health related. Many are about specific medications for diseases or illnesses. Most ask the question, "When was the last time you had your X checked?" It seems like a good question until you hear the litany of side effects at the end of the commercial.
After considering several of these repeating commercials, I considered a question that is extremely important to anyone who sells merchant services: When was the last time you looked at your residual report?
It's a straightforward question and one that I ask ISOs often. You would think the responses would be immediate and indicate that ISOs look as soon as their reports come out. However, I typically get cursory answers along the lines of, "I check the total" or "I look at it when I have a question."
Like the health-related commercials imply, it's a topic and effort most would like to avoid. However, there are consequences for avoidance, and they have a similar impact. Not looking at your residuals impacts your financial health, instead of your physical health, and unlike the commercials, there is no list of side effects to distract you.
Several excuses are given as to why people do not look at their residual reports consistently. The primary reason has to do with our shared background: almost every successful merchant level salesperson, independent sales agent, and ISO is first and foremost a salesperson. Also, taking the time to analyze a residual report can seem daunting. Then there's the argument that spending too much time analyzing residual numbers takes time away from selling.
Although the need to devote maximum time to selling is valid, the reasons for consistently reviewing your residual report far outweigh all reasons not to do so.
The most important reason, however, is one that is rarely considered. How do you evaluate your current ISO partner if you aren't reviewing your residuals? How do you know if your ISO considers you a true partner and is not just treating you like a vendor?
Before you can do monthly residual reviews, you must do a deep dive into your most recent report. This consists of a full analysis of all available data and developing a clear understanding of how your residuals are calculated.
Set aside enough time to fully analyze the data. You should be able to complete a full review in an hour if you keep the interruptions to a minimum and have the information you need available.
You are not required to review every single merchant. Instead choose merchants of various sizes and pricing models. Do consider any and all that caused you to lose money, but don't restrict yourself to solely these merchants. Even the most profitable merchants' data could contain errors.
For each merchant you selected, your goal is to verify that your payout is accurate. Begin with one merchant. Study either the merchant statement for the month you are reviewing or any online data available. Identify what was billed to the merchant, including interchange (I will explain why shortly).
Look over the billing to determine if it appears accurate. Is the discount rate what you expected, or has it been changed? Do the remainder of the fees match what you charged the merchant on the application? Are interchange, dues and assessments accurate to what is charged by the card brands, or are they padded? Note your answers, but do nothing yet. Calculate your Schedule A expenses as you understand them for that merchant. From the total collected from the merchant deduct the following:
This total is the gross income earned on the merchant. Calculate your share from this total, and compare it to what you were paid.
If it matches your payout, move on to the next merchant. If not, identify the difference (both positive and negative) and attempt to identify the cause.
It may be that you are not getting credit for any padded fees. You may have miscalculated your Schedule A expense. Most reports will provide you the number used to calculate this expense. If it differs from your figure, you should find out why. Note your questions and move to the next merchant.
Once you have completed your review, approach your partner with all of your questions. The responses you receive will be as critical as your full review. If it's human error, determine when it will be fixed and when the corrections will be added to your income.
You may find that an 80 percent share isn't truly an 80 percent share of actual income. You may also find that certain fees are charged to the merchant but are excluded from your income. You may also discover that what you perceived to be a good deal isn't as good as you thought. If so, it may be time to reconsider your partnership.
Once you complete your review and address your concerns, reviewing future reports will take a lot less time and require fewer steps. Remember, no one will protect your revenue better than you will. Take the time to complete a full review. It's worth the effort.
Jeff Fortney is Vice President, ISO Channel Management with Clearent LLC. He has more than 17 years' experience in the payments industry. Contact him at firstname.lastname@example.org or 972-618-7340. To learn about how Clearent can help you grow faster and go further, visit www.clearent.com.
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