As a seller on TikTok Shop, vouchers and discounts play a key role in driving sales, increasing customer engagement, and boosting conversion rates. However, while these incentives can significantly improve your sales performance, they also introduce complexities when it comes to financial reconciliation.
TikTok’s platform offers various discounting options, from store vouchers to site-wide promotions, and each of these can affect your net revenue, payout calculations, and ultimately, your financial reporting.
This article will walk you through how to reconcile net sales correctly when TikTok vouchers and discounts are involved. We will discuss:
- How TikTok vouchers and discounts impact gross and net sales.
- How to track vouchers and discounts in your accounting system.
- The key steps to reconcile net sales and ensure accurate revenue recognition.
- Common mistakes to avoid during the reconciliation process.
By the end of this article, you’ll have a clear understanding of how to manage and reconcile vouchers and discounts for TikTok Shop, keeping your financial records clean and ensuring accurate reporting.
How TikTok Vouchers and Discounts Impact Net Sales
TikTok Shop offers various ways for sellers to offer discounts or promotions to customers:
- Store Vouchers: Vouchers that sellers can offer to customers for a specific discount (e.g., RM10 off for purchases above RM50).
- Platform Vouchers: Vouchers provided by TikTok, often for site-wide events, such as “RM10 off your next purchase” or discounts during special sales periods like 11.11.
- Coupons: Sellers can provide time-sensitive coupons to customers to encourage quick sales or engage with returning buyers.
- Flash Sales and Bundles: Sellers often discount bundles or select products for promotional periods.
These discounts and vouchers, while effective at increasing conversions, reduce the gross amount of your sales and need to be subtracted to calculate your net revenue.
Here’s the typical sales flow for TikTok Shop:
- Gross Sales: The total sales value, including full product price and shipping charges.
- Discounts/Vouchers Applied: Any discounts or vouchers that reduce the customer’s final order amount.
- Net Sales: The amount after deducting discounts, vouchers, and other promotional adjustments.
Properly accounting for these reductions is crucial to ensure that your net sales are correctly reported, and that your payouts reflect the actual amount owed after all discounts and promotions.
How to Track TikTok Vouchers and Discounts in Your Accounting System
Once you understand how discounts and vouchers impact your sales figures, the next step is to ensure that these adjustments are properly recorded in your accounting system. Here’s how to manage this process:
1. Record Gross Sales
Your gross sales should be recorded at the full price of the order before any discounts are applied.
For example:
- Order amount: RM150
- TikTok voucher applied: RM30
- Net sales after voucher: RM120
In your accounting system, record the total gross sales amount (RM150) at the time of the sale.
Example Journal Entry for Gross Sales:
- Dr TikTok Shop Clearing Account RM150
- Cr Sales Revenue RM150
2. Record Voucher and Discount Amounts
Next, you need to track the voucher or discount amounts separately. This is crucial for accurate revenue recognition and for understanding the true cost of sales.
For vouchers and discounts, you can treat the amount as an expense or a contra-revenue account. A contra-revenue account reduces your gross sales to reflect the actual income earned after applying the discounts.
Example Journal Entry for TikTok Voucher Discount:
- Dr Sales Discounts or Vouchers Expense RM30
- Cr TikTok Shop Clearing Account RM30
In this example, the Sales Discounts account reflects the amount of the voucher, reducing the gross sales figure to give you the net revenue.
3. Track Platform Discounts Separately
If the discounts are platform-provided, such as a site-wide promotion or event discount (e.g., 11.11, 12.12), you’ll want to track these separately. TikTok may cover part of the discount, which affects your actual payout.
For example, if TikTok offers a RM10 off for a certain period, and you have 100 sales of that item, TikTok will effectively reduce your payout by RM1,000.
Example Journal Entry for Platform Discount:
- Dr Sales Discounts – TikTok RM1,000
- Cr TikTok Shop Clearing Account RM1,000
This ensures that both the expense and the deduction from your payout are tracked and reconciled accordingly.
Step-by-Step Guide to Reconcile Net Sales
Once you’ve correctly recorded the sales and voucher discounts in your GL, you can proceed with the reconciliation process. The goal is to ensure that your gross sales match the net sales you receive after applying discounts, and that the payout aligns with the actual amount after TikTok’s adjustments.
Here’s a step-by-step guide:
Step 1: Download All Relevant TikTok Shop Reports
Start by downloading the following TikTok Shop reports for the period you are reconciling:
- Order Report: To track total gross sales.
- Voucher Report: To see the total value of vouchers and discounts applied.
- Settlement Report: To track payouts and adjustments.
- Fee Report: To check the platform fees that were deducted.
- Refund Report: To account for any returns or chargebacks.
Step 2: Match Gross Sales to Order Report
Your gross sales should match the sales recorded in the TikTok Order Report. The gross sales amount should include the full value of the product plus any applicable shipping fees.
Example:
- Order total (product + shipping): RM150
- Discount applied: RM30 (voucher)
Your gross sales should still be RM150 even though the customer only paid RM120 after applying the RM30 discount.
Step 3: Deduct Discounts and Vouchers
For accurate net revenue, deduct the value of vouchers and discounts from your gross sales. This is where the Sales Discounts or Voucher Expense account comes in.
Ensure that the discount or voucher applied aligns with the figures in the Voucher Report. Any discrepancies here will affect your final net sales and payout reconciliation.
Step 4: Reconcile Net Sales with Payout Report
Now, cross-check your net sales (after deductions) with the figures in the TikTok Shop Settlement Report.
- Net Sales: What your shop earned after applying discounts and vouchers.
- Payout: What TikTok Shop is sending you after applying platform fees, transaction fees, and adjustments.
Ensure that your net sales match the payout report after taking into account the fees and refunds.
Example Journal Entry for Reconciliation:
- Dr TikTok Shop Payout (Net Amount) RM120
- Cr TikTok Shop Clearing Account RM120
The TikTok Shop Clearing Account should balance to zero after posting the payout, ensuring that your bank deposit and GL entries are aligned.
Step 5: Adjust for Any Refunds or Returns
Refunds and returns impact both your net sales and inventory levels. If a customer returns a product after the sale, you’ll need to reverse the revenue and voucher entries.
For example, if a refund of RM20 occurs:
- Dr Sales Returns & Refunds RM20
- Cr TikTok Shop Clearing Account RM20
This ensures that your net revenue reflects the actual sales that were fulfilled.
Common Mistakes in Vouchers and Discounts Reconciliation
1. Incorrect Discount Tracking
Sometimes, discounts or vouchers are not tracked correctly, either by the finance team or the system. This can result in mismatched net revenue and payouts.
Solution: Ensure that all discounts and vouchers are tracked in a separate account and fully deducted from gross sales.
2. Not Accounting for Platform-Provided Discounts
TikTok Shop often offers site-wide promotions that reduce your payout, but these may be overlooked or miscalculated.
Solution: Always track and account for TikTok’s platform discounts separately in your GL to ensure accurate payout calculations.
3. Manual Errors in Refunds and Returns
Returns can often be overlooked or processed late, leading to discrepancies between sales revenue and payouts.
Solution: Implement a system to immediately reverse refunds and adjust inventory and sales figures to maintain accuracy.
4. Using Gross Sales to Calculate Payouts
The payout amount is based on net sales, not gross sales. Using gross sales figures for payout calculations will lead to incorrect financial reporting.
Solution: Always deduct vouchers and discounts before calculating your net sales and payout figures.
Best Practices for Reconciliation
1. Automate Voucher and Discount Tracking
Use automated tools or integrated accounting software to track and apply discounts and vouchers in real-time. This will reduce manual errors and save time.
2. Implement Clear Discount Policies
Ensure that your discounting policies are clear, consistent, and easily accessible for your finance and operations teams. This helps avoid confusion and ensures that discounts are applied correctly.
3. Perform Regular Reconciliation
Do a weekly or biweekly reconciliation of your vouchers, discounts, and sales figures to avoid a backlog at month-end. This will help catch errors early and prevent reconciliation headaches at the end of the month.
4. Regularly Review Fees and Adjustments
Check the TikTok Shop Fee Report for any adjustments or unexpected fees. This will help ensure that your net sales and payouts are not impacted by unexpected deductions.
Conclusion
Reconciling TikTok Shop vouchers and discounts is an essential part of maintaining financial accuracy for your business. By following the steps outlined in this guide, you can ensure that your net sales are recorded accurately, that your payouts match your expectations, and that your inventory remains in sync.
With proper tracking and reconciliation, you’ll avoid common pitfalls such as misreporting sales, inaccurate payouts, and discrepancies in general ledger entries. By implementing best practices like automating tracking, conducting regular reconciliations, and ensuring transparency in your discount policies, you can confidently manage your TikTok Shop finances without fear of errors or confusion.