The Hidden Margin Challenge in Distribution

Distribution is one of North America’s largest industries, with wholesalers across the U.S. and Canada generating more than $10 trillion in annual sales. But high sales don’t always mean high margins. Distributors often operate on thin margins due to ongoing inventory and logistics costs. As more commercial buyers expect to pay by credit card or online invoice, payment processing fees can quickly eat into already-thin margins.

Because distributors typically handle fewer transactions with much higher average ticket values, payment processing fees can add up quickly. As a result, reducing these costs is becoming an increasingly important way for distributors to protect margins. Implementing a compliant surcharging program can help offset credit card processing costs and potentially save tens of thousands or even millions of dollars annually.

Challenges Impacting Distributor Margins

Distributors serve a mix of strategic accounts,long-standing customers, smaller buyers, and one-time purchasers, each withdifferent commercial expectations.

This creates several challenges:

• High payment processing fees, especially for distributorshandling high-value transactions
• Customers may pay through multiple channels, includinginvoices, phone payments, portals, and recurring billing workflows
• Pricing, discounts, freight, and other adjustments canmake the final surcharge calculation more complex
• Strategic or long-standing customers may require amore selective approach than newer or transactional accounts

How to Make Surcharging Work for Your Business

1. Automate Selective Surcharging

A distributor does not have to treat every customer or transaction the same way. Selective surcharging can help distributors focus on areas where payment costs create the greatest margin pressure while preserving flexibility for important customer relationships.

Automated selective surcharging can create a consistent experience across invoice payments, hosted payment pages, virtual terminals, and other channels. It also gives sales, finance, customer service, and operations teams a clear, consistent policy to communicate without adding manual work. The goal is more than simply calculating a fee. It is to make surcharging easy to manage across the business without requiring teams to change their existing payment workflows.

2. Integrate Surcharging Into Your Existing Systems

ERP systems such as Microsoft Dynamics 365, NetSuite, and Acumatica have become central to distributor operations. Surcharging should work within the systems distributors already rely on. Replacing or overhauling those systems can be costly and require employee retraining.

For distributors processing hundreds or thousands of invoices each month, integrating payments into existing workflows can reduce administrative work and create additional savings beyond the reduction in payment processing fees. Integration can also help apply surcharge rules consistently across the business and payment channels.

3. Make Compliance and Transparency a Priority

A successful surcharging program needs to maintain compliance with all applicable card network rules and legal requirements. Clear disclosures, advance notification where required, and consistent application are important parts of a compliant program.

Transparency also matters to the customer experience. Surcharge policies should be clearly communicated before payment, with customer-facing teams equipped to explain the policy. Building compliance and transparency into the payment experience from the start can help distributors recover costs while maintaining customer trust.

Protecting Margins with Surcharging

Payment processing fees are often treated as a cost of doing business.For distributors operating on thin margins, they can also be an important lever for protecting margins.

With compliant surcharging, distributors can recover significant payment processing fees while maintaining a fair and transparent experience for customers. But the effectiveness of a surcharge program depends on the provider behind it. The right provider can help businesses identify which transactions qualify, apply surcharges selectively, maintain compliance, and optimize the program over time.

Choosing the right surcharge provider starts with asking the right questions:

• Can you integrate with our ERP?
• Do your surcharge rates reflect the actual cost of payment acceptance, or do you apply a flat surcharge rate across all transactions?
• How do you help us maintain compliance as surcharge rules change?
• Can we selectively surcharge by customer or payment type?
• What consultative support is available to help us build and implement the right program?

The right provider should help you recover the actual cost of acceptance by tailoring surcharge rates to your processing costs rather than applying a one-size-fits-all flat rate. They should also offer consultative guidance to help you stay ahead of evolving surcharge compliance requirements.

Why Choose InterPayments?

InterPayments helps distributors take control of credit card processing fees through compliant surcharging tailored to their business needs. The InterPayments managed surcharge solution automates selective surcharging by customer type, product line, and geography, helping distributors recover fees where they have the greatest impact on margins.InterPayments also provides in-house consultative support to help businesses navigate evolving surcharge compliance requirements and adapt their programs as regulations change. With tailored fee recovery strategies and built-in compliance, InterPayments helps distributors protect margins while delivering a seamless customer experience.

When thoughtfully designed and managed, a surcharge program can improve cost recovery while supporting long-term growth. A managed, compliant surcharge program not only strengthens margins, but also makes payments a more strategic part of the business.

Contact us to learn how InterPayments can turn your payment processing costs into new opportunities for savings.