One of the key advantages of online commerce is the ability to accept fast, efficient and secure payments. When customers can make immediate online payments, businesses typically experience improved cash flow and reduced debtor days, while also delivering a more convenient customer experience.
- Understanding online payment options: Online payment methods include credit and debit cards, automated clearing house (ACH) services such as PayPal, and recurring payments via direct debit. These transactions are facilitated by merchant service providers, which are specialist organisations that process payments on behalf of your business. Some providers specialise in card-based transactions, while others focus on ACH or direct debit facilities. When selecting a provider, it is prudent to choose one that integrates seamlessly with your accounting software. This allows payment links or buttons to be embedded directly into invoices, streamlining the receipting process and reducing administrative effort.
- Costs and accounting considerations: Most merchant service providers do not charge upfront set-up fees; however, transaction fees will apply. These typically range between 2% and 4% per transaction for credit and debit cards, and less than $2 per transaction for direct debit payments. As these fees represent an additional operating cost, they should be factored into your profit calculations. Modern accounting software can record and allocate these costs automatically. Given that card processing fees can accumulate on higher-value invoices, many businesses elect not to offer online payment options above a certain invoice threshold.
- Business benefits: Businesses that offer online payment options generally receive payments more quickly. While not all customers will pay immediately, providing a simple online payment facility can significantly reduce average payment times. In addition, customers increasingly expect the option to pay online. Offering this capability can enhance customer satisfaction and provide a competitive advantage.
If you are considering implementing online payments, professional advice can help ensure the system is set up efficiently and aligned with your broader accounting and cash flow objectives.
