How to Get Paid: August 5th, 2022
Hello All,
One of the most important questions for new and existing businesses is determining how they are going to get paid. Years ago, your options were basically cash, cheques or wire transfers (and perhaps the odd letter of credit for those in the import/export business). This, while being simple, limited your sales to customers as cheques require trust (will it clear the bank? Will the seller actually deliver the product after cashing the cheque?). Also, it is more administratively burdensome as you have to go the bank to deposit them and then wait for them to clear.
Nowadays, receiving payments has become infinitely simpler. You can sign up with a variety of payment facilitators, and start accepting credit card payments often almost immediately (assuming a decent credit score). In addition to credit cards, you can accept:
e-transfers from other Canadian customers.
Debit card payments
Direct debits with pre authorized debits (PAD) agreements
Wire transfers
Etc (see blog post)
Setting up to receive payments depends on the type of payment. There are credit card processors such as Stripe, Paypal, QuickBooks Online , each of which requires a separate application. You can sign up directly with ecommerce providers such as Shopify (which can be a one stop shop) or use an add on such Woo Commerce for your Wordpress or other website. Squarespace lets you integrate your Stripe and Paypal accounts. If you are a service provider, you can set up pre authorized debits (PAD) with several different processors (such as Plooto, Stripe, Rotessa to name a few). Or you can simply have your customer wire transfer you the funds by giving them your account details, which they can then do easily on an ongoing basis.
With so many options it can be difficult to know which types of payments you want to accept. Every business has different considerations that need to be evaluated:
Cost . Credit card payments tend to be most expensive and often cost about 3% of the total amount of the charge to the customer. This can add up and result in a significant reduction in profit. Cheaper options are cash or cheques, but far less convenient. Debit card fees are quite cheap, but you usually need to meet the customer face to face. E-Transfers are great but not practical if you have more than a few retail customers or if you have a website.
Timeliness: Receiving payments quickly is important for many businesses. While credit card payments are processed immediately, it can take up to a few days to be deposited into your bank account. Cheques can also take long to clear. Cash, debit and e- transfers are pretty much immediate.
Convenience: Many customers want the most convenient option to pay for their goods and services. For retail and ecommerce stores, this is often by credit card. Service providers, consultants and contractors can accept payment by e-transfer or wire transfer or Pre Authorized debit (PAD) where the customer’s bank account is automatically debited on a monthly (or periodic) basis. The key is to make it as simple as possible for the customer.
Limits: some payment types such as e-transfers or credit cards can have limits on how much can be charged. If you sell high value items or services, this is something to take into consideration.
Foreign customers: if you sell to customers outside of Canada, you want to make sure that you have a payment solution that can handle foreign transactions. Most credit card payment providers, such as Stripe, Paypal, Square etc. will process these, but it is good to verify. Also, the cost of converting foreign currency to Canadian dollars can be significant so you would want to familiarize yourself with the costs.
Ensuring that you are aware of the pros and cons of each payment method while giving your customers as much flexibility as possible can make the act of receiving payments i.e. money into your bank account much more pleasurable.
There are various types of ways in which businesses can accept payments. I discuss 10 in my blog post:
MON, SEP 28
10 Payment Alternatives to Help Small Businesses Get Paid Faster
One of the numerous ways in which technology has benefitted small businesses has been to increase the number of payment options available. While conventional methods of payment like cash and cheque
Small Business Articles/Tips
This article from CPA Canada discusses various fintech tools that can help make your accounting/bookkeeping easier. Many apps integrate with your accounting software, therefore reducing the amount of data entry.
One of the risks of offering credit cards are chargebacks, which can be initiated by customers and reverse a credit card charge from a business. This article discusses chargebacks in greater detail.
Tax Tips:
A reminder that any fees paid to a payment processor are deductible. These include monthly fees for terminals, per transaction fees, admin charges, minimum monthly fees etc. It can also be useful to review your fees statements and separate out the GST/HST/QST which can be fully claimed back if you are registered for sales tax.
This article from QuickBooks Canada provides a breakdown of the different types of credit card processing fees that you will see on your statement.
QuickBooks Tip: Credit Card Processing
QuickBooks Online offers a way to sign up directly through their portal to receive credit card payments (go to the “gear” icon, accounts and settings and you should see a “payments” tab on the right hand side). This is a useful feature as you can email invoices to customers which can then be paid simply by clicking a link. Once processed, the charge is automatically posted to the bank account that you designate.
Books and Resources
Small Business Tax Facts(Sole Proprietorships/Registered Businesses/Self Employed Workers)
This book helps you have a better understanding of tax (brackets, tax rates, deductions etc), how it applies to your unincorporated small businesses and how to do your own tax return (or at least understand what your accountant does). It also includes a comprehensive breakdown of deductible expenses, by category with special sections on more complex deductions such as home office, vehicle and capital cost allowance.
FastStart Your Corporation(Corporations)
A step by step guide to starting your small business corporation, including what you need to know about incorporation, setting up your accounting and tax considerations.
QuickStart your QuickBooks(Sole Proprietorships and Corporations)
A comprehensive guide that takes you through the many features of QBO and gives you step by step instructions on how to setup and work with QBO day to day. It is ideal for beginners who have never used QBO before and also for those who are currently using it, but have questions or need guidance.
FastStart Your Business (Sole Proprietorships)
A step by step guide for anyone who is planning to start a Canadian business or become self employed (and does not want to incorporate) and wants to know what they need to do or simply has questions.
Small Business and Your Dividends (Corporations)
For incorporated small business owners who want to know more about small business dividends, the differences between salary vs dividends and which is better and step by step instructions on how to file your own dividend declarations (T5s).
Use discount code “special” to save 20% on any (or all) book(s) when you purchase from the website.
Please note that all books on my website are in PDF format.
If you prefer a print version, all books are also available at Amazon . Note that print versions purchased on Amazon include a complimentary PDF - you just need to email me and include proof of purchase.
Free Resources
Business 2022 Tax Deadline Calendar
Starting A Corporation Checklist
Start Your Business Checklist
Dividend Declarations Checklist
Small Business Tax Return Checklist
QBO Set Up Checklist.
Small Business Calculators
Previous newsletters.
Consultations
I also provide consultation services where I can answer your specific questions relating to your small business and/or finances, provide clarity and give you guidance. Additional details can be found here and here.
Note that I no longer provide ongoing accounting or tax preparation services.
Reviews/Feedback
I would love to hear your comments on my current blog posts, topic ideas for new blogs, book feedback or anything else that you want to talk to me about. You can use my feedback form or email me directly at ronika@montrealfinancial.ca.
For anyone who has purchased my books through Amazon or directly and found them useful, I would be very grateful for a review on Amazon (to leave a review you only need to have an account with Amazon even if you did not purchase the book from there).
Finally, if you think anyone would benefit from this newsletter, you can send them to my subscribe link.
Hard to believe that it is already August! Enjoy it while it lasts :)
Ronika
