When you own a business, you need to be able to accept payments for your service or products. Fortunately, there are many ways to process payments both in person and online.
Accepting Payments In Person
If you have a storefront or studio, or you deliver services and products in person, your customers will likely want to pay you with one of these three methods.
Cash
Cash is paper money and coins that customers can use to pay for their purchases. When you accept cash payments, you do not need to pay any credit card processing fees or risk bounced checks. On the other hand, you will need to keep change and make trips to the bank to deposit the cash in your account. You don’t want to keep too much cash on hand as that may increase your chance of theft.
If you decide to accept cash, you need to make sure you have:
- A business bank account in which to deposit your money
- An appropriate amount and variety of coins and bills to make change
- Training in how to how to spot fake money and handle cash transactions systematically
- An accounting system that balances the cash drawer every day
Check
A check is a written, signed, and dated document that instructs the payer’s bank to pay a specific amount of money to the recipient. Checks are generally considered safer than cash because only the recipient is able to redeem or deposit the check. Some customers may prefer to pay by check compared to cash or credit card. But there is a risk of a “bounced” check, which happens when the payer’s bank account does not have enough money in it to pay the amount owed. Your bank may charge a fee for the bounced check even though it is not your fault, and a bounced check can disrupt your business’s cash flow.
If you want to accept checks as payment, make sure you have:
- A clear check acceptance policy that governs how you and your employees handle check acceptance and deposits
- Training in identifying counterfeit checks
- A way to verify identification when a customer wishes to pay with a check
Credit/Debit Card
Credit and debit cards look and function quite similarly. These cards are issued by banks and companies that allow the payer to send money electronically to the recipient. Credit cards borrow money from the issuing bank on the condition that the user pays off their balance in a timely manner. Debit cards send payment directly from the user’s bank account. Many customers use credit and debit cards to avoid carrying cash around for purchases.
To accept credit or debit card payments in person, you will need a card reader device. Square is a popular and relatively inexpensive option that you can even plug into your smartphone and take anywhere. Whatever card reader you choose will charge a small fee for each transaction, and some may charge monthly fees as well.
Accepting Payments Online
Whether your business delivers services and products in-person or virtually, you can accept payments online. Many customers enjoy the convenience of paying online with the click of a button. You can also connect your online payment options directly to bookkeeping or accounting software to make that task easier.
Here are four ways to accept payments online:
Stripe
Stripe is an online payment processor that can accept a wide variety of payment methods such as credit/debit cards, bank transfers, and digital wallets like Apple Pay or Google Pay. You can also connect Stripe to online shops like WooCommerce or Shopify. Stripe charges processing fees based on the amount of the payment and payment method used. These fees are deductible on your business taxes.
PayPal
PayPal is another popular online payment processor that lets users send and receive money from bank accounts, credit cards, and debit cards without revealing their account information. Money that you receive through PayPal can then be transferred into your business bank account. PayPal also charges processing fees that are similar to Stripe’s fees. You will need to make sure to use a business PayPal account to accept payments for your business. (There are also personal PayPal accounts you can use to send money to friends and family or purchase products for yourself, but these are not appropriate for a business.)
Electronic Invoices
You may want the ability to send an invoice to your clients. An invoice tells clients how much they owe and may also record their payment history. Electronic invoices are a convenient way to bill clients, especially if they can click a button and pay the invoice directly through the software rather than call you with a credit card number or send a check. If you use Square’s card reader, you can also use the Square app to send invoices. PayPal and Stripe also have invoicing options, or you can use a special invoicing software like FreshBooks or Harvest.
E-commerce Software
If you sell products, you can use e-commerce software to set up an online store. Customers can shop from the comfort of home any time they want without having to wait for a physical store location to open. E-commerce software requires connecting to a payment processor like Stripe or Square, but can charge customers the price of an item automatically without you having to generate an invoice. You can set up an online store using e-commerce software like Shopify or WooCommerce. (You may need to learn some basic web design skills or hire a developer to set up your online store for you.)
Regardless of how you decide to accept payments for your business, make sure you have basic bookkeeping and accounting skills so that you understand how much money is entering and exiting your accounts. You can learn more about business finances in our Start a Business class.
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