When it comes to setting up your business, there's a pretty long checklist of digital "things: you need to take care of: finding the right content management system, web design (whether in-house or contracted out), marketing...not to mention deciding on and fine-tuning a unique product or service that your customers will love.
One important area that can get overlooked is finding the right combination of small business payment solutions for your business. There's a plethora of payment processing methods out there that cater to businesses both small and large, and it's worth your time to do some careful research and figure out which ones best suit your company's needs (and budget).
As we explored in a recent post on effective invoicing, getting paid on time and in full by customers is absolutely crucial if you want to maintain healthy cash flow, stay in business and grow. One way to ensure this happens for your online business is to implement the right online payment solutions. We've collected a few examples and laid out their respective pros and cons to help you make that decision!
In terms of popularity, PayPal is among the most-recognized online payment options, and is used by entrepreneurs worldwide to receive (and send) payments. Pros: You can accept credit card payments whether or not your customers have a PayPal account themselves, and it's free to set up a base account. (There is a per-transaction fee of 2.9% - which may be lowered based on your monthly transaction volume plus $0.30 per transaction.) Cons: One of the drawbacks to using PayPal is that your funds can be frozen with no advance warning. You're also not protected as a seller if you provide intangible goods—such as, say, consulting services—which are not physically shipped to customers.
Credit & Debit Cards
Accepting credit or debit cards as methods of payment is a natural choice for any small business doing ecommerce. The challenge is figuring out the credit card payment processing system—and minimizing your spend on it. Pros: Anyone buying anything online likely has a credit or debit card, thus you're open for business. Cons: Credit card processing fees are wide-ranging and dependent upon your personal and business creditworthiness. (Learn more about building business credit!) It bears repeating: if you want to take debit and credit payment, you're going to pay fees. You also need to be aware of data security and privacy issues should a breach happen. It likely won't technically be your fault, but try explaining to a customer that it was the "merchant account provider" who dropped the ball.
While it's used primarily for in-person payments made via a credit card swiper for iPhone, iPad, and Android devices, Square is a payments option a small business owner should consider. Pros: Square features an easy-to-use and customizable interface (including custom rewards programs for customers), plus the ability to receive payments the next day. And if your business has a mobile app, you can automatically integrate their mobile payment system into the app. Cons: The 2.75% per transaction fee (which increases to 3.5% plus 15 cents per transaction when a transaction needs to be manually keyed in) can be a bit much for bootstrapping small business owners.
Another method of online payment processing used in the United States is ACH (Automated Clearing House), which is mainly used for Business to Business (B2B) payments. This network for financial transactions processes large-volume batches of debits and credits. (Read up on the differences between debits and credits in accounting.) Pros: The per-transaction cost is generally lower than those charged for other payment solutions, and like the other solutions featured in this post, ACH is quicker and more seamless than more traditional payment methods (like checks). Cons: If the customer's account is closed or has insufficient funds, you will not be able to collect your payment.
More Small Business Payment Solutions
There are no shortage of online payment solutions out there, so it's definitely worth your time to do some research into their fee structures and features. Some others to check out are: LevelUp, Amazon Payments, and Google Checkout.
While researching to find the payment solution that fits your business' needs, remember to ask yourself how this solution would fit with your existing or planned ecommerce environment, whether or not it needs to integrate with your bank and your accounting software, and last but not least, whether or not your customers will actually be willing to use it to pay for your products or services.