If you can’t find the information that you’re looking for regarding the merchant services, payment gateways and payment processing in general on daily basis, please use the button below to ask us a question. All your questions about payments are welcome and they will get answered as soon as possible (5-7 business days).
In split funding there is one buyer and two or more sellers. The funds are distributed to each of the sellers based on predetermined rules.
My question relates to the accounting practices that must be followed when recognising the flow of revenue to the sellers.
Does one of the sellers have to count the full revenue and treat the revenue to the other sellers as expenses? Or is it possible to arrange that each seller only has to count their split from an accounting rules persepective?
My scenario includes a VAT registered seller and a non-VAT registered seller, they are coming together to offer a single point of sale but neither wants the others revenue on their books or otherwise counting towards their business turnover (because of tax implications).
I hope, I understand the question correctly.
There are several split funding models that we described in the respective article here.
Under payment service provider-centered (or PSP-centric) model the PSP remits the funds to the merchant (VAT-registered entity) and to the affiliate (non-registered entity), respectively.
Under merchant-centric model first, all the amount goes to the merchant and only then the affiliate gets his share from the merchant.
It looks like under the second scenario (model), at some point the affiliate’s share might show on merchant’s books. This is a disadvantage of the model for the merchant.
However, the advantage of the merchant-centric model is that in cases of refunds and chargebacks this model is more reliable, because the merchant gets the opportunity to withhold the affiliate’s share of the refund or chargeback amount and return it to the unsatisfied customer if necessary (while in the case of PSP-centric model it might be problematic).
So, I guess, your choice of a particular split funding model should depend on specific transaction volumes you have to handle, on your chargeback and refund rates, and on tax rates you are dealing with.