Account level reserves can be a serious setback for rapidly growing Amazon sellers. How can you keep your business running when Amazon won’t release funds until at least two weeks after your customer receives the product?
In the game of e-commerce, healthy cash flow is essential to business-critical tasks like securing inventory, keeping your ads running, and ensuring a healthy stream of sales for your store, and like it or not — the Amazon account level reserve is just as much a part of the game.
Let’s take a closer look at what sellers need to know about account level reserves on Amazon and how to get access to funds if you ever find yourself in a cash flow stalemate.
Understanding the Amazon Account Level Reserve
- What is the Amazon Account Level Reserve?
- Breaking Down Amazon’s Reserve Tiers
- How Long is Money Held in the Amazon Account Level Reserve?
- Why is My Amazon Account Level Reserve So High?
- How to View Your Current Amazon Reserve Amount
- Tips to Avoid an Account Level Reserve
- How Does Amazon’s Seller Payment Schedule Work?
- Scale Your Growth with Faster Amazon Payouts
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What Is the Amazon Account Level Reserve?
The Amazon seller account level reserve is a sum of money Amazon reserves from your balance to cover potential chargebacks, returns, refunds, or guarantee claims after customers receive your product. It’s also called an “unavailable balance”.
You can think of it as a type of insurance — a proactive strategy meant to protect the financial liability of your store, Amazon, and the customer. By holding onto a part of the money in your Amazon seller’s account, Amazon guarantees all parties will be taken care of in the event that you can’t fulfill an order.
This also helps prevent fraud, since before Amazon had a holding period, many scammers took advantage of the system by selling high volumes of inventory for cheap with extended shipping times. This gave scammers the perfect opportunity to collect their profits and vanish before Amazon even noticed.
Here are some of the other reasons Amazon may put a reserve on your seller account:
- You didn’t provide shipping confirmation
- You have open A-to-z guarantee claims
- Your seller performance has fallen below Amazon’s benchmarks
- Local tax regulations require Amazon to withhold income tax from you (this varies by store)
- You have chargebacks on one or more of your orders
- Your seller account is under review
- You have payment information errors
By offering this service, Amazon is both protecting itself and helping you carry out your obligations as a seller. Using the reserve as a buffer, customers have enough time to issue a complaint or return an item.
But for many sellers, this policy comes with some frustrating consequences. With an account level reserve, you may have to wait 14 days or more to receive your disbursement. Additionally, your payout could roll over into the next cycle or even stay on hold for several payout periods.
This can result in a vicious cycle of negative cash flow leading to lost sales as you wait to secure inventory until your payout arrives.
“Since we get paid every 14 days, our cash was tied up, especially considering the amount we hold in reserve,” said the team at premium wedding gift store Deluxy. “We had to place a lot of orders for Q4 last year, and that’s when we started looking for funding to be able to purchase all of the inventory.”
Whether you sell via Amazon FBA or FBM, the challenges of the reserve policy can impact your business. It’s also important to note that these are not the only variables that play a role in determining your account reserve. Amazon also uses a tiered system to assess the amount reserved.
Breaking Down Amazon’s Reserve Tiers
Using a tiered model, Amazon looks at various factors, including:
- Your Order Defect Rate (ODR)
- The age of your account
- How many orders you’ve fulfilled
This helps Amazon determine how much money it needs to reserve from your account. To find out how much money Amazon will keep, start by figuring out which tier you fall under based on the latest guidelines for 2023.
If you’re a new Amazon Pay merchant, you’ll automatically fall under Amazon’s first tier, which means:
- 100% of your payments processed over the past week will be held in reserve for seven days after the transaction processing date
- Amazon will hold the amount of all unresolved transaction disputes, such as guarantee claims and chargebacks
If you’ve been using Amazon Pay for a year and have completed a minimum of 100 orders, you’ll get upgraded to Amazon’s second tier.
Your account may also be eligible for an upgrade to Tier II if:
- You’ve been an Amazon Pay merchant for at least six months
- You have a minimum of 100 completed orders
- You’ve maintained an ODR below 1%
Amazon’s second tier amount is 3% of your daily processed payments averaged over the past 28 days or the total value of unresolved transaction disputes — whichever is greater.
Within Tier II, you’re eligible to be upgraded to Tier II-Plus if you’ve maintained an ODR below 1% averaged over the past 60 days.
Once you’re in Tier II-Plus, Amazon will only hold the number of unresolved transaction disputes. While this is great news, there are still some details you need to keep in mind.
If your ODR reaches the 1% threshold at any time, you’ll automatically revert back to the standard second tier. You will not be eligible for Tier II-Plus again until your ODR goes below 1%, averaged over the previous 60 days.
Unfortunately, Amazon won’t notify you about this, so you’ll need to keep an eye on your ODR information in Seller Central.
How Long Is Money Held in the Amazon Account Level Reserve?
Even if you have a good understanding of your reserve tier, you may still have questions about why there’s a reserve on your account. If you head to Reddit or Quora, you’ll see countless sellers asking when they can expect to receive their payouts.
Here’s an example you might be familiar with. Spoiler Diecast says:
“I’ve been selling on Amazon for almost six months and have had success so far — and my account is in good health. I’ve had hardly any returns or cancellations and I always ship on time. However, it’s taking forever to get paid. My total balance is $3,517 but my available funds are only $275. It’s been like this for days. Is this discrepancy normal? It’s really frustrating to have my money just sitting there limiting me from buying more inventory.”
Now just imagine multiplying those numbers by 10. What’s worse? This user might be waiting a lot longer before Amazon releases the funds.
The actual reserve amount depends on the tier they fall under. However, Amazon’s deadline for releasing the money is more about the age of your account.
How Does Amazon’s Seller Payment Schedule Work?
Regardless of how long you’ve been on the platform, Amazon does not issue payments immediately.
Typically, the Amazon seller payment schedule looks like this:
- You receive funds to your Amazon seller account after a customer makes a purchase
- Amazon tracks the customer payment and holds some of it in your account level reserve
- Once your seller account is settled and you have a positive balance, Amazon remits money to your bank account every 14 days. If you’ve been a seller for 10 years or longer, you may be eligible for next-day disbursements. This means that you get paid the day after a sale.
- Once Amazon initiates a payment, it can still take up to five business days for the money to reach your bank account
Amazon typically releases funds seven days after the order’s delivery date, which is approximately 14 days from the day the order is placed.
Here’s an example timeline to help you calculate your potential payout date:
- The customer places an order on January 1st
- You ship the order on January 2nd
- The customer receives the order on January 7th
- The funds from the sale will be released to your account on January 14th
- The money reaches your bank account on January 19th
It’s important to remember that there may be other factors that influence your reserved period and payment date, including any change to your bank account information. In this case, a one-time three-day hold is placed on your account so Amazon can verify this new information.
For new sellers, Amazon needs to build up the amount in the account level reserve, meaning that payouts may be delayed between four and six weeks after the first sale. New sellers should adjust their expectations when waiting to receive their first payout.
Why Is My Amazon Account Level Reserve So High?
There are a few reasons why your Amazon account reserve level might be high. Typically, it’s because your account has been identified as having a higher-than-average risk of chargebacks or other types of financial losses. As a result, Amazon holds more of your funds in reserve as a safeguard.
Additionally, if you’re a new Amazon seller or have a limited selling history on Amazon, the platform may place a higher reserve on your account to mitigate risk. They may also increase your reserve level if you sell high-risk items like collectibles, sports memorabilia, or fine jewelry. Also called gated categories, selling these items can be challenging due to additional roadblocks Amazon puts in place to protect buyers.
How to View Your Current Amazon Reserve Amount
To view your current Amazon reserve amount, navigate to the Chart of Accounts on the payment dashboard. Just head to Reports, then Payments, and then Chart.
You can also see reserved funds in the account level reserve section on the Statement View tab on your Payments report.
Tips to Avoid an Account Level Reserve
If you have an account level reserve and you need access to cash flow, the good news is there are several strategies you can use.
- Respond to any A-to-z guarantee claims and chargebacks as quickly as possible
- Keep your account in good standing
- Diversify with other sales channels and e-commerce marketplaces, such as Marketplace, Shopify, BigCommerce, Walmart, Etsy, and eBay
- Fully fund an emergency savings account
- Apply for a business credit card that offers zero-interest payments for up to a year, then switch to a new zero-interest card when the year is up
- Apply for a line of credit that only charges interest on the amount you borrow
- Negotiate better terms with your suppliers
- Explore marketplace funding solutions like Amazon Lending
- Lock arms with a flexible e-commerce funding partner
Each of these strategies has its merits. Take time to consider your category, business model, growth goals, and existing resources before creating your funding strategy.
While navigating an account level reserve is possible, there are things you can do to avoid a high account level reserve in the first place.
Keep the following tips in mind to avoid an account level reserve and protect your total Amazon ROI:
- Make sure your account health meets Amazon’s expectations
- Resolve customer disputes quickly
- Carefully follow Amazon’s fulfillment guidelines
- Deliver a responsive and personalized customer experience
- Perfect your storage and shipping process
- Maintain an ODR below 1%
Last but not least, play the game. Commit to selling on Amazon for at least six months before making any decisions about your future on the platform. Once you see the real impact of Amazon’s account level reserve policy on your business, you can create a growth strategy that accounts for the right amount of funding, advertising, and inventory you need to stay in stock and scale your sales.
Moving Forward: Preserving Cash Flow Amidst an Amazon Account Level Reserve
In the end, the Amazon account level reserve can feel like a major setback. But when you’re armed with the knowledge of how it works, how to prevent it, and what to do if it happens, you can thrive as a seller no matter what.
And if you need help keeping your cash flowing despite an Amazon account level reserve, we’ve got you covered.
Designed to tackle cash flow issues that come from snail-like marketplace payouts, the SellersFi Amazon Revenue Advance could be the solution you’ve been looking for.
Contact us about how we can help.