Automated residual calculations use software tools to handle the duty of scouring through monthly residual reports, finding the key data, and combining it all into a holistic picture useful to your ISO or PayFac. Going automatic offers some significant benefits that make it an easy and obvious choice for most companies selling merchant services because it addresses some of the most glaring problems that residuals management traditionally presents to managers – namely, automated residual calculations make a slow process fast, an error-prone process accurate, and a leaky process tight. The difference that can make to both your available time and your ISO’s bottom line is significant, making adopting automated residuals one of the most important yet accessible changes your ISO can make. 

 

What are Residual Payments?

Before we get into the meat of why automating residuals is so important for your ISO or PayFac, let’s start with a quick recap of the basics of credit card processing residuals. Feel free to skip ahead!

Residuals are effectively an ISO or PayFac’s commission on the transaction fees their merchants pay. Every time an electronic transaction is processed, a fee goes to the acquiring bank, a small slice of which is kept by the payment processor, with a smaller slice still going to the ISO. The commissions are “residual” because they’re earned over and over again, every single time a merchant takes an electronic payment for the lifetime of the merchant’s processing. Residuals are the lifeblood of all independent sales organizations and payment facilitators, and all the work ISOs and PayFacs do is ultimately in service of generating more.

 

How Manual Residual Calculations Hold Back Your ISO or PayFac

The ongoing, lifetime aspect of residuals is important for two reasons. First, it means tiny commissions can add up extremely quickly. An ISO or PayFac can earn millions of dollars from a portfolio of hundreds or even thousands of merchants, all taking hundreds or thousands of electronic payments per day.

Second, because residuals are earned on every transaction from every merchant, there are hundreds of thousands or even millions of tiny individual commissions being earned each month, and errors can add up just as quickly as the payments themselves. Add to that the fact that managing residuals across multiple processing partners is exceptionally time-consuming, and it becomes clear why handling them manually just isn’t a smart way to do business.    

Manual Residual Calculations Eat Up Your Time

Top-performing registered ISOs often have half a dozen payment processing partners or more. Having a lot of partners is important because it maximizes the chances a merchant can successfully be placed with the right services, but it also introduces some major headaches. 

Each processor has its own reporting systems and formats, and integrating well with the competition to make an ISO’s life easier is low on the list of priorities. As a result, each month, ISOs are forced to take in potentially six or more disparate reports, comb through each one for the key residuals data they need, and combine that data in a way that offers a clear and accurate picture of the month’s overall earnings. You’re probably already extremely familiar with what a slow, cumbersome, and frustrating process that can be. 

The time you spend just trying to wrangle residuals data every month is time you’re not spending on important big-picture tasks like managing your team and planning for future growth, making it a big drain on you and your business.

Manual Residual Calculations Slow Down Agent Payouts

Another extremely important part of your monthly residuals management is calculating the payouts due to your independent agents. Calculating agent splits is important for two main reasons:

  1. Only after subtracting your agents’ payouts from your gross residuals can you determine your ISO or PayFac’s net residuals – your true earnings. 
  2. Just like your company, your agents’ residuals ultimately drive everything they do. As a result, any errors or delays in their payouts understandably result in a less happy, less motivated sales team – bad news for you. 

Manual residual calculations force you to apply your agents’ splits by hand. That might not be a huge issue if you have a highly standardized agent program, but if you’re like most ISOs and your agents negotiate their own splits – potentially even on a processor-by-processor or merchant-by-merchant basis – it can become a highly complex task. The inevitable result is either slower payouts or occasional incorrect payouts, both of which can hurt your relationship with some of the most important members of your team.

Manual Residual Calculations Cost Your ISO or PayFac Money

Sometimes processors make mistakes, and sometimes they quietly make very small adjustments to fees – small enough that they can be barely perceptible, but big enough that they can have a real impact on your bottom line if they go uncorrected. 

The problem is that these small changes can be almost impossible to notice when you view your residuals in the aggregate only. To find them, you’d need to comb through the nitty-gritty details of each and every report – an incredibly poor use of your time. The unfortunate reality is that, despite their potential to hurt your profits, you have almost no chance of catching small fee errors if you’re managing your residuals manually. 

 

How Automated Residual Calculations Will Change Your Business

The good news is that some forward-thinking payments technology companies have recognized the problems with traditional residual calculations and developed software systems to eliminate them. Today, automated residual calculation tools like the ones included in IRIS CRM enable your ISO or PayFac to remove all of the potential human error from residuals management, turning what was once a long, tedious, and error-prone process into something that happens automatically in the background with perfect accuracy. 

Instead of spending potentially dozens of hours each month juggling reports, wrangling data, and calculating splits, today, with the right tools, the information you need can be available instantly as soon as your residual reports drop each month.  

Let the System Calculate Everything

At the core of automated residual management systems is a comprehensive reporting suite that parses and combines the data from your various processor reports without any manual intervention required. With these types of systems, you either load your monthly processor reports in or, in some cases, have them pulled in automatically, and the system does the rest. 

Rather than having to dig through reports to find the data you need, you can access it at any level of granularity you like through a single, unified reporting dashboard. Key high-level information like your gross and net residuals for the month are often available at a glance, and drilling down further is easy thanks to the ability to sort, search, and refine reports in a matter of a few clicks. 

Automated residual calculations ensure you’ll never need to wade through a sea of irrelevant data to find the specific information you need. As a result, not only do automated residual calculations save you hours of lost time every month, but they also enable you to make better decisions as a manager by providing better, more useful, easier-to-understand business intelligence. The ability to understand and manage your residuals more carefully while saving countless hours every year makes it hard to overstate the benefit of moving to an automated system. 

Automate Agents Splits

With certain automated residuals management systems, your agents’ splits are programmed into the system right at the time of onboarding a new merchant. When residuals numbers drop each month, the stored split data is automatically referenced, and a payout is instantly calculated down to the penny. No matter how complex or varied your commission arrangements are with your independent agents – or any other stakeholders due a residual on a merchant – split calculations will be available to you as soon as you need them, calculated with 100% accuracy, with zero manual calculation required. 

Instant split applications don’t just save you time on calculations, they also enable you to pay out your agents faster than your competitors – a key to attracting the most talented salespeople in the industry and keeping them happy and loyal for the long run. 

Catch Small Errors and Losses Before they Have a Chance to Become Big Ones

With tools like IRIS CRM’s residuals management suite, you can set the system to automatically compare each month’s residuals report to the previous month’s, instantaneously identifying any changes in your ISO’s fees. 

By maintaining constant awareness over even the slightest changes to the fees being charged by your processing partners, you can inquire about any unexpected increases and ensure that your pricing policies are always as up-to-date and profitable as possible. Automation makes it possible to plug even the tiniest of profit leaks before they can add up to a flood – something just not possible with manual residual calculations. 

 

Automated Residual Calculations with IRIS CRM

IRIS CRM is the payments industry’s top customer resource management platform. Every aspect of it has been designed to address the specific challenges and tasks ISOs and PayFacs handle on a daily basis. 

Alongside its sales and productivity tools, IRIS CRM’s automated residuals suite offers a variety of tools designed to make calculating and managing your residuals faster, easier, and more accurate than ever. Just some of those benefits IRIS CRM offers your residuals management include:

  • Fully automated residual calculations as soon as your processor reports hit the CRM each month.
  • An intuitive reporting dashboard that presents all your residuals data and KPIs in a set of easy-to-digest tables and graphs. 
  • Fully customizable, sortable, and filterable reports that allow you to access all residuals data at the portfolio, processor, and merchant levels. 
  • Automated split applications based on agent information entered at the time of onboarding through TurboApp, IRIS CRM’s proprietary automated merchant boarding system.
  • The ability to pay out agents right away, right through the CRM with the built-in ACH payments integration. 
  • Automatic detection of changes and errors in your residuals reports from month to month, ensuring pricing and profits are always optimized.  

 

If you’re ready to find out more about how managing your residuals automatically through a robust payments CRM can save you countless hours, refine your operations, improve agent relationships, and save you money, schedule a guided demonstration of IRIS CRM today!