Ask HN: How do you dole out commission payments to many users? | Hacker News Reader

Ask HN: How do you dole out commission payments to many users?

5 pointssnorkel3 comments

Have any HN'ers here had to manage something like this:

You have a paid SaaS offering that allows users to earn referral fees for any new paid signups they bring in. How do you manage paying the referral fees, or in general how do you process payments to users?

Do you post the signups payment to your own merchant account, then post a credit to the referring users credit card?

Any reason to batch user credits or process them immediately instead?

Are there any tax implications?

Any unexpected gotchas to watch out for?

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I do this on a smaller scale so here are my tips.

1. You process the initial payment.

2. 30 days later or so, after any refunds have possibly gone through, you pay your affiliates.

3. You can pay your affiliates through PayPal or check. Or credits to your system if they want.

4. You have to keep track of all payments you make.

5. Any affiliate you send more than $500 to, you have to send them a 1099 at the end of the year for IRS purposes. (It might not be $500, double-check that.)

6. I would recommend getting an affiliate management script like iDevAffiliate to handle the front-end for your affiliates so they're clear on how much they've earned and so on.

- Paypal Mass Payments and checks works to pretty large numbers. Minimum payout of $100 avoids writing two thousand $0.34 checks.

- Yes there are tax implications. You need to report payments to the IRS. Users probably need to fill out a 1099. You should get a 1099 before sending any money (even under the limit).

- Fraud. Someone might buy a bunch of accounts with stolen card numbers credited to their affiliate account. Then you pay them their commission. Later the card company reverses the charges and you're out the commission. A partial solution is to wait a month or so before paying out the commission.

I strongly recommend that you consider one of the affiliate networks (CJ.com or one of the other big 4) to use for this type of thing.

They all handle payments and all of the other details automatically. All you have to do is keep some money in an escro account and be willing to absorb their fees. Generally they charge 20% on top of any affiliate payments.

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