How Does CollabPay Work? The Complete Workflow

how collabpay works

In short, CollabPay automates the process of calculating and paying your product creators their cut of sales.

If you have collaborated on products with another person or company, you can now easily calculate their earnings of the profits and pay them automatically.

It’s a completely automated process, so once they are set up, then you can sit back and let CollabPay do the work.

Here’s an example:

You own the store and then collaborated with Jim to create a product together. The deal is that you both earn 50% of the profits each, split 50/50.

You would need a way of calculating Jim’s earnings from the sales of that product in your store. This is where you would install CollabPay onto your store and then invite Jim as a Collaborator to get a free account and connect with your store.

You would assign Jim’s account 50% of the earnings of that product. Then once a sale comes in of that product, CollabPay will automatically calculate how much Jim is owed and then add that amount to a pending payout.

You can set the payout frequency. Let’s say you set it to pay him once per week. Jim will get paid weekly as long as there are sales of that product.

Shipping & taxes

The amazing thing about CollabPay is that you can account for tax and shipping costs. That means you can set it to deduct the tax and shipping amounts from the total price before it calculates the earnings.

This means you are both getting 50/50 on the profits of the sale. Then you, as the store owner, can hold the tax and shipping costs in your business account to pay for them.

Visual example

Here is a visual example of a $25 order with 3 Collaborators – two of them earn a percentage amount, and the other one earns a flat fee. Then the store keeps the rest for itself.

You can see that the Shipping and Tax amounts are being deducted before the split calculation takes place:

collabpay infographic

How do the payments work?

Using automatic payouts – best method

The store owner that installs CollabPay to their eCommerce store can connect their PayPal business account to CollabPay and give them permission to make payments on their behalf.

This way, CollabPay never takes the money. The money is paid directly from the store owner’s PayPal to the Collaborator’s PayPal.

CollabPay strictly only calculates and initiates the payment on behalf of the store owner.

This works by using a feature from PayPal called PayPal Payouts. It allows a business PayPal account to be connected to an app, so the app can make payments on their behalf and send mass payments.

Using PayPal Payouts will also incur a $0.25 fee for each payout. These are PayPal fees, and CollabPay is not in control of this. Every payment processor in the world has a transaction fee, so this is unavoidable.

example of automatic payouts

Using manual payouts

If you do not want to connect your PayPal account to CollabPay, you can pay your Collaborators manually. CollabPay can be used as a calculation tool.

It will create payouts on the Payouts page. Once the payout is finalised and no more orders are added to it, you can mark it as paid by going into the payout and clicking the “Mark as paid” button. This then allows you to pay your Collaborator in any way you please, such as bank transfer or similar.

How to pay Collaborators

There are two methods for paying Collaborators. You can either:

  1. Automatic payouts – Set up and connect your PayPal account to enable automatic payouts to Collaborators
  2. Manual payouts – “Mark as paid” on the payout and pay them manually in your own way like bank transfer etc.

1. Automatic payouts with PayPal

You can connect your PayPal business account to CollabPay, and CollabPay will automatically pay from your PayPal account directly to the Collaborator’s PayPal account.

You will need to get access to PayPal’s feature “PayPal Payouts” to enable this. All you need to do is drop Paypal a message and request access to “PayPal Payouts”.

This allows the CollabPay app to initiate payments on your behalf. Learn how to connect your PayPal account to CollabPay here. It’s as simple as:

  1. Go to CollabPay settings
  2. go to “PayPal Payouts”
  3. Click the “Login with PayPal” button
  4. Approve CollabPay to make payouts.
  5. Remember you will need to be approved and given access to the PayPal Payouts feature by contacting PayPal, otherwise, the payouts will fail.

2. Manual payout then “Mark as Paid”

The “Mark as paid” feature works on the payout level. So once your payout is pending to be paid, you can “Mark as paid” to finalise it. Once it’s marked as paid, you can then pay your Collaborators.

How do Collaborator accounts work?

There are two types of accounts with CollabPay:

  • Store owner account
  • Collaborator account

Store owner accounts

The store owner accounts are the ones who install CollabPay to their eCommerce store and invite the Collaborators to earn a percentage or flat fee of sales from selected products.

As a store owner, you will see in the navigation:

  • Collaborators – here, you can invite Collaborators to handle the earnings and product attaching.
  • Orders – all orders in your store.
  • Products – all products in your store.
  • Payouts – a full list of payouts for all Collaborators.
  • Settings – customise all of your settings here.

As a store owner, you will need to:

  1. Invite Collaborators to create a free account, and they will automatically connect to your account
  2. Assign Collaborators with a percentage or flat fee earning on products you choose
  3. Connect your PayPal business account to pay them automatically, or pay them manually and mark the payouts as paid.
store owners collabpay account

Collaborator accounts

The Collaborators accounts are free, and you can invite someone to join your store as a Collaborator. Collaborators only earn from store owner accounts.

For a collaborator to get paid, all they need to do is enter their PayPal account email address into their account settings. As sales come in of their products, they will see their total earnings and when they are going to get paid.

The Collaborators can see in their account:

  1. Orders (without personal information of the customer)
  2. Products they are attached to and what percentage or flat fee they are earning
  3. Payouts – a list of all their payment transactions that they have been paid by the store owner
  4. Settings that they can customise
collaborator account

What do the payout statuses mean?

  • Paid – the payout has been paid.
  • Pending Payout – the payout has been finalised and is ready to be paid. No more orders will be added to it.
  • Active – the order earnings are still being added to Active payouts.

What happens if the payout fails?

You will be notified by email and on the Payout page if the payout fails. It will attempt to payout for 3 days (once per day), and if they fail every time, the payout will be marked as “Failed”.

From here, you will need to fix the problem that caused them to fail and manually Payout the payment yourself. You can either:

  • Click the “Manually pay via PayPal” button
  • Or use the “Mark as paid” button, then pay your collaborator in your own method (bank transfer or similar)

Please make sure you check and find out why the Payout had failed. It usually fails because of one of two things:

  1. PayPal has not given you access to use their feature PayPal Payouts. Have you had confirmation from PayPal that they have given you the ability to use the feature?
  2. The collaborator has not provided their PayPal payment email address in their Collaborator account. They need to enter this to get paid.

Summary

Please see our Beginner’s Guide tutorial if you want to learn how to set up CollabPay.

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