Payment Delays Now a Possibility on Amazon

One of the advantages to selling on Amazon is that buyers must pay immediately, and sellers get the funds right away, subject to their disbursement schedule. That's changing to some extent thanks to Amazon Business "Pay by Invoice," though it's important to note it won't affect purchases from "regular" (non-Business) buyers.

Amazon Business launched in 2015 to offer features attractive to businesses of all sizes, such as multi-user accounts, approval workflow, purchasing system integrations, and tax exemptions. On Tuesday, Amazon sent a letter to US sellers informing them it was launching Pay by Invoice and that sellers' items would be subject to such purchases by Amazon Business customers. The email read in part:

"As a seller on Amazon, you do not need to do anything to make your items available for purchase by Amazon Business customers using Pay by Invoice. Your products will automatically become available for invoiced purchasing with no added fees or effort. 

"Amazon will handle all aspects of the invoicing process, including credit risk assessment, billing, and collection activities. 

"For all Pay by Invoice transactions, payment to you is guaranteed, even if the Amazon Business customer is late or defaults on their payment to Amazon.

"For any invoiced orders that you receive on Amazon, your payment on these orders will be credited to the available balance of your Selling on Amazon account as soon as the customer payment is processed and no later than the 7th day past the due date of the customer's invoice."

Previously sellers had to meet certain qualifications and proactively sign up to sell on Amazon Business. We are seeking confirmation from Amazon if that is still the case, and whether or not the new practice applies to all third-party sellers. (See update below.)

While additional sales sound like a positive, some sellers said waiting for payments could put pressure on cash flow since they still have to pay their suppliers and vendors in a timely fashion.

There's no way to opt out, but Amazon does offer one way for US sellers to get paid faster for invoiced orders - but it comes at a cost. According to the letter:

"We are also launching the ability for you to get paid faster for invoiced orders. With this feature, your payment for Pay by Invoice orders will be credited to the available balance of your Selling on Amazon account immediately after shipment for a processing charge of 1.5% of the invoiced order amount."

When the program launched in the UK in the fall, one seller said Amazon was offering selected business customers free credit "at our expense." Another seller thought it was a good way to bring in additional orders since many businesses can only pay by invoice.

One EcommerceBytes reader who received the letter yesterday called the program "forced coercion into making us give net 30 terms on sales." Another reader's reaction: "So you can't opt out and you're forced to wait on payment. If you want to get paid faster you have to pay extra? And what happens if the customer never pays???"

The answer to the last question: Amazon handles the risk of non-payment. It promises to pay sellers "no later than the 7th day past the due date of the customer's invoice," and as it noted, it guarantees payment to the seller "even if the Amazon Business customer is late or defaults on their payment to Amazon."

It's important to note that Amazon Business will not allow every buyer to pay by invoice. It tells business customers: "Pay by Invoice gives approved Amazon Business customers the option to purchase items on credit. Amazon sends an itemized invoice email when items ship. The due date and payment information are included in each invoice."

Those buyers who do pay by invoice must pay their bills by the due date via wire, ACH funds transfer, or check payment, and Amazon Business does not support payment by cash, money order, debit or credit cards (thus saving on payment processing fees, as one seller pointed out).

Amazon Business will launch Pay by Invoice in the US after June 30, 2018. "You will receive additional information and resources prior to the launch," Amazon told sellers.

We've asked Amazon PR several questions about the program and will update this post as we learn more.

Update 5/3/18: An Amazon spokesperson confirmed the Pay by Invoice (PBI) change is applicable to all sellers regardless of their enrollment in the Amazon Business Seller program. 

When asked if there was a way to opt out, she said, "Amazon's mission is to offer the earth's biggest selection of products to our customers, and this includes our Amazon Business customers. To ensure a great shopping experience for Amazon Business customers including those who qualify for Pay by Invoice payment method, we believe that all selection should be available to them, and we believe the services and protections we offer to sellers makes an opt-out unnecessary. This is a great opportunity for sellers and we want them to be able to participate fully."

She said initially, Pay by Invoice would only affect a small amount of sellers as it only applies to orders from qualified Amazon Business customers. But she said the program comes with some distinct benefits for sellers:

- Amazon is guaranteeing the payment to the seller by taking on the credit risk for these transactions. If any PBI customer is late or payment or defaults, Amazon still pays the seller within 7 days after the due date of the Invoice. Amazon is removing the payments risk in Invoicing. 

- For sellers who have cash flow concerns we are providing the get paid faster option which has a processing charge of 1.5%

- Business customers who prefer to pay on terms (Invoicing) would not buy from Amazon sellers in the absence of Pay by Invoice option. These customers tend to be larger buyers with higher average ASPs and larger order sizes. These large Amazon Business customers also have shown a preference for consolidating their spend among fewer suppliers so they are unlikely to place orders from an Amazon seller directly outside of the Amazon Business platform. So sellers can expect to get incremental sales in the form of larger orders for higher priced items from customers who would be unlikely to buy from them otherwise.

Here is some additional information we obtained about how the program impacts sellers:

- The Order details page in the Seller Central tool will have a new "Payment Method" field which will show value "Invoicing" for all Invoiced orders. Order reports will have a new Payment Method Detail attribute showing the same value.

- The due date of all Invoiced orders will be provided to sellers for all invoices that are pending payment 

- Payments for Pay by Invoice orders will be credited to the available balance of the seller's Selling on Amazon account at the latest by the 7th day past the due date of the Invoice. The due date is determined based on the payment term of the customer (30 days after shipment in the case of Net30). (Amazon wouldn't discuss the terms they offer customers, but Net 30 is standard.)

- Get paid faster will be available as an account setting. Sellers will be able to make their choice of using get paid faster on a new account setting page prior to the launch

- No categories are excluded from this program. All selection on Amazon is made available only to Amazon Business customers who qualify for Pay by Invoice.

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