Guide about handling Invoice Defect Rate

Since there are numerous Amazon Sellers regularly seeking help with handling their Invoice Defect Rate, I decided to prepare this article summarizing all information.

Here you can review Amazon’s Business Invoicing Policy:

Amazon Business invoicing policy All sellers are required to provide Amazon Business customers with a valid VAT invoice for each order within one business day after order dispatch is confirmed. Sellers that are not required to apply VAT on their sales are required to provide receipts. Similarly, credit notes on returns from Amazon Business customers must be provided within one business day of return confirmation. Amazon allows sellers to provide invoices and credit notes via the Amazon VAT Calculation Service, in which case invoices and credit notes are either generated by Amazon or generated by the seller based on VAT calculation data provided by Amazon (available for eligible third-party solution providers only). Sellers not required to register for VAT in the EU and the UK can let Amazon issue receipts on their behalf by declaring their VAT exemption status. Sellers who do not use an Amazon solution to generate invoices or receipts must upload their own invoices, receipts, and credit notes, either on Seller Central via Manage orders or using a third-party solution provider. What do you need to do to comply? To comply with this new Amazon Business invoicing policy and keep your Invoice Defect Rate at 0% (target is 5%) which might cause you suspension from 5th April 2021 is simple and all you need to do is to enroll for: Amazon VAT Calculation Service (for VAT registered sellers) OR Automatic Receipt Generation (for Non-VAT registered sellers) after you declare your VAT exemption status After you enroll for one of these services, Amazon will be uploading all necessary invoices for customers on your behalf and you can simply forget about IDR. Enrolling for Amazon VAT Calculation Service (for VAT registered sellers) is really simple and it takes just few minutes and you can enroll at this link: Enroll for Amazon free VAT Calculation Service. Enrolling for Automatic Receipt Generation (for Non-VAT registered sellers) after declaring your VAT exemption status might be easy for some Non-VAT registered sellers at this link just by following simple instructions. But some sellers might experience obstacle by seeing warning message stating following: What to do if you see this warning message? If you see this warning message saying that you are not eligible for Automatic Receipt Generation and you are sure that you are not liable to be VAT registered, then simply open case with Amazon Seller Support proving it and request them to make this Automatic Receipt Generation eligible for you. Then enroll. IDR (Invoice Defect Rate) you can find in Seller Central: Performance > Account Health > Customer Service Performance > scroll down > View details > Invoice Defect Rate Or at this link: https://sellercentral.amazon.co.uk/performance/detail/customer-service?ref=sp_st_dash_cs_vm

What is Amazon’s new Invoice Defect Rate?

It was first introduced on Amazon.co.uk last summer because “Amazon Business customers require timely invoices for tax and accounting purposes” and Amazon wants to make sure you “deliver the invoicing experience this fast growing segment of customers expects”.

And I have to say that personally I am surprised by the amount of orders where the customers request an invoice / VAT receipt – especially as the product I’m selling isn’t something you would necessarily think of business customers for.

So I do believe it when Amazon says this is a growing segment, after all they usually know what they’re talking about with this kind of thing. And I for one definitely won’t say no to some additional sales!

Since Amazon introduced this new metric they’ve been recommending Amazon FBA sellers maintain it under 5%. But from April 5th 2021 this becomes part of the Amazon invoice requirements to sell on Amazon.co.uk, Amazon.de, Amazon.fr, Amazon.it, and Amazon.es.“

Failure to comply with this upcoming performance requirement may result in account deactivation.”

How is the Invoice Defect Rate calculated?

It’s the percentage of orders for which you didn’t upload an invoice by midnight on the first working day following the day of confirmed dispatch.

For example if an order has confirmed dispatch on a Monday, you need to upload an invoice by 23:59 on Tuesday. For orders that are confirmed dispatched on a Friday, you’ll have until 23:59 Monday the following week to upload an invoice as it only takes into account working days.

You can check your current Invoice Defect Rate by going to Seller Central > Account Health > Customer Service Performance. At the moment it only calculates it based on the last 7 days of orders (if it shows N/A that just means you didn’t have any orders from Amazon Business customers in the last 7 days) but presumably this will change by April…

Now to the main point:

How do you reduce your Invoice Defect Rate?

Well there’s a number of different options depending on your VAT status and if you decide to use Amazon’s VAT calculation service. Let’s quickly go through them one by one:

1. Enroll in Amazon’s VAT Calculation Service and let Amazon create invoices on your behalf automatically. IDR is 0% when Amazon’s VAT Calculation Service generates an invoice on your behalf.
2. Enroll in Amazon’s VAT Calculation Service and choose the settings to upload your own invoices via your solution provider.
3. Upload your invoices via your solution provider without enrolling in Amazon’s VAT Calculation Service.
4. Upload your own invoices manually from the Manage Orders or Order Details page.
5. If you are exempt from VAT registration in both the EU and the UK, declare your VAT exemption status and let Amazon issue receipts on your behalf automatically.

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Regarding Amazon Seller Performance, you can always participate in our Amazon Seller Performance – Friendly Advice – Worldwide group, where you will be very welcome.

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Additionally, here you can watch my YouTube video, where I am presenting you several secret tips about appealing Amazon Seller Account suspensions (don’t be confused by the opening of the video, where I am enjoying a vacation – it’s a part of the story):