Businesses today are spending hours of manual time just figuring out whom to pay, how to pay and when to pay. Splitting settlements between stakeholders/vendors is a whole new ballgame on its own.
But why is splitting settlement necessary in the first place? Is there a way to simplify the process for vendors?
What is Split Settlement and Why are Present Systems Outdated?
The process of paying out funds to multiple stakeholders/vendors according to a predefined commission set by a business owner is called a split settlement.
After all, issues like these are not uncommon:
- Hassle in the reconciliation of vendor settlements
- Occurrence of manual errors while splitting payments to multiple accounts according to varying commissions
- Error/Log in updating bank details of the stakeholder/beneficiaries
- Trying to map customer payments to the commissions given to vendors
… and many more
Month-ends usually end up wreaking havoc on the accounts team. If you are facing the same problems and are seeking a solution to end this, this blog is for you.
How Can Cashfree Payments’ Auto Collect Solve Your Split Settlements Issues??
Cashfree Payments’ Auto Collect – Split Settlement is not just a payment splitting solution.
In fact, it’s your end-to-end payments splitting experience. It empowers businesses to manage payouts at a per-transaction level with the power of virtual accounts to multiple stakeholders.
Once payment is collected via Cashfree Payments’ collection suite – Auto Collect, it gets split based on the predefined split percentages either at the merchant level or the virtual account level. And the money is paid out to multiple vendors/partners/bank accounts at the pre-defined settlement times.
How Does Payment Splitting Work?
Let’s understand this with the help of an example:
- Consider yourself as a Merchant having multiple branches/outlets
- Let’s consider you have 3 branches in this case
- To experience the functionality of split settlements, firstly you will have to onboard all your vendors/stakeholders with whom you want to split every incoming payment to the Cashfree Payments’ Auto Collect ecosystem
- Next up, generate unique virtual bank accounts for every branch and setup the vendor/stakeholder split at the same time
- Now there could be 3 cases in which the payments come in and get split:
Case 1: Whenever one of your branch receives a payment on its’s virtual bank account (Virtual accounts are bank accounts that have no physical existence, and transact on behalf of a real, physical account acting as a layer – VPA 01 in this case ), the fund gets split automatically to the respective vendors (vendor 2 and vendor 3 which is the branch bank account and your bank account respectively in this case) based on predefined ratios as defined during virtual account creation.
Case 2: Whenever you receive a payment directly, you might want to split it into the bank accounts of multiple departments within your organization (vendor 1 and vendor 2 in this case can be your inventory and accounts payables departments respectively).
Case 3: If you want to settle all incoming funds directly to your bank account, you can do that too by not defining any split on your primary bank account level.
It’s that easy!
This way you could spend time scaling your business to newer heights and leave the payment settlement operations to us.
How Can You Set up Auto Collect-Split Settlement on the System?
- Onboard your account on Auto Collect
- Enable Split Capability
- Add vendors
- Configure vendor split
- Settle across vendors
- Reconcile
Onboard Your Account on Cashfree Auto Collect
For you to be able to settle a transaction to multiple vendors/partners/bank account, your account must first be onboarded onto Cashfree Payments’ seamless collection suite – Auto Collect.
Once you are onboarded onto Cashfree’s ecosystem you are ready to get started.
Enable Split Capability
Next up you will have to enable split capability for your account.
This can be done from the Admin dashboard. Under the merchant’s Auto Collect profile, please click on ‘Preferences’ on the Left-hand sidebar and turn the switch on for Split Settlements.
Our ops team will help you enable this.
Add Vendors/ Partners/ Bank Accounts
Adding vendors is super easy. You can do it yourself via merchant APIs or you can ask your account manager to add vendors using the Retool dashboard.
a. Merchant APIs –
Vendors can be created via Merchant APIs.
b. Retool Dashboard for Account managers –
- Visit the retool dashboard
- Enter Merchant ID
- Create Vendors
Configure Vendor/Partner/ Split
You can set the Split configuration via API. Your account manager can do the same via Retool dashboard.
a. Merchant APIs –
The vendor split needs to be configured while creating vendor accounts.
b. Retool Dashboard for Account managers –
The Vendor Split percentage can be configured or edited via the retool dashboard.
Settle Across Vendors/Partner/bank accounts
Once a split is defined the settlement happens across multiple stakeholders automatically based on predefined settlement cycles.
Reconciliation
You will receive webhooks-based notifications after successful settlements to the vendors/partners/bank accounts thus enabling you to reconcile your ledgers instantly without hassle.
Does Auto Collect – Split Settlements Have Reporting Capabilities?
Auto Collect – Split Settlement does have free reporting capabilities.
It gives you access to the vendor settlement dues, settlement status, refund adjustments and more directly from the dashboard which helps you make informed business decisions.
What Are The Industry Use Cases?
- Revenue-based financing – Few Cashfree merchants have onboarded customers and have also partnered with multiple NBFCs. When a transaction is collected on a virtual account, the funds can be distributed among the Merchant, NBFC and the merchant’s customer.
- Auction houses – Auction houses are marketplaces where there are buyers and sellers. Transactions are collected on virtual accounts where buyers can park their funds. When a deal is confirmed, a share of the funds will be taken as a commission fee by the Auction house and the remaining funds will be settled to the seller.
- Dealers and distributors – If payments from a given virtual account need to be disbursed across multiple dealers and distributors, AC split will be able to support this use case.
Auto Collect Split Settlements is not limited to only the above use cases. In fact, any business owner that needs to share commissions with multiple parties can make use of Cashfree Payments’ Auto-Collect Split Settlement feature.
For more information, reach out to our payment experts here.
