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Get Paid by Credit Card: Simpler Than You Think with Kashoo

Posted by Nikki Layton on October 26, 2016 at 12:12 PM

Let us know if this sounds like you: You’ve been running your successful small business for a while now and you’re growing. Awesome! Now, your new customers keep asking if they can pay by credit card, but do you know where to start? Accepting credit card payments, POS payment terminals, and merchant accounts, it all seems overwhelming. So you do what any normal human in your position would do: you Google it.

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Only 4.56 million results, that’s it. Unless you have a year of weekends, that’s an impossible task wrapped in an overwhelming proposition. Thankfully, you’re here. At Kashoo, we have some amazing options for getting paid by credit card. We’ve partnered with WePay, and developed some pretty seamless integrations with Stripe and Square. But the question is, which one is the best fit for your business? Ultimately, which one makes the most sense for your customers? Grab a coffee, sit back, and let us explain.

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Two Ways, Three Players

Let’s talk about two different types of credit card processing accounts you can set up for your business, and then using real-world examples, we’ll look at three different Kashoo recommended players you could use to provide those services. Finally, we’ll look at the pros and cons of each so you can make an informed and painless-ish decision.

Pay-As-You-Go

Pay-as-you-go credit card processing was first introduced in 2009 by a company called Square, but since then, more players have introduced similar solutions for small businesses. Pay-as-you-go processing allows almost any small business owner, freelancer, or weekend artisan to accept credit card payments on-the-spot or from an invoice.

Here’s an analogy to help you understand this type of account. When you started your business, you most likely thought about getting some office space or a storefront. Trouble is, it costs a ton of money, and a rigorous approval process to get your own space, in your name. So maybe, it makes more sense to sublease space in a public market or co-working space first. You really don’t need to renovate or customize your space to suit your needs. Your name isn’t on the lease, so there’s no risk to you, but you may have to pay a little bit more per square foot for the little space you have.

That’s exactly what a pay-as-you-go account is like. The signup process is usually minimal, there are typically no credit checks, and you are able to start accepting credit cards almost immediately on a “standard” account. Sounds amazing, right? It is for lots of micro businesses, but it isn’t the right fit for everyone. Sometimes, the transaction fees for each transaction can get expensive, especially if you need to do a lot of credit card processing or you have more complex needs. Let’s weigh the options.

Pros Cons
  • Easy to get started
  • Fees are deducted before you get paid
  • Flat fee pricing
  • Longer hold times for funds
  • Simple POS System (use an app on your device)
  • Potential for holdbacks, you can’t access your cash for 30-90 days
  • No monthly fee
  • Higher processing rate & per transaction fee
 
  • No customer service or account manager

Merchant Accounts

Merchant accounts are the standard way that small business owners have been able to accept credit cards since the late 1950’s when Bank of America introduced “non-store-specific” credit cards. Let’s continue our analogy.

Getting a merchant account is like “putting your name on the lease,” and getting your own space. You anticipate a ton of foot traffic, and you may need to renovate or customize the space to suit your needs. Your name is tied to the lease so there’s risk to you and your credit ratings if business slows down and you can’t make your payments. That’s why there’s a more strenuous application process. But the upside for you is that you will ultimately pay less per square foot, you have some negotiation power with the landlord, and you can accommodate your complex needs.

In the same way, getting a merchant account requires some paperwork (sometimes a lot of paperwork), and the institution that you are getting your account from will do a credit check to determine the risk associated with your account. No to mention, you’ll be on the hook for a monthly fee every month regardless of whether you use the service or not. Sounds too complicated? Here’s what you need to decide: what is your time worth? This process takes a little bit of time, but the result is that you have your own merchant account, and you’ll be saving in transactional / processing fees in the long run. So while you may not save that much on the first month, every transaction after that means more money in your pocket, and as you get busier, that margin will only grow!

Pros Cons
  • Lower processing rates and per transaction
  • More complex approval process
  • 1 monthly charge for all fees
  • Monthly fee + processing fees
  • Funds deposited within 1-2 days
  • Complex pricing structures
  • Account manager
  • Complex POS System

Now, let’s dig into some real-world examples so you can see what type of business you relate to, and which solution might be right for you. At Kashoo, we have three different ways (Payments in Kashoo with WePay, Stripe, and Square) that you can accept credit card payments, and have the information flow seamlessly into your accounting software. Not only are you getting all the benefits of accepting payments, but you are also reducing your accounting tasks and making your customers happy at the same time! When was the last time you killed THREE birds with one stone?

Example 1 - Betty’s Cafe

Betty needed a simple Point-of-Sale” (POS) System in her cafe so that, as people came up to the counter, she could quickly enter in what they wanted to eat and drink, and then take credit card payments if needed. She has a few part-time workers, and whatever system she used needed to be easy enough so they could get a handle on it, but also limited what parts of her books her part-time staff could access. The majority of her customers pay by cash (she doesn’t send them an invoice for coffee and a muffin), and she is accepting under $4,000 a month in credit card payments. Betty chose Square as her POS and credit card processor, and it makes perfect sense. All of her credit card transactions through Square, including related fees and deposits, are automatically imported into Kashoo in real-time, and posted to the appropriate income and expense accounts. So what’s the lesson? Because her total credit card volume is low, the “per transaction” rate for pay-as-you-go processing doesn’t cost her as much as the monthly fee that she would have with her own merchant account. Plus, she gets a simple POS System that works perfectly for her business and her staff.

Example 2 - Interiors by Indigo

Indigo is an interior designer who is just getting started. He still has a full-time job, but has started taking small design projects on the weekend. He needs a system that will allow him to send invoices to his clients in a way that makes him look professional, and that they can pay instantly once they receive the invoice. Due to the fact that he is just getting started, his total processing volume is still really low, and he doesn’t have clients every single month that wants to pay by credit card. Stripe is a perfect fit for Indigo. He doesn’t need a POS System, since all his invoices are sent by email. Plus, because it’s a pay-as-you-go processor, he doesn’t have a large monthly fee to shoulder. On the months he doesn’t need it, he doesn’t have to worry about the overhead, but on the months he does, it’s there and ready for him. Also, because his overall credit card volume is low (less than $4,000 a month), the higher transactional fees won’t be an issue. The part that will give him the experience that he is looking for is the seamless integration with Kashoo. He can create his invoices in Kashoo using one of our templates for a look and feel that works with his brand. Then all he has to do is create his invoice, hit “Send,” and his clients will have an invoice in their inbox that they can pay instantly from whatever device they want.

Example 3 - Fred’s Personal Fitness

Fred owns a personal training studio. His business works by selling “training packages” to each of his clients. The average price of a package is $300+ per month, and his clients want to pay him by credit card. In an average month, he has about 40-50 clients that are paying him ($300 / month x 40-50 clients = $13,500 / month), and he needs to be able to create an invoice for their customized package, and email it to them so that they can pay him at the start of each month. Because his transactional volume is higher than $4,000, it is important that he gets the lowest credit card processing rate possible. That is why taking the time to set up his own merchant account will save him money in the long run. It’s true, he’ll have a monthly fee to maintain his merchant account, but his transactional processing rate will be lower, and this will mean that at the end of each month he will probably end up saving $50 - $100 for the volume of transactions he processes. And that savings will only increase as his business grows.

Did You See Your Business in Any of Those Examples? How Does This Translate to Your Business?

We find it easiest to look at a checklist. Go through and see which option ticks the most boxes for you and your customers. Then, GET STARTED today with the option that makes the most sense. And remember, we’re always here to help. Call 1-888-520-5274 and chat with our Customer Success Team.

square_blog.jpg(Pay-As-You-Go)

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(Pay-As-You-Go)
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(Merchant Account)
  • Customers want to pay on-the-spot with a swipe of their credit card (POS System)
  • Want to email invoices and allow customers to pay online
  • Want to email invoices and allow customers to pay online
  • Accept less than $4,000/month in CC
  • Accept less than $4,000/month in CC
  • Accept more than $4,000/month in CC
  • Worried about credit rating
  • Worried about credit rating
  • Have a good credit rating
  • Need to start accepting CC within a day or two
  • Need to start accepting CC within a day or two
  • Has the time to go through an approval process to save money in the long run

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Topics: Know and Grow Your Business, Accounting Basics