Finance, how marketplace finance works

microsoft marketplace, how payments work a practical guide for finance teams when your company transacts through microsoft marketplace covers who invoices whom, how taxes are handled, how the money flows, and how long the cycle takes summary microsoft is the seller of record they invoice the customer, collect payment, and handle taxes per local jurisdiction the publisher (isv) does not invoice the customer the publisher receives a single net payout from microsoft after microsoft collects microsoft retains a 3% transaction fee, or 1 5% for correctly flagged private offer renewals microsoft pays publishers on the 15th of the month following customer collection no collection from the customer means no payout to the publisher the three parties party role publisher (isv) owns the software, sets the price, publishes the offer receives net payout microsoft invoices the customer, collects payment, remits taxes, pays the publisher customer end buyer pays microsoft, not the publisher the customer's accounts payable is with microsoft the publisher's accounts receivable is from microsoft the customer and publisher have no direct billing relationship through marketplace the end to end flow publisher creates the offer in microsoft marketplace (typically via wetransact) customer accepts the offer microsoft invoices the customer, in local currency, with applicable taxes customer pays microsoft per the contract's payment terms microsoft retains its fee (3% or 1 5%) microsoft pays the publisher around the 15th of the month following collection the transaction fee scenario fee publisher receives per $100 any transaction, public or private offer 3% $97 00 renewal of a private offer, flagged correctly in partner center 1 5% $98 50 \ warning for the 1 5% renewal rate, the publisher must check "this is a renewal" when creating the private offer in partner center the discount applies for the full term if the box is missed, the standard 3% applies and there is no retroactive correction taxes in most countries, microsoft is the merchant of record microsoft calculates, collects, and remits vat, gst, or sales tax to the local authority, and provides tax compliant invoices to the customer in a smaller list of publisher managed countries, the publisher is responsible for tax registration, collection, and remittance microsoft only lists the offer the full country breakdown (microsoft managed, publisher managed, and reseller countries) is maintained by microsoft here tax details for microsoft marketplace https //learn microsoft com/en us/partner center/marketplace offers/tax details marketplace the "collected" rule microsoft pays the publisher only after microsoft has collected from the customer even if the order is marked won, the customer has been invoiced, and the due date has passed, the publisher is not paid until the customer's payment actually lands at microsoft you can monitor this in partner center, under marketplace insights, revenue dashboard the status moves from "invoiced" to "paid", which then triggers the next payout cycle payment scenarios the timing from purchase to payout depends on the customer's contract type three common cases scenario 1, regular customer (payg or enterprise agreement) the customer is on pay as you go or an enterprise agreement microsoft invoices at the start of the next billing cycle and the customer pays net 30 step when what happens purchase month 1, e g 14 may customer accepts the offer invoice start of month 2, e g 1 june microsoft issues the invoice at the start of the customer's billing cycle customer payment month 2, e g 30 june customer pays microsoft publisher payout month 3, 15 july microsoft pays the publisher around the 15th of the month following collection end to end, roughly two months from purchase to payout scenario 2, fast track (mca customer) only applies when the customer is on a microsoft customer agreement microsoft issues the invoice immediately on purchase, rather than waiting for the start of the next billing cycle step when what happens purchase and invoice day 1, e g 14 may customer accepts the offer, microsoft issues the invoice the same day customer payment before end of month, e g 28 may if the customer pays within the same month, the transaction falls into the next payout cycle publisher payout 15 june publisher receives payment on the 15th of the month following collection end to end, roughly one month from purchase to payout best case scenario, only available on mca scenario 3, csp customer (reseller in the middle) the end customer buys through a cloud solution provider, who is the customer of record on the marketplace transaction the csp receives the invoice from microsoft and has 60 days to pay in parallel, the csp invoices the end customer on its own terms step when what happens purchase month 1, e g 12 february end customer accepts the csp private offer nothing else happens this month microsoft invoices the csp month 2, e g early march microsoft issues the invoice to the csp the 60 day clock starts csp invoices the end customer during the 60 day window the csp invoices the end customer separately, on its own commercial terms csp pays microsoft 60 days later, e g early may the csp pays microsoft at the end of the 60 day window publisher payout 15 june microsoft pays the publisher on the 15th of the month following collection end to end, roughly four months the extra month versus a direct ea or mca deal comes from the csp having 60 day payment terms with microsoft, instead of the standard net 30 how the publisher receives the money payment method typical receipt after microsoft issues ach (us bank) 2 to 5 business days sepa (eu bank) 2 to 5 business days wire transfer 1 to 3 business days paypal (where supported) 1 to 2 business days set the payout method in partner center, under payout profile microsoft converts the customer's local currency invoice into the publisher's payout currency at a monthly exchange rate, documented in each payout report publishers always receive payment from microsoft corporation (us entity), regardless of where the customer is located edge cases what if the customer does not pay? in rare cases (bankruptcy, dispute, prolonged non payment), microsoft cannot collect the transaction does not become eligible for publisher payout the publisher absorbs the loss monitor the revenue dashboard for "disputed" or "past due" statuses what if the customer cancels or asks for a refund? within the 72 hour saas cancellation window, a charge back applies to the publisher's next payout after 72 hours, the cancellation continues through the end of the current billing period, the customer pays for the full period, and the publisher receives the full payout microsoft issued refunds outside the window result in a retroactive charge back on the publisher's payout