One of the oft-ignored components in an online retail store is that for Financial Management. In our component overview article, we presented basic details of this component. Here we will dive deeper into the component, paying special attention to making sure we track the flow of money from customer bank account to your (merchant) bank account, transaction by transaction.
In the diagram, I1 includes all the details about C1A and C1B (this is a detail generated by merchant during order submission by customer). C2A and C2B are deposits (in aggregate) into merchant’s bank and I2A and I2B are the corresponding transaction level details for them.
As presented in the diagram above, money flows in these steps:
- Customer pays for the item and after some time, money flows from customer account to payment processor’s account (in a complicated, multi-step process, depending on payment methods used – see Selecting Payment Gateway for more details). This happens for each transaction.
- After some time (depending on what is the payment gateway or CoD vendor company’s policy regarding this), this money flows into Merchant’s bank account. This transfer is in aggregate; all transactions since last transfer will be aggregated and money transferred to merchant’s bank account, netting out the fees owed to the vendor company.
Information should flow similarly:
- Customer order details should be available to the merchant after order is placed.
- For each deposit in the bank, payment gateway and CoD vendor provides details of the transactions and fees that were aggregated this payment.
Let’s take an example: in an online store, 100 customers place orders. 80% of them select Cash on Delivery (CoD) as payment method, remaining customers select Credit Card (CC). Also, assume that CoD attracts a 5% fees from the CoD vendor, and CC attracts a 3% fees from Payment Gateway. Also assume that each item is priced Rs. 100 and each customer buys only one item.
Given this, here are various components of cash and information flow:
| Payment type | Count | Order Value | Cash Collected | Fees | Cash Deposited |
| Credit Card | 20 | 2000 (=20*100) | 2000 (=20*100) | 60 (=3%*2000) | 1940 (=2000-60) |
| CoD | 80 | 8000 (=80*100) | 8000 (=80*100) | 400 (=5%*8000) | 7600 (=8000-400) |
I2A will list the details of 80 CoD transactions and I2B will list the details of 20 Credit Card transactions.
In Part 2, we will look at how we reconcile this data to ensure that we track every rupee that flows through our system and is owed to us. Stay tuned!
