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By

04 Nov 2016

Taking Payment After Delivery – how Khaos Control can Help

Taking Payment After Delivery

As per my colleague Brendan’s recent blog post, the trend to allow customers to pay for their goods after they’ve received them is growing. Whilst this is something that PayPal allows you to offer your customers, this does come at the cost of PayPal’s significant cost per transaction. For many retailers, they may wish to consider offering this kind of service themselves via their ‘normal’ payment integration.

Things to Consider:

  • Fraud – before going down this route, you will need to spend some time analysing and assessing the risks involved. Whether or not this option is viable for you as a business will depend greatly on your core demographics and the types of product that you offer.
  • Product Range – is this service something that you are going to offer across your entire product range, or will you limit it to certain items / order values etc..?
  • Can you fulfil goods quickly enough in order to be able to offer this kind of service? A pre-authorisation lasts between 3 and 7 days depending on the customers’ card issuer. Therefore, trying to authorise a transaction more than 3 days after the pre-authorisation has been generated could result in the payment failing.
  • Are there any implications with your merchant bank with regards to taking payment after delivery? Talk with your Account Manager, they will have their own thoughts on this and will be able to flag up any hidden charges that may come your way.
  • How are you capturing card details at the moment? If you are authorising up front, then moving to a payment after delivery model is going to involve some significant changes.
  • Does the Payment Provider you currently work with support authorising a transaction some days after the initial pre-authorisation is taken.
  • Do your carriers provide you with the level of detail you will need in order to be confident when processing payment that the goods have been delivered?
  • Returns / Exchanges – invoices in Khaos Control need to have been issued before you can create a return, refund and / or exchange.  You will need to decide how you will handle these as you would either need to take payment prior to issuing and exchanging the original order, or you would need to amend the original invoice’s pricing for the lines impacted in order to process everything through.
  • Part-ships – If you are part-shipping an order and offer this service, Khaos Control won’t be able to process the second and any subsequent parts of the order until you have taken payment on the initial invoice.  Factoring in this addition time into your feasibility assessment for offering this service will be important.

We’ve thought about this, now let’s crack on

Khaos Control’s invoice manager provides you with a great deal of flexibility, so there is more than one way to approach this. However, assuming that I am already pre-authorising my orders and can fulfil to my customers within the 3 day window, this is what I would do:

  1. Re-order your Sales Invoice Stages – Authorise Payment will be moved to be the penultimate stage in the Invoice Manager above ‘Issue’.
  2. Limit this offer. Either using a Sales Source, Invoice Priority or simply running off the order value, I would decide to limit who I offer Payment after Delivery to as a business. For example, I’m going to offer this option to everyone, but I’m going to configure Khaos Control to hold up any order worth more than £100.00 for review and, potentially, manual intervention from my team. To do this:
    1. Create an Invoice Priority in System Data for ‘Payment After Delivery’.
    2. Create a new Manual Hold Sub-Stage in Sales Invoice which can be used to review Payment After Delivery orders that are over £100.00 in value.
    3. Create an Invoice Rule in Sales Invoice which automatically picks out every order stamped with the ‘Payment After Delivery’ Invoice Priority, and has a value of more than £100.00, and moves them to the new Sub-Stage that you’ve created.
  3. Review (and potentially change) your automated emails – these will need to trigger after shipping, or as invoices move into the Authorise Payment stage. You may also want to use the Invoice Priority as a way of defining a different set of email templates, with different messaging etc. if this is a service that you’re offering for some orders and not all.
  4. Processing Payments – you will need to implement a process of reconciliation in terms of confirming with your carriers that goods have been delivered. Unfortunately this doesn’t tend to be something that the carriers feed back to us via their APIs, but handling these by exception – in terms of dealing with delivery failures etc. first and then authorising everything that remains would seem the lowest impact way of doing this. If you are handling this kind of payment and ‘normal’ payments as well, then filtering this invoice stage by Priority (or ordering your invoices by Priority) will make sense.
  5. Additional automated emails – with this extra step in the process, an automated email to confirm that you’ve taken the money for their goods will ensure that the customer is on the same page.

In terms of fulfilling sales orders and taking payment, I envisage the process running as follows:

Order is created / imported with a pre-authorised payment

Pick / Pack / Despatch

Order sits in Authorise Payment until delivery is confirmed

Authorise Payment

Issue Order

Things to Watch Out For when taking Payment After Delivery

  • Additional processing time – someone is going to need to deal with reconciling delivery errors from the couriers. You will also have made your invoice process more complex at this point, which means that it is likely to take longer to deal with orders in the Authorise Payment stage.
  • Delays and back orders – you may want to put additional invoice rules in place so that if a Payment After Delivery invoice is more than 3 days old, then it is pulled out of the Invoice Manager process automatically and held for review / manual intervention.
  • Stock Value – until you issue an invoice, your stock value reports and the stock value figure in your accounts will still include the despatched goods. Your stock levels are updated from the moment that the goods are assigned to the order, so you won’t oversell and will know what you have where, however, your finance team will need to be aware of this and sign it off.
  • As mentioned above, the operational issues that this would option would cause in terms of returns and part-ships may outweigh the benefits.

We are always looking for innovative ways in which Khaos Control can be used to help businesses test new offers for their customers and to drive growth, if you have something you would like us to focus on in this kind of blog post in future, please contact us today.

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