Small businesses, such as plumbing and heating contracting firms, are constantly searching for ways to reduce costs, increase visibility and improve revenues. They are seeking new means to offer payment services to ensure customers have whatever resources they need to complete payment, or else risk losing a sale. Below are 10 tips every business owner should know about processing payments.
1. Consolidate payment vendors.
Each vendor relationship costs time and money. It’s usually more cost-effective and efficient to use a full-service payments provider who can process all forms of payments, such as credit cards, debit cards, automated clearing houses, check services and gift/loyalty cards by using all payment methods, including retail point-of-sale, Web, phone, payments-equipped cell phones and check scanners.
2. Maximize sales channels.
You can “close the sale” more often if you’re accessible in all the places your customers want to buy from you. Forcing your customer to pay a certain way - by calling, mailing a check or physically coming to your office - could seriously limit your opportunities.
“These days, many customers don’t carry cash or checks. Most of us use online bill pay and checks are getting obsolete,” says Kenneth Underwood, owner of Kenneth’s Plumbing in Houston.
“We accept all types of payments,” adds Douglas Langtry, master plumber for Aqua Services Plumbing & Heating in West Yarmouth, Mass. “It’s important to be paid at the time of service, especially when you’re dealing with new customers. And, while we accept cash, it’s easier to have the technicians deal with checks and credit cards, because our field personnel aren’t really in a position to make change for a customer.”
3. Embrace credit cards.
Customers buy from stores/vendors with which they feel comfortable. Asking your customer not to use a credit card could make you lose future sales.
“These days, almost everyone has some form of credit or debit card,” Langtry says. “Using credit is a normal business practice, eliminating the security concerns of cash and providing an additional level of security, since customers have proof the job was paid for through their credit card company.
“We work with many homeowners who are either off-site or out of the area. We wouldn’t be good business people if we automatically extended all absentee owners credit, hoping for a timely payment. Being able to process either an advance deposit or payment in full as a mail order/telephone order account is vital to our business. It also promises the customer the work was done or, in the case of an advance deposit, that it’ll be scheduled in a timely manner.”
4. Integrate data with accounting system.
Integrating your payments data into your accounting system can not only eliminate the inaccuracy of manual data entry, but also reduce your days-sales-outstanding, and enhance your audit and compliance positions.
Up until about two years ago, Carroll Plumbing & Heating in Richmond, Va., processed credit-card transactions via a credit-card terminal, and then manually entered the information in its accounting/enterprise resource planning system. The company recently implemented an integrated system, where transaction data automatically flows into their accounting/ERP software.
“Processing a credit-card transaction used to take 45 minutes,” says Courtney Gregory, Carroll’s treasurer. “Using the integrated payments system, we’ve cut the time down to under 20 minutes. Now, once we collect a credit-card number, it’s securely stored. When a customer wants to use that number again, we don’t need to re-verify it, and we know immediately if we’ve entered an incorrect card number. There’s less paper trail, so we don’t make as many manual errors; we can easily run a report to tell us what credit cards are about to expire; and we have gained certainty about the cost of transactions, which helps us budget more efficiently.”
5. Have a mobile payments strategy.
Leveraging your cell phone as a part-time credit-card terminal is cost-effective and convenient. Dedicated mobile credit-card terminals can cost upwards of $400 and require a monthly cellular plan. Converting cell phones into instant credit- and debit-card acceptance devices that flow directly into your business’s bank account can enable instant distribution across your company, with no extra hardware or systems costs. Plus, it allows everyone in your company to take an order.
“Having a mobile payments solution allows us to accept credit cards in the most cost-effective way for our business,” Underwood says.
“Using a mobile payments product allows us to increase our cash flow,” adds Jerry Butler, president of America’s Plumbing Co. (dba 1-800Plumbing) in Bloomington, Ill. “Plus, being able to swipe credit cards at the jobsite makes it convenient for the customer and saves me a trip to the bank. Processing is secure and transaction receipts are emailed directly to the customer.”
6. Have a check payment strategy.
For small- and mid-sized businesses, checks are the largest form of payment, the largest cost-efficiency opportunity and, possibly, the largest payments risk exposure. Converting paper checks electronically to ACH, checks-by-phone, Web, Check 21 and check guarantee can help increase cash flow, create back-office efficiencies and mitigate losses.
Because the results have been so positive with Carroll Plumbing’s integrated credit-card payments system, Gregory plans to enable integrated payments for other forms of payment with its accounting/ERP system. “I’m particularly interested in solutions that will enable me to scan, digitize and post paper-check payments to our ERP software, freeing up more time to spend on customer service,” she explains.
7. Choose a payments provider.
Product complexities and ongoing investment in infrastructure and security have caused payment systems to move from being bank-owned to business software company-owned and -operated. Select a technically savvy and financially stable payments provider that can meet your business’s unique needs in a safe and secure environment.
A relatively small company without internal IT staff, Carroll Plumbing turned to Sklar Technology Partners, the service provider for its ERP software and other technology solutions, for help. Gregory says Sklar told her how an integrated payments system would automatically create accounts receivable receipts for paid invoices within its ERP software. The solution would also take care of credit-card pre-authorization, guaranteeing the customer’s credit status for the order amount, and capturing the pre-authorized amount when a credit-card order is invoiced.
8. Get PCI certified.
Payment card industry certification is a requirement of all businesses interacting with credit or debit cards. It ensures that you’re up-to-date on the latest best practices to protect your business and customers from payment fraud. And, just as you use virus software on your PC, you should use payment security software that scans your PC and alerts you to potential security leaks.
“PCI compliance should be taken seriously,” Butler says. “While I have some concerns about it, I have extreme faith that our payment processor is helping to keep us and our customers’ data safe.”
9. Use encryption technology.
End-to-end encryption (E2EE) starts with your payment capture devices and goes all the way to the transaction being authorized. E2EE prevents the card account data from being stolen electronically and lessens the cost and impact for your business to become PCI-certified.
“The integration between our accounting software and the PCI-certified payment processing service allows us to say we’re PCI compliant, and shows we take our customers’ security very seriously,” Langtry explains.
10. Understand cost vs. product and service.
Using the lowest-cost provider could come at the expense of limited product functionality, potential security holes and lower levels of customer service, resulting in lost business. In today’s competitive environment, take the time to study the best practices of your competitors and understand how your payment system touches both your customers and back-office operations.
“The biggest attraction to the payments processor we chose was the integration with our accounting system,” Langtry says.