One of the most exciting landmarks in any entrepreneur’s life is the first time he or she makes a sale, whether it is a check in the mail, a credit card transaction or cash. If you are running a small business, it is important to determine the best way or ways for you to accept payments. The following information can help you compare the benefits and disadvantages of credit/debit cards, checks and cash.
Nowadays, it is becoming more and more rare for a business to not accept credit and debit cards. There are even mobile and online services that allow people with no brick-and-mortar business location to accept credit cards, such as swiping devices for tablets and smartphones.
Not only are credit cards considered by many to be the most popular method of customer payment, they can make your business seem more legitimate, especially if you do not have a physical storefront or other office. Furthermore, accepting credit cards can help you make sales.
“The convenience of using credit cards generally increases the likelihood of consumer ‘impulse purchases,’ which ultimately contributes to an increase in a business’s average sale,” according to the U.S. Small Business Administration. “Customers are more likely to make these purchases if they have access to credit or their available bank account funds.”
Recently, the rise of EMV cards, which have metal chips in them and are inserted into a card reader rather than swiped, has led to an important change in the process of accepting credit cards. While most big businesses are already outfitted with new chip card readers, smaller businesses are left wondering if they have to make the change as well. Although you are not technically required to do so, since October 2015, you can be held liable for counterfeit transactions if you do not update your point-of-sale terminals.
“This is what they call a liability shift,” said Tom DeSimone of Merchant Maverick. “Since having the EMV terminal could have theoretically prevented the fraud, the liability is now on acquirers and merchants (you).”
Because of this increased liability, it is possible that you will actually be required to use the new machines by the company that processes your payments and issues your POS machines.
Tracking and managing cash can be more difficult for some small-business owners, since the funds are not automatically tallied up online like they are with a credit or debit card. You do save time, however, in not having to combine multiple payment sources when you do your accounting if you accept only cash.
Businesses that accept only cash are becoming a thing of the past, especially since taking credit cards is easier than ever. However, there are definitely still some advantages to accepting only cash. For one thing, businesses can be charged a fee when taking credit cards, and this can add up over time to take a bite out of their profits.
Another benefit to cash is that it is the most reliable form of payment. In certain instances, credit card payments can be cancelled after the fact and checks can bounce, so having cash in your hand is the surest way to know how much you have.
“There is limited risk of fraud when accepting cash only,” according to the SBA. “There are cases of counterfeit cash payments, but compared to other payment methods, fraud is much less common in cash transactions.”
If you don’t take credit/debit cards, accepting checks can allow your business to be more flexible with customers who don’t have sufficient cash on them at the time of purchase. This can help you avoid losing sales, which is especially relevant in recent years with a large percentage of consumers who are used to paying with cards and not carrying cash on them at all times.
If your business accepts checks, it is important to create a policy to ensure that you are not subject to check fraud. Common rules that businesses impose are that checks come from a local or in-state bank. Many businesses also do not accept checks that do not have numbers or personal information printed on them, such as the ones given out as placeholders when a bank account is first opened. It is also important to examine the signature of the check with a form of ID.
If you have any questions about other forms of payment or any ways we can help with your cash flow, be sure to stop by and we’ll be happy to assist you.
To learn more about how to accept debit and credit card payments for your business, contact us at 703-584-3400, option 2.
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