Calculating residuals is one of the most important tasks ISOs perform each month because residuals represent the vast majority of revenues. Monthly residuals also determine how much an ISO’s independent agents earn, so their accurate and timely calculations are extremely important to the core employees that bring in merchants and drive portfolio growth. Unfortunately, it can be a major task to calculate residuals each month because they’re made up of a number of distinct components – namely, the actual gross earnings from each process, the splits due to each agent, and the costs passed through. 

Processor Residual Reports

Each month, each of an ISO’s payment processing partners sends out a report outlining the value and volume of transactions processed and the residuals earned for the period. The reports aren’t necessarily complex, but they are dense and time-consuming to work through. With an average ISO working with a handful of processors – potentially half a dozen or more – a lot of residuals data comes in each month. And the data in those reports only describes the ISO’s gross residuals – agent revenue sharing is not yet factored in. 

Agent Splits

Agent splits are the share of residuals (after costs) that go to the independent agent who brought any given merchant in. Agent splits are negotiated in advance, and not all agents an ISO works with get the same split. That can introduce complexity when residuals drop each month, as the ISO has to ensure each agent’s split is accurately applied. 

Schedule A Costs

Schedule A costs are the costs that the ISO passes on to the independent agent, like interchange costs and the processor’s markup. Schedule A costs can also be negotiated between the ISO and the independent agent, and some ISOs also place their own small markup on the schedule A costs. So, in addition to nailing down the right revenue share percentages, it’s also critical that the correct deductions be made before applying each agent’s splits. 


The Old Way to Calculate Residuals

The traditional way to calculate monthly residuals has been used by ISOs since the electronic payments industry first emerged. It works, but it’s exceptionally time-consuming, headache-inducing, and rife with the potential for costly errors. 

Traditionally, residuals numbers drop around the 20th of the month (or the 10th for some processors like TSYS) and a manager responsible for wrangling them begins compiling the reports from each payment processor. Because each processor uses its own unique reporting formats, combining the data isn’t easy, and requires poring over pages and pages of residuals data and often manually bringing everything together. At best, it takes hours. 

Once the residuals data from all processing partners has been combined, the ISO will know its total monthly gross residuals, but what matters is calculating net residuals after agent payouts. To do that, the person handling the numbers has to go through and apply each agent’s split to the residuals earned from the merchants they brought in. It also requires applying each agent’s negotiated schedule A costs to ensure the agent is being charged the correct amount. Assuming the correct costs and splits are applied for each and every agent, the ISO will then have their final net residuals and be ready to send off agent payouts. But, if they get anything wrong, the ISO will potentially lose money by overpaying agents or risk underpaying agents – a surefire way to damage a working relationship, especially with top talent. 

While it’s all basic math, the sheer volume of data and the complexity introduced by individual agent contracts that need to be considered make it an incredibly slow, frustrating process. Luckily, today, there is a better way. 


The New Way to Calculate Residuals

Forward-thinking ISOs understand that residuals calculations are a job ideally suited to automation. Instead of spending hours poring over reports, combining processor data, and manually applying splits, they trust their monthly calculations to technology like IRIS CRM – the payments industry’s top customer resource management system. IRIS CRM not only makes it easy to calculate residuals, but totally automatic, as well. 

The first thing IRIS CRM does is automatically combine monthly residuals reports from all of an ISO’s partners. As numbers come in and the reports hit the CRM, the system automatically parses the key data and combines it all for easy access in IRIS CRM’s reporting dashboard. Users can generate detailed reports for total portfolio-wide residuals or for any individual processor with a few clicks in a matter of seconds. High-level residuals data is also displayed in a few places around the system at a glance to make quick reference even easier. 

On the agent side, IRIS CRM automates everything, ensuring splits are calculated instantly and accurately every single time. When new merchants are boarded through IRIS CRM, the agent splits and costs are entered once at the beginning of the process. As a result, the splits for every individual agent are already stored in the CRM and ready to be applied automatically. Users never even have to worry about looking them up. With agent revenue sharing data entered upfront, monthly split calculations become a set-and-forget process for the lifetime of the merchant-ISO relationship. 

When all is said and done, ISOs using IRIS CRM have their gross and net residuals and agent splits calculated and available instantly, with zero manual work required. The result is countless hours saved, countless headaches avoided, and happier, more loyal independent agents thanks to faster and perfectly accurate payouts. 


To find out more about how IRIS CRM can change the way your ISO calculates residuals and save you a significant amount of time, reach out to a member of the team or schedule a guided live demonstration today.