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October 15, 2024
Payments 101
Many business owners don’t feel they have the time to sit down, learn to interpret the info, and analyze transactions in their monthly statements. But keeping a regular tab on your payment processing is non-negotiable for business success.
We’re here to help you figure out exactly what your statement is trying to tell you so you can get the crucial info you need quickly and without frustration, including:
At the highest level, merchant statements list all of a merchant’s transactions, sales, and processing fees for the last month. You may also see these referred to as merchant account statements, credit card processing statements, or merchant processing statements.
Keeping a close eye on your statements is non-negotiable for business success. Regular statement review can help you:
Let’s take a look at a sample Electronic Payments statement. We’ll walk through each section and explain what you need to know about the info there. If you’re working with a processor other than EPI, your statements will look a bit different than this, but the same basic components will be similar. If you’re already in the EPI family, these examples should be a great walkthrough for your monthly reviews.
(The samples we’ll look at are examples for training purposes, so you may notice that they are a bit sparser than your regular monthly statements!)
Each of your statements includes important notices like the examples above. You’ll typically find these beginning under the Summary, but you should read on to see if there are any continued notices on subsequent pages (as is the case with these samples).
While they may initially look like boilerplate, don’t be tempted to skip these sections; it’s extremely important to review them every month, as they can include time sensitive information like:
Card networks won’t contact you directly to notify you of changes, so it’s critical to keep an eye on your statement notices to ensure you don’t miss anything. The validation dates for PCI compliance are also important — missing these can result in fees. You can see an example of this at the end of the last paragraph in the samples above.
These sections provide more detailed information about your high-level transactions. In the second table above, the values in your Funded Amount column match what you see on your bank statement. Within the bank statement, you’ll find these denoted as Bankcard, BNKD, or BankCD to categorize the transaction within the merchant processing industry. The numbers following this refer to your processor (1205 or 5642 are EPI), and the code at the end of the entry in your bank statement gives you more information about the transaction activity:
How your Fees Charged column looks in the table above can differ depending on the setup of your account. The example above shows monthly discounting. If your account uses the same structure, you’ll see zeros throughout the column until the end of the month, when all fees come out at once.
If your account has daily discounting, you’ll see values for each day, as in the example below:
Some important notes on daily discounting:
Amounts Submitted (also known as batches) are your “standard” transactions. This section tracks anything that fell in the normal batching process over the last month.
This section will be blank like the sample above unless you have a direct relationship with a specific card company, like American Express. Since these transactions are processed differently, you’ll see information about them isolated here.
This section contains chargebacks, adjustments, split funds, and cash advance. It’s important to note that not everything in this section is a chargeback; it is just anything outside the normal batching transaction process.
If you do have a chargeback or network adjustment, you’ll see ADJUSTMENT in the Description column. If you see MFA AMOUNT instead, you’ll know this is split fund or cash advance activity.
In the example above, INTERCHANGE and DUES & ASSESSMENTS are fees associated with card associations (more on this below). EPI and other processors cannot control or change these fees.
The only EPI charges you’ll see in this section are Basis Points (BPS) and authorization charges. Above, DISC 1 (line 2) denotes monthly BPS. You may also see DISC 6 on your statement — these are daily BPS. The first line item under AUTHS & AVS is an authorization charge. The example above says CPU GTWY, meaning the fee is associated with an authorization requested via CPU-CPU line or gateway. There are many other codes you might see here, depending on how the merchant requested authorization.
Interchange charges, or program fees, are rates set by card associations (Visa, Amex, etc.) and are essentially the cost of using their credit network. If your account uses Interchange or Tiered Pricing, you’ll see that each card costs a different amount to process. Card associations use these charges to fund cardholder incentives like rewards points. The entry method can also impact your fees; swiped, dipped, and waved entries cost less than manually key-entered transactions.
If you have Interchange (IC) pricing, your statement will include a table with rates for each card network like the one above. If you don’t see a table like this in your statement, you are likely set up with a flat rate. Don’t worry too much about which setup you have; it has little impact on your business beyond how you interpret your statement.
The end of every statement includes an IRS-required section for tax purposes. This lists gross reportable sales by month and year-to-date (YTD) associated with your tax ID number (TIN). The YTD amount on the December statement should match what you see on your 1099, but it’s important to note that these are gross sales only. To get information about refunds, chargebacks, and adjustments, you should work with an accountant who can dive deeper into the specifics of your account.
Here are some of our top tips based on your most common statement questions:
And, finally, if you’re seeing a rise in chargebacks on your statements, there are actions you can take! Learn more about combatting chargebacks.
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