Are you a first-time small business owner? Just like other novices, accepting any payment types as long as you get paid might come across your mind. You are excited about the idea of offering ease and flexibility to all your would-be customers. Doing so will not guarantee you an all-but-rainbow-and-sunshine operation, though. It has downsides, too. As a matter of fact, that’s a dangerous model to set. Every payment method comes with its hits and misses. And by accepting some types of payments not aligned with your business model, you might be adding risk onto your already risk-filled small business. Thus, picking only the best payment methods for small businesses is crucial.
Payment Method Types
Before you allow customers to use any which payment options they want, you should know the pros and cons of different types of payment. Here’s a short checklist to help you figure out which ones will work best for your small business.
The key edge of cash is that you merely collect the amount owed by your customer and it goes straight to your register or bank account—it costs nothing to process. This is why cash has known as the king of payments. However, in recent years, trends show that it is slowly going out of favor with younger consumers.
Besides, when you elect to operate on a cash-only basis you should be diligent in recording your cash payments as Internal Revenue Service or IRS imposes a stringent tax auditing process. Disparities in your book and unaccounted dollars could land you with hefty fines.
So here’s a tip. Know exactly your target markets and their preferences in paying. Accepting cash at your small business can be your starting point, but you must delve into other payment forms later.
2. Credit Card
Customers all over the globe have started to expect businesses to accept at least some types of credit cards. Thus, the credit card is identified as the leading method of payment next to cash. Given this scenario, your small business has a great chance of progressing if you will follow this trend.
This payment form comes with a cost, though. The majority of credit card companies charge a transaction fee, flat fee, and incidental fee (under certain situations) that may impact your earnings. But if you will consider that there are more than 500 million owners of credit and debit cards in the U.S. alone, it is unwise to run your business without accepting credit cards.
Our advice is you do your research on affordable merchant services and you should be able to accept credit cards with no hassles.
This payment form is far from being ideal. Apart from being outdated, this poses threats to both your customers and your business. With the sensitive details printed on it, such as the account numbers and addresses, a customer might be exposed to identity theft once the check is misplaced.
Further, as an owner of a small business, it would be difficult for you to confirm whether checks are good or if the account has inadequate funds. A bounced check will not only hurt your business’ cash flow but can also incur additional fees.
If you finally decide to accept checks, we highly suggest that you comply with the procedures from the Small Business Administration or SBA to protect your business
4. Mobile Payments
Financial and tech experts believe that mobile payments are going to be the future of payment convenience and security. With this payment system, customers can use their mobile devices to pay even on e-commerce websites. Moreover, this offers a cheaper, faster, and reliable way to do business—making this payment form increasingly popular with small businesses.
Don’t be so troubled if you don’t have access to this payment method now. However, make sure to have some means of accepting mobile payments by 2021.
5. Automated Clearing House or ACH
This payment form is preferred by freelancers or businesses offering subscription services. Regulated by the National Automated Clearing House Association, you can guarantee that this is faster, more secure, and less costly than other forms of payment. Since ACH payments connect bank accounts with billing accounts, payments are made automatically.
On picking the best payment methods for small businesses
The list of payment methods for accepting payments is constantly evolving; thus your choices are continually growing. But by understanding their respective pros and cons and how each function, there’s no doubt you’ll determine the best payment methods for small businesses. If you need help on setting your business up with suitable payment method types, send us an email or visit our site.