Ask a D2C founder which of their SKUs is most profitable and you will usually get a confident answer. Ask how they know and the confidence tends to fade.
What a settlement actually nets off
Between the order value and the money arriving in your account sit: marketplace commission, closing fees, shipping and weight handling, return shipping, storage fees for anything sitting in a fulfilment centre, and any advertising billed against the account.
Each is a separate line, computed on a separate basis, and several are charged at the SKU level while others are charged at the account level. That mismatch is precisely why the totals never tie without work.
The reconciliation
Line by line, monthly, against the books. Not the summary — the detailed settlement file.
Three categories of difference tend to appear.
Timing. Orders in one period settling in the next. Harmless, but it has to be identified before the rest is meaningful.
Fee errors. Wrong weight slab applied, wrong commission category, a return charged twice. These are recoverable, and the window for raising them is finite.
Returns not credited. The most common and the most expensive. Stock that came back but was never credited, or was credited as damaged when it was not.
Finding true profitability
Once settlements reconcile, the useful number becomes available: contribution margin per SKU after all variable costs, including advertising attributed at the SKU level rather than spread across the account.
This calculation routinely identifies products that lose money on every unit sold. Not marginal products — products with healthy-looking gross margins that are erased by return rates and ad spend.
That finding is uncomfortable and it is also the fastest available profit improvement, because dropping a loss-making SKU improves the bottom line immediately and costs nothing.
The multi-warehouse complication
Inventory sitting across several fulfilment centres in different states creates a GST registration and stock-tracking problem alongside the settlement one. They are usually solved together, because both depend on knowing what physically sits where.
What to do first
Reconcile one month properly. Not automatically, not approximately — one month, line by line, by hand if necessary.
You will find things. What you find in that first month determines what the process needs to catch every month thereafter.
