Merchant Statements: How They Help Your Business

Having a clear understanding of the financial aspects of your business is vital for you to succeed. The merchant statement or processing statement is an important document or tool that plays a crucial role in financial management. The blog will dive deep into what exactly are merchant statements, how to read them, and also help in understanding the different types of fees involved and their impact on your business.

What is a Merchant Statement?

This is a document that most processors provide each of their clients periodically. It is mostly every month. The merchant statement will include detailed information about monthly sales volume split card-wise. Credit card and debit card sales, chargebacks, and refunds that are processed for the month and every fee associated with each transaction.

Merchant statements not only serve as the summary of the payment processing activity but also help in identifying trends and patterns in your business, such as periods of high sales volume, frequency of chargebacks, and overall card pattern usage.

Reviewing your merchant statement regularly can also help you spot discrepancies or unexpected fees, ensuring you're not overcharged and adhering to agreed pricing models, and optimizing your payment processing costs.

Key Components of a Merchant Statement

By having a comprehensive understanding of the key components in a merchant statement, businesses can effectively manage their finances. Some of those key components are:

Transaction Details: This section lists all processed transactions, including dates, amounts, and payment methods used.
Fees: Various fees will be detailed here, such as transaction fees, monthly fees, and chargeback fees.
Net Sales: The total revenue after subtracting refunds and chargebacks.
Deposits: The statement will indicate the total amount deposited into your bank account, along with the date of deposit.
Chargebacks and Refunds: A breakdown of any chargebacks or refunds processed, including reasons for chargebacks, which can help identify potential issues.

How to Read Your Merchant Statement

Reading your merchant statement can seem daunting at first, but breaking it down into sections can make it much easier to understand. Here’s a step-by-step approach to help you get the most out of your statement:

Start with the Summary: Begin by reviewing the summary section, which provides a snapshot of your total sales, fees, refunds, chargebacks, and net deposits. This section is useful for getting a quick overview of your monthly processing activity and understanding how much money was deposited into your bank account after fees were deducted.
Analyze Fees: Take a close look at the fee breakdown section. This will include charges for each type of transaction, such as credit card processing fees, monthly account fees, and other service-related costs. By understanding each fee, you can identify areas where you might be able to reduce costs, such as by negotiating lower rates or switching to a different payment processor.
Check Transaction Details: The transaction detail section lists every individual transaction, including the date, time, amount, and type (e.g., credit, debit, refunds). Cross-referencing these details with your internal sales records can help you spot discrepancies, such as double charges, unauthorized transactions, or errors that may need to be disputed.
Look for Patterns: Merchant statements also reveal trends over time. Pay attention to patterns in your sales volume, chargebacks, or refunds. For example, a sudden spike in chargebacks might indicate customer dissatisfaction or potential fraud, which needs immediate attention. Similarly, identifying your peak sales periods can help with inventory planning and marketing strategies.
Review Dispute and Chargeback Sections: If your statement includes a section on chargebacks or disputes, it’s important to review it carefully. Chargebacks can be costly, and understanding why they occur can help you take preventive measures. This section may include details on which transactions were disputed, the reasons given, and any associated fees.

Common Fees to Look Out For

Merchant statements often include various fees that can affect your profitability. Being aware of these charges is crucial for optimizing your business expenses.

Transaction Fees: These are charges applied to every processed transaction, whether it's a sale, refund, or chargeback. The fee may vary depending on the card type (credit, debit, or rewards card) and the method used (swiped, keyed-in, or online). Monitoring these fees can help you choose the most cost-effective payment options for your customers.
Monthly Service Fees: These are charged periodically and can cover various services, such as account maintenance, customer support, or access to payment processing software. If these fees seem high, consider reviewing your contract or exploring alternatives with lower monthly costs.
Chargeback Fees: When customers dispute a charge, you may be hit with chargeback fees. These fees can be substantial, especially if disputes are frequent. Reducing chargebacks by improving customer service, providing clear return policies, and using fraud prevention tools can help lower these costs over time.
Batch Fees: Every time you settle your transactions at the end of the day (known as batching), you might incur a small fee. If you run multiple batches daily, these costs can add up. Consolidating your settlements to once a day (where possible) can help minimize batch fees.
PCI Compliance Fees: Some processors charge fees to ensure that your business meets Payment Card Industry (PCI) data security standards. If you’re not compliant, you might also face non-compliance fees. Regularly completing the PCI compliance questionnaire and maintaining secure payment practices can help you avoid these charges.
Equipment Rental Fees: If you lease card processing terminals or other equipment, these rental fees will appear on your statement. If these fees are too high, it may be worth exploring purchasing equipment outright or switching to a provider with lower rental costs.
Early Termination Fees: If you decide to switch payment processors before the end of your contract, you may face early termination fees. These fees can be significant, so it’s important to review your contract terms before making any changes.

Understanding and regularly reviewing these fees can help you better manage your expenses and potentially negotiate better rates with your payment processor.

The Importance of Regular Review

Regularly reviewing your merchant statements is crucial for maintaining sound financial management. Here’s why it matters:

Spotting Errors: Routine checks can help you identify discrepancies or unauthorized charges, ensuring that your financial records remain accurate.
Optimizing Costs: Understanding the fees you’re being charged allows you to identify areas where you can cut costs, such as renegotiating rates or switching providers.
Analyzing Trends: Monitoring sales patterns and chargeback rates helps you make informed business decisions, adjusting to changes in customer behavior and market conditions.
Accurate Forecasting: Keeping precise records enables better financial forecasting, helping you plan for future growth and budgeting more effectively.

That’s why, at Q PaymentZ, we offer a Fee Assurance Program. Our dedicated team periodically reviews each client’s merchant statement to ensure you’re not paying more than the agreed amount. This proactive approach helps protect your bottom line and keeps your costs predictable.

Leveraging Merchant Statements for Business Growth

Merchant statements are not just for tracking expenses; they can be powerful tools for driving business growth. Here’s how to leverage them:

Informed Decision-Making: Use the data from your statements to make informed decisions about pricing, marketing strategies, and inventory management.
Enhancing Customer Experience: Analyzing transaction data can reveal customer purchasing patterns, allowing you to tailor your offerings to meet their preferences.
Strengthening Financial Health: By actively managing your fees and understanding your cash flow, you can improve your business's overall financial health.

Conclusion

Merchant statements are more than just a monthly report; they are vital tools that provide insight into your business's financial health. By understanding their components, learning how to read them, and regularly reviewing your statements, you can make informed decisions that drive profitability and growth. Whether you’re looking to cut costs, improve cash flow, or enhance customer experience, leveraging the information within your merchant statements will empower you to take charge of your business finances. With this knowledge, you can navigate the complexities of payment processing and position your business for long-term success.