Diversifying Your Accepted Payment Methods

By: Michael | Published: July 28, 2010 | Filed under: Entrepreneurs, Small Business Advice, Small Business Tools

Small business owners tend to accept the majority of payments one way: paper check. While this is one of the easiest payment methods to accept, there are a plethora of downsides to it as well. You should know, that as a small business owner, you do have options and can offer these options to your customers as well. Let’s explore what of the downsides of checks are, what other payment options are available, and how to go about bringing them on board as part of your offering.

Accepting checks can be a tremendous hassle compared to most other payment options. One of the largest downsides of accepting paper checks is all of the waiting involved. Wait for your client to receive their invoice in the mail, wait for them to write you the check, wait for them to mail it, wait for the check to come in the mail, etc. Once you receive the check, it still needs to be taken to the bank for deposit, which also occupies time. In addition to being tremendously time consuming, accepting paper checks is by far one of the least green payment methods. You usually have to mail a paper invoice, which not only consists of the invoice itself, but the envelope it’s contained in and sometimes even a remittance envelope. Then your client needs to send a check, meaning another envelope is being used in the process. This also involves two stamps, and the price of a stamp is only increasing.

One of the easiest payment methods to accept from your clients is PayPal. It’s 100% free to sign up, bears no monthly fee and no processing minimum. PayPal allows your clients to pay you from their PayPal balance, credit or debit card, and even their bank account. If you have clients who don’t have PayPal accounts, and don’t want one, they can still pay you with their credit or debit card without even signing up for an account. PayPal charges a $.30 fee per transaction they process, and a variable percentage rate based on your volume. This fee ranges between 1.9% and 2.9% of each transaction. Once the money is in your PayPal account, you can withdraw it using the PayPal debit card, spend it online at any merchant that accepts PayPal, or transfer it to your bank account. You’re given instant access to the cash once your client has completed the payment.

Another way to accept instant payments is with a bank merchant account. This allows you to accept credit cards directly from your client without PayPal. This has some huge advantages over accepting cards through PayPal. First, the transaction rates will be significantly lower. Second, you will have a lot more control over when you charge your clients. With PayPal, you have to wait for your client to put their card information in and approve the transaction. With your own merchant account, you can retain your clients credit card information and charge them on terms that you and your client agreed upon. The guarantee of getting paid on time, every time can often do wonders for small business cash flow. Merchant accounts will sometimes include monthly charges and even processing minimums. While the easiest way to obtain merchant processing is from your bank, you can shop around online for lower rates and more flexible terms. Note, due to the large amount of power involved with being able to charge clients cards at any time, there application process will include a check of your business credit. It can really help your odds if you know you are applying for the account when you have already established good credit for your business. For tips on how to build up credit for your small business, read our post about establishing small business credit.

One of the most flexible, yet least noted payment method is remote bank capture. This allows you to withdraw the amount due from your client’s bank. Much like a merchant account, this gives you the flexibility to get paid on your terms since you are in control of when you make the withdrawal. Accepting this payment method will normally include a small per transaction charge, usually around $.30. This gives you the flexibility for maximum cash flow, without all of the processing fees and hassle of credit card processing. Talk to your bank about if they can arrange for you to have the option to accept these types of payments.

PayPal, a merchant account and remote deposit capture will add flexibility to your business, give your clients more options, save you time and even save paper. While paper checks may still be the norm, diversifying your accepted payment methods can tremendously benefit your business and may even result in happier clients since they no longer have to worry about mailing you a paper payment. Considering all of these benefits, how can you possibly go wrong accepting more payment types?