5 types of payment methods for your business

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Accepting only cash and checks for purchases limits both your revenue generation and customer acquisition. The Ascent covers five more of the best payment methods to use in your small business.

For hundreds of years cash was king, but that is no longer the case. And while you may have started accepting only cash and checks in your small business, that’s not going to cut it in today’s environment.

You need to integrate multiple forms of digital payments to capture the full range of methods available today.

Still not convinced? Consider this: In 2019, consumers paid in cash for only 26% of purchases, while debit and credit cards accounted for 53% of all transactions. We’ll go over five payment options below that you need to know and use to catch this wave.

We will look at five different ways to make payment:

5 Best Payment Methods for Your Small Business

Offering different forms of payment beyond cash and checks offers multiple benefits. First, it will help you acquire customers if you let people use the payments they prefer. Additionally, most digital payment systems have added features like sales reports and related analytics to help you manage sales.

Method 1: Point of Sale (POS) System

A point of sale system allows you to accept credit card payments. This will increase revenue by giving customers another way to easily pay without having to write a check or find the nearest ATM to withdraw cash, which will drive impulse purchases.

When to use a point of sale system

A point-of-sale system will be especially useful for customer-facing sales: a menu item ordered from a food truck, a product purchased from a retail store, or an on-the-spot payment for a service call. It will also allow you to track returns, refunds, and inventory.

  • Sales and inventory management: A customer purchases an item from your store. The POS system not only processes the credit card transaction by swipe, chip, or tap, but as part of the sales process, it also updates inventory, captures customer information, and tracks which employee has performed the sale.
  • Product return : A customer returns an item. A refund is issued, inventory is automatically updated to reflect the returned product, and sales records now show the refund.

Method 2: Virtual Terminal

A virtual terminal is a web-based application that allows you to manually enter credit card information to complete a transaction without the customer or the card being physically present.

When to use a virtual terminal

Virtual terminals are good for phone orders and offsite sales. Plus, if you don’t have a physical location or are a freelancer, it will save you the cost of setting up a POS system to process sales.

  • Telephone order: A customer places a takeout order. The transaction is processed using a virtual terminal and the food is picked up without the customer or employees having any physical contact.
  • Off-site sale: A salesperson uses a virtual terminal at a trade show to close a sale without having to set up and secure on-premises point-of-sale hardware.

Method 3: Online Payment Gateway

Unlike a point-of-sale system or virtual terminal, which requires action on your part to complete a sale, an online payment gateway on your website will allow customers to initiate and complete a transaction by themselves. same. This means you can generate online sales around the clock.

When to use online payments

If you’ve only done in-person transactions, adding an e-commerce website with an online payment gateway can be a productive new sales channel. It helps you with everything from selling the products you ship to customers to taking food orders for pickup or delivery.

  • Product purchase: A customer visits your website and selects a product, paying with a debit or credit card. An order notification is sent to your e-commerce dashboard with information, including delivery instructions.
  • Food order: A customer selects menu items on your website for pickup or delivery and pays for their order. This frees employees from taking orders over the phone or manually processing payments.

Method 4: Automated Clearing House (ACH)

ACH payments take money directly from a customer’s bank account, much like you might have set up monthly billing for your utilities or a mortgage payment. Unlike other digital payments, this does not require a credit or debit card as a customer will set up the payment with their bank account and routing numbers.

When to use ACH payments

ACH payments are useful for regular purchases. One sales technique you could try is to offer a discount for ACH payments. You won’t wait for customers to manually initiate payment and you’ll enjoy a more predictable cash flow from month to month.

  • Subscription payments: A customer purchases a monthly gym membership and enters their banking information to have payments automatically taken. You will now receive monthly payments without further customer interaction.
  • Recurring purchases: A local company contracts with you to provide training services to new hires, which means the total amount billed each quarter will vary. Instead of submitting an invoice and waiting for payment, you can immediately draft the correct amount.

Method 5: Click to Pay Billing by Email

Another online payment method you should consider is click-to-pay email billing. It reduces the time and costs needed to generate and send paper invoices, and it decreases payment times.

When to use click-to-pay email billing

Ideal for B2B transactions, you can promote it by adjusting your pricing strategy to offer a discount when used instead of having to wait for a paper check in the mail.

  • B2B payments: You email an invoice for services rendered to your designated contact at a company’s business office. Upon receipt, they can immediately click to pay the bill.
  • Mobile billing: You can email an invoice from your smartphone or other digital device if you’re out of the office when it’s time to invoice a client.

The best point of sale software for your small business

Debit and credit card payments are the most important initial transactions to offer, so you need to choose the best POS system for your operations. There are dozens of POS providers to choose from, but the three options below are worth looking closely at when making your choice.

1. Square

If you’re new to selling credit cards, Square might be a good choice. Download the app for free, and all you need is the Square Magnetic Stripe Card Reader, which is compatible with iOS and Android devices.

You can make sales from virtually anywhere if you have an internet connection. As your sales grow, you can upgrade to Square Register or Square for Retail for a feature-rich POS system.

The Square portable credit card reader can be connected to a smartphone to process sales.

The Square credit card reader plugs directly into a smartphone to process transactions. Image source: author

Eligible merchants can receive a free smartphone card reader, with no subscription fees or other fees beyond Square’s individual transaction fees: 2.6% of sale plus $0.10.

2. Shopify POS

Shopify POS seamlessly combines in-person and online sales into one point-of-sale system. And it offers robust capabilities for inventory and customer management, performance analysis, and other sales and marketing features.

The Shopify POS sales dashboard includes information such as total sales, sales by channel, fees incurred, orders to fulfill, and gross and net revenue.

The Shopify POS sales dashboard keeps you on top of revenue, orders to fulfill, and sales by channel. Image source: author

Shopify POS requires a monthly subscription, and its five plans start at $9/month and go up to $299/month. Depending on the plan you choose, transaction fees will range from 2.4% to 2.9% of each sale plus an additional $0.30.

3. Lightspeed POS

Lightspeed POS offers features comparable to other systems: credit card transactions, inventory and customer management, and sales reports. And it has a version specifically tailored to the restaurant industry: menu management, raw material tracking, and floor plan management are all included.

Lightspeed POS for Restaurants has a feature to create a floor plan to visually track orders and customers.

Lightspeed POS for restaurants lets you set up a floor plan for easy order tracking. Image source: author

Lightspeed POS for Retail offers five plans, ranging from $69/month to $299/month. The restaurant edition costs $69/month for your first register and is based on a quote to add more registers.

When using Lightspeed Payments, the transaction fee is 2.6% of each sale plus, depending on the plan you choose, an additional $0.10 or $0.30.

Expand your payment options now

A Beginner’s Guide to Virtual Terminals If you only accept cash and checks for transactions, adding the above methods will generate more revenue and serve your customers better. Additional benefits such as sales analytics will improve your sales forecasting and related business intelligence efforts.

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