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Get Paid: Payment Options for Small Business Merchants

The past 20 years or so have ushered in a revolution for small business payment options. Even just a couple decades ago, when credit-card payments had become common for most large merchants, many small businesses were cash-only operations because of onerous credit-card processing fees and the high cost of implementing credit systems.

Fast-forward to today, and the options available to small businesses have exploded. Even tiny mom-‘n’-pop shops are able to accept payment for goods and services in ways that make them just as accessible to consumers as the Walmarts and Amazons of the world.

But each choice in this wealth of payment options has its ups and downs. Here’s a look at some of the most important methods of accepting payment, and the pros and cons of each:


Pros: It’s free. If you want to accept cash, you don’t have to pay any processing fees, buy expensive systems or negotiate contracts with a processor. As long as you can count change, you can accept greenbacks. You also have access to your funds immediately – credit transactions can take one to two days to process, and as a small business, even that difference may matter at some point in your early stages.

Cons: It’s increasingly less popular among consumers. The TSYS 2017 U.S. Consumer Payment Study said that only 12 percent of Americans preferred cash to other payment options.Meanwhile, the U.S. Federal Reserve’s Survey of Consumer Payment Choice found that cash usage dropped from 40 percent of transactions in 2012 to 32 percent by 2015. Also, cash has problems on the back end. Accounting can become much more complicated simply because cash can get lost, and there’s far less of a paper trail than with credit cards. Also, carrying large amounts of cash on hand puts you at risk for theft.

Credit/Debit Cards

Pros: Plastic is the dominant payment method du jour. That same TSYS study said 44 percent of consumers prefer to use debit cards, and another 33 percent opt for credit cards. Add that together, and that means three out of every four people that come to your small business hope you have some sort of card reader. Credit-card transactions also leave behind a very clear paper trail in case a transaction is disputed or if you run into accounting problems. Cards also have a few other benefits, such as the fact that credit-card use actually encourages impulse buys, and accepting them should put you on an even playing ground with your rival businesses.

Cons: The biggest downside to accepting credit cards is that there are numerous expenses involved. The average processing cost for Visa, Mastercard and Discover swipes is around 1.95 to 2 percent, for instance – difficult margins to accept if you’re a small business with little financial flexibility. Whoever provides the technology to allow you to accept credit cards will charge fees, too. There are other small fees and assessments, too, that add up to hefty costs. Other issues include instances of actually being liable for credit card fraud, as well as sudden chargebacks from dissatisfied customers that challenge their transaction.

Digital Payments

Pros: Digital payments come in a number of forms, but typically refer to either accepting payments online, or allowing people to use “digital wallets” in store. The upside is that both types of payment are increasingly popular among consumers, especially younger, more connected ones. Total transaction value of digital payments in the U.S. is expected to hit $884 billion this year, then grow an average of 9.1% annually through 2022, when it’s expected to hit $1.25 trillion. And naturally, accepting payments online allows you to collect from customers anywhere – not just a physical storefront – which greatly expands your potential customer base.

Cons: Similar to accepting credit cards, programming your website for e-commerce or accepting digital payments in person involves a range of setup costs, as well as service and usage fees, which vary widely depending on the provider. Moreover, thanks to a growing list of digital payment providers, the market, while growing, is very fragmented. Only 13 percent of adult smartphone users have even tried Apple Pay, according to a Pymnts.com study, while only 7 percent had tried Google Pay.

What Payments Options Are Best for You?

The payments world was already tricky to navigate, but the wide-open world of digital payments are creating real headaches for small business owners trying to decide what to accept. Just look at this abbreviated list of payment options out there: Apple Pay, Google Pay, Samsung Pay, Square, PayPal, Venmo, Square Cash, Zelle, even Facebook Messenger.

If that sounds confusing, it’s because it is. Business payments is in perhaps more flux than it ever has, which means small businesses have a lot of difficult decisions to make going forward. McManamon & Co. can help. We’re a full-service accounting, tax, fraud, forensic and consulting firm that provides services to small and mid-size businesses – and that includes helping you make decisions about how you you’ll get paid.

Let us help you with your money matters. Call us at 440.892.9088 or contact us online.

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