How to Get Paid
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:
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
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.
