Amazon Holding Seller Funds: Attorneys Explain Amazon’s Policy
If you’re an Amazon seller, you may have heard about Amazon’s policy on holding funds. Many sellers are confused and frustrated by this policy. However, it is important to grasp why Amazon has put it in place and how it impacts your business.
Sellers on Amazon usually must wait for at least 14 days to get paid. However, sometimes Amazon may hold back your money even longer, which can be frustrating and affect your cash flow. In this article, we will discuss Amazon’s policy on holding seller funds, why it is in place, and ways to reduce its impact on your business.
What are Amazon’s Seller Payment Terms?
As an Amazon seller, you’ll receive payment every two weeks for your orders, minus Amazon’s fees. The payment includes orders delivered at least seven days ago for 14 days. The exact payment dates vary depending on when you joined Amazon. They may not always be on the 1st and 15th of every month, as some other marketplaces do.
Amazon holds the payouts seven days after the estimated delivery date to ensure customer satisfaction. This gives buyers enough time to assess their orders and request returns if necessary. If a customer requests a return within this 7-day, Amazon processes it from the funds on hold.
What is Amazon’s Policy on Holding Funds?
Amazon’s policy on holding funds is a practice where Amazon withholds a portion of a seller’s funds for a certain period. This means that when a customer purchases a product from your store, Amazon will not immediately release the total payment to you.
Instead, they will hold a percentage of the payment for a certain period, typically 14 days. After this period, the funds will be released to you, and you can use them to pay for expenses or reinvest in your business.
How Much Does Amazon Hold?
The amount of funds that Amazon holds varies depending on the seller’s account health and performance. In most cases, Amazon will save 30% of the total payment for 14 days. However, this percentage can be higher for new sellers or those with a history of poor performance.
How long does amazon hold funds in reserve
Sometimes, Amazon may also hold funds for up to 90 days. This usually occurs when there is a big chance of fraud or when a seller has previously broken Amazon’s rules.
Amazon may hold your payment for over 14 days as an “account level reserve.”
Amazon holding funds for 90 days
Amazon’s 90-day fund holding policy is a protection measure for both buyers and Amazon. To increase the likelihood of getting their money faster, sellers should focus on providing great customer service, following rules, and meeting performance targets.
What Is an Amazon Account Level Reserve?
Amazon holds a part of a seller’s funds for a specific time. This happens when a customer buys a product from your store. Amazon will not release the total payment to you immediately. Instead, they will hold a part of the payment for about 14 days. After this period, the funds will be released to you, and you can use them for your business expenses.
Amazon does this to protect both buyers and sellers. It ensures buyers receive their products and are satisfied before releasing the total payment to the seller. This also prevents fraud. By holding funds, Amazon checks the seller and their products’ legitimacy by reducing the risk of scams and fake products.
The amount of funds that Amazon holds depends on the seller’s situation.
Why Did I Get a Reserve On My Account?
As an eCommerce seller, finding that your Amazon earnings are tied up in reserves can be frustrating. To prevent this from happening, it’s essential to understand why funds become temporarily unavailable. Here are the most common reasons why Amazon puts reserves on seller accounts:
- A-to-Z Guarantee Claims: If you have unresolved claims, your account may be subject to reserves until those claims are resolved.
- Chargebacks: Amazon may reserve your funds until the chargeback has been fully processed. Dealing with chargebacks as soon as possible is crucial to avoid a lengthy reserve period.
- Account Reviews: Amazon may put accounts under review for suspicious activity. This hold should disappear once the problem is resolved.
- Low Performance: The lower your seller rating, the higher the risk of reserves. You can avoid account-level reserves by maintaining a high seller rating.
- Tax Requirements: Amazon may reserve your account until you determine any sales-related taxes you’ve incurred over the year.
Why Does Amazon Hold Seller Funds?
Amazon’s policy on holding funds is designed to protect both buyers and sellers on their platform. Amazon uses funds to make sure buyers get their products and are happy with their purchases. They wait until the buyers are satisfied before giving the full payment to the seller.
This policy also helps prevent fraudulent activity on the platform. By holding funds, Amazon can verify the seller’s legitimacy and their products, reducing the risk of scams and counterfeit products.
Amazon’s Reserve Tiers
If you’re an Amazon seller, the amount of money you can access from your sales is determined by a reserve amount. This reserve amount is determined by various things. These include how long you’ve had your account and if you have any unresolved disputes.
Amazon Pay uses a tiered model to calculate the reserve rate, which is as follows:
- Tier I: New sellers are placed in Tier I and are subject to a reserve rate of 100%. This means the funds earned from their sales are held in reserve for a week after the transaction processing date. If everything checks out, the funds are disbursed to their bank accounts.
- Tier II: After using Amazon Pay for a year and completing at least 100 orders, sellers are upgraded to Tier II. Under this tier, 3% of their daily processed payments over a 28-day average are held in reserve. The transaction costs are also factored into the reserve rate if they have any pending disputes. Sellers can request to be moved to Tier II after six months and 100 completed orders if they’ve maintained an Order Defect Rate under 1%.
- Tier II Plus: Tier II sellers that have maintained an Order Defect Rate of less than 1% for the past 60 days are automatically upgraded to Tier II Plus. Under this tier, Amazon only reserves the amount of unresolved chargebacks and A-to-Z guarantee claims. However, if your Order Defect Rate exceeds 1% at any time, you will be downgraded to Tier II until you get your metrics up again.
How Does Amazon’s Policy on Holding Funds Affect Sellers?
Amazon’s rule about keeping money can greatly affect sellers, especially those who need the money to pay for things or put it back into their business.
Cash Flow Issues
The most apparent impact of Amazon’s policy on holding funds is cash flow issues. With a portion of your funds, Amazon can delay your access to cash, making it difficult to pay for expenses such as inventory, shipping, and other business costs.
This can be particularly challenging for small businesses or new sellers who may not have a lot of cash reserves to cover these expenses.
Limited Growth Opportunities
For many sellers, the funds they receive from Amazon are crucial for growing their business. By holding funds, Amazon can limit a seller’s ability to invest in new products, marketing, or other growth opportunities.
This can be frustrating for sellers looking to expand their business and increase their sales on the platform.
Difficulty Managing Finances
Amazon’s policy on holding funds can also make it difficult for sellers to manage their finances effectively. With a portion of their funds being held, sellers may struggle to keep track of their cash flow and expenses, leading to potential financial issues.
How Can Sellers Minimize the Impact of Amazon’s Policy on Holding Funds?
While Amazon’s policy on holding funds may seem like a significant obstacle for sellers, you can minimize its impact on your business.
Improve Your Account Health and Performance
One of the best ways to reduce the amount of funds that Amazon holds is to improve your account health and performance. This means maintaining a high seller rating, responding to customer inquiries promptly, and avoiding policy violations.
By demonstrating that you are a reliable and trustworthy seller, you can build a positive relationship with Amazon and potentially reduce the amount of funds they hold.
Diversify Your Sales Channels
Relying solely on Amazon for your sales can make you vulnerable to their policies and changes in the marketplace. By diversifying your sales channels, you can reduce your dependence on Amazon and mitigate the impact of their policies on your business.
Consider selling on other platforms such as eBay, Etsy, or your website to diversify your income streams and reduce the impact of Amazon’s policy on holding funds.
Plan for Cash Flow Issues
Knowing that Amazon will hold a portion of your funds, planning for any potential cash flow issues is essential. This means setting aside a portion of your funds to cover expenses during the holding period.
Planning ahead can avoid any financial strain and ensure that your business operations continue smoothly.
Amazon’s policy on holding funds may seem like a significant obstacle for sellers, but it’s essential to understand why it exists and how it can affect your business. By improving your account health and performance, diversifying your sales channels, and planning for cash flow issues, you can minimize the impact of this policy on your business.
While it may be frustrating, it’s important to remember that Amazon’s policy on holding funds is ultimately designed to protect buyers and sellers on their platform. If you follow their rules and keep a good relationship with Amazon, you can keep growing and doing well as a seller on Amazon.