Payment Options

 

As a small business owner, you’ll need to decide what types of payment you’ll accept from customers.

You might offer customers the choice to pay with:CashChecksDebit cardsCredit cardsMobile paymentsElectronic bank transfers

Offering more than one option could help you attract a wider variety of customers and allow your customers to make larger purchases. However, there are advantages, disadvantages and costs associated with each payment type. Pros and cons of different payment types

Where you open your business and the types of items you sell could play an important role in deciding which payments systems to offer customers.

If you expect to make a large portion of your sales online, accepting electronic payments will be a must. Similarly, if your products or services are expensive, customers might not feel comfortable carrying that much cash to your store to make a purchase — checks, cards or mobile payment could be better options.

On the other hand, if you sell inexpensive items from a physical store, your customers may prefer to pay with cash. Customers may also expect you to accept cash if you open a shop in an area where many people don’t have bank accounts or where card processing networks, the companies that send and verify information when someone makes a purchase with a card, frequently go offline.

No matter which payment type(s) you offer, there will be advantages and disadvantages to each. Here are some of the pros and cons of the main payment types:Payment TypeAdvantagesDisadvantagesCashOne of the most common and easiest forms of payment.

Many customers will expect you to accept cash.

You won’t have to pay any fees to accept cash. Customers might not want to make large purchases with cash.

Storing cash at your place of business or home, or transporting it to the bank, can be dangerous.

Ensuring your register is stocked with bills to make change can tie up money you could use for other business purposes.

Counting money at the end of each day is time-consuming. ChecksMay lead customers to make more frequent or larger purchases.

Allows customers to safely make large purchases.

You won’t have to keep as much cash in your store.

You won’t have to pay any fees to accept checks. After depositing a check, you’ll need to wait for the bank to process the check and put the money in your account.

There’s a risk that someone will try to pay with a fake check, or that a check will “bounce” if the customer doesn't have enough money and you won’t receive the payment. Debit, Credit and Prepaid CardsMay lead customers to make more frequent or larger purchases.

Allows customers to safely make large purchases.

Can be quicker and more convenient for customers at checkout than cash or checks.

You won’t have to keep as much cash in your store.

You don’t have to worry about bad checks or fake cash.

Allows foreign travelers to more easily make purchases. You’ll have to wait for the transaction to process before getting money in your account. This usually takes between one and three days.

You may have to pay transaction fees, a small percentage of the transaction. Debit cards generally have lower fees.

You will need to purchase or rent a device to accept payment (called a point-of-sale device).

You may be responsible if a customer uses a fake or stolen card to make a purchase.

If a customer disputes a charge (i.e., initiates a “chargeback”), the transaction may be reversed and you won’t receive a payment. Mobile PaymentsMay lead customers to make more frequent or larger purchases.

Allows customers to safely make large purchases.

Can be quicker and more convenient than accepting cash or checks.

You won’t have to keep as much cash in your store.

You don’t have to worry about bad checks or fake cash.

Mobile payments may be more reliable than card-based transactions in some areas.

If you sell items at markets, conferences or trade shows, you can bring your mobile payment system with you.

Allows foreign travelers to more easily make purchases. You’ll have to wait for the transaction to process before getting money in your account. This usually takes between one and three days.

You may have to pay transaction fees, which is usually a small percentage of the transaction.

You will need to purchase or rent a device to accept payment (called a point-of-sale device).

You may be responsible if a customer uses a fake or stolen payment information to make a purchase.

If a customer disputes a charge (i.e., initiates a “chargeback”), the transaction may be reversed and you won’t receive a payment. Electronic Bank TransfersAllow you to receive large payments without paying fees.

Allows customers to safely make large purchases.

Can be quicker and more convenient than accepting cash or checks.

You won’t have to keep as much cash in your store.

You don’t have to worry about bad checks or fake cash.

Could be a good option if you sell products or services to other businesses. Non-business customers might not feel comfortable transferring money directly from their bank account to your business.

You’ll have to wait for the transaction to process before getting money in your account.

You may need to set up this type of transaction with your bank and the customer’s bank, which isn’t always easy. Mobile WalletMobile Wallet payments allow customers to pay without using a physical card

Often more secure to customers than using a physical card as the data is encrypted and cannot be seen

All smartphones are now equipped with a mobile wallet

Quick, efficient checkout process can encourage customers to make more frequent purchases

Requires you to rent or own a device to process the “tap” to complete the transactionQR “Quick Response” CodesContactless payment option for customers who want a hands-off experience

Enabled in all smartphones and does not require a specific app for customers to access

Does not require a POS or payment terminal to complete transactionsRequires a strong wifi connection

May require customers to input credit or debit card information more than once since information is not automatically storedAutoPayAutoPay is very easy to set up for customers

Beneficial for subscription services or recurring payments

Ensures on-time payments that aren’t reliant on customers being reminded to submit payment

Less time spent following up with customers to remind them to submit paymentsOverdraft payments occur more often with AutoPay resulting in reverse transactions

Customers may forget about the AutoPay they’ve set up and request refunds after the factEmail InvoicingIf your business is providing services,email invoicing immediately following the service allows customers to pay and receive a receipt automatically

Allows you to streamline your reporting and manage data securely, connecting with your CRM and accounting systems

>More efficient and environmentally friendly

Quicker transactions and less follow up required to collect paymentPrimarily for service providers and less useful for retail,consumer goods or online businesses

Potential for lost emails or being flagged as "junk mail"

As a small business owner, especially if you hire employees, you’ll also want to consider the time and effort associated with each type of payment.

For example, employees might need less pelatihan to accept cash sales than credit card sales, but you’ll need a safe place to store the cash and may need to regularly make trips to the bank. Additionally, you might want to create a system to make sure employees are accurately adding up the cash and aren’t stealing from your business.

On the other hand, it might take more time to train employees to accept cards, but once they’re trained, there may be fewer math errors and it will be much easier to add up and record your sales for the day.

Also, consider other forms of payment and whether they could work for your business. Perhaps you could benefit from selling gift cards that your customers can give to their friends or family. Or, you might be able to stand out from your competitors by letting your customers pay with digital payment methods. Preparing your business to accept payments

The amount of time and effort that goes into running your business’s payment system can depend on the types of payments you’ll accept and how closely you want to monitor your business.

If you only accept cash and don’t have a lot of inventory to track, getting started could be as simple as buying a cash register and paper sales book. However, most small business owners want (or need) a more detailed process for tracking their inventory and sales. Many see the benefit of letting customers pay with cards or digital payments.