Offering flexible payment options, such as paying via e-Transfer or credit card gives your customers more freedom to pay their way. There are many different payment methods, so take the time to review common payment methods and their various advantages before you start swiping cards or upgrading your systems. Explore common industry buzzwords, payment types, and processing system options to get a handle on your small business payment processes.
Payment processing seems simple, but you may come across unfamiliar terms as you’re sorting out your options. Figuring out what those terms mean lets you make informed decisions that save you money and allow for smooth payment processing.
For example, the merchant discount rate refers to the fee banks and credit card companies charge for processing card payments, usually a percentage of the total sale. This adds to the cost of accepting cards, so you want to understand how it works.
Another unfamiliar term you may hear is EMV, which stands for Europay, MasterCard, and Visa. These companies represent the main players in developing the chip-based card technology that many consumers use. EMV cards feature encryption keys and dynamic data for better protection against card fraud.
Familiarizing yourself with electronic funds transfers can help you receive your money faster. These electronic transactions happen almost instantly and work for both one-time and recurring payments. An electronic funds transfer is an efficient, secure way to pay your employees via direct deposit. Similar to an electronic funds transfer, interact e-transfers only require the email address of the recipient to quickly and securely transfer money between bank accounts.
If you sell products online, you may hear the term callback URL. When a customer purchases online and pays through a third-party payment processor, the callback URL redirects them back to your website after they complete the transaction. The customer gets confirmation of the order, and may even browse a bit more on your site.
Depending on the type of business, you may deal with point-of-sale (POS) payments, invoices with payments made later, or both. POS payments take place at the time of purchase, such as a sale at a cash register in a retail store. You don’t have to worry about following up to get customers to pay or deal with late payments. Those payments can be cash, cheque, credit or debit card, or mobile payment, depending on what type of payments you accept.
If you invoice clients, you collect payments for goods or services later. Setting clear payment terms is essential in getting paid quickly. Create invoices that spell out what you expect. Let customers know when they need to pay and how they can make those payments. Offering several payment options can make it easier for clients to pay.
Dealing with late payments is easier when you set up automatic reminders. If a friendly email reminder doesn’t do the trick, tacking on late fees may inspire your late-paying customers to remit payment. You can also take a proactive approach to avoid late payments by knocking off a small percentage of the bill if a customer pays early.
Offering more payment options encourages your customers to spend more or pay their bills faster because they have a choice. But you also want to consider the costs associated with different payment methods to protect your profits.
Cash and Cheques
The traditional cash and cheque options seem like the most cost-effective payment type. You don’t need special equipment, and you eliminate the fees that come with processing credit card payments. Accepting cash means you have to count it, store it safely, and take it to the bank—which all take time. Accepting only cash can limit the amount people spend based on how much cash they have on hand.
Accepting cheques comes with the risk of losing money if someone writes a bad one. Bounced cheques usually come with additional fees from your bank plus an additional cost to recover the money from the client.
Both cash and cheques are the preferred methods for some customers, so you may want to consider accepting them. Adding other payment options can also help remove some of the limitations.
Accepting credit cards at your small business may encourage customers to spend a little more since they’re not limited to the cash in their wallets. These days, you have many affordable options for card processing equipment. Many craft show and market vendors use the card reader Square for credit card processing, but it also works for other small businesses. The card reader plugs into your mobile device and works with an app to process cards.
Even nonprofits benefit from accepting credit cards as a way to increase donations. If you host a fundraiser event, you can process credit card donations through mobile swipe devices, payment apps, and more.
That said, dealing with credit card payments comes with some potential drawbacks, including chargebacks, which happen when customers request refunds through their bank. It’s also a good idea to compare the fees and equipment options when choosing a credit card processing company. If you decide to switch payment processors, consider if you can avoid agreement cancellation fees.
Mobile and Online Payments
Online payment apps let customers pay for goods and services securely without swiping a credit card. There are many advantages to mobile payments. For example, apps that integrate with QuickBooks can easily sync the data to keep your records accurate. Accepting mobile payments in your brick and mortar store can speed up the checkout process and encourage customers to buy more. Mobile payment and billing apps can make it easier to send and manage invoices while collecting payments faster.
Your online payment options vary depending on how you sell. For example, Etsy checkout options let you quickly accept payments for your handmade goods sold on the website.
Technology brings about new payment methods, such as Bitcoin and other cryptocurrencies. If you have a point-of-sale system in place, you can likely upgrade it to accept cryptocurrency so customers have one more payment option.
Various software and payment systems make it easier to process payments. Having a robust point-of-sale system in place lets you process and record customer transactions easily no matter the payment method they use. You can also accept payments through QuickBooks for quick, and easy processing. Cloud-based payment processing simplifies how you collect sales tax based on the location of your customer. If you run an e-commerce store, you can use the Shopify-QuickBooks integration to process payments seamlessly and automatically import the information into your accounting records.
Exploring different payment processing options and payment types helps you balance customers’ preferences and your profits. With cloud-based and online payment options, you can save time and money on every transaction.