Entrepreneurs, Small Business and Merchant Payment Processing Services

It is your responsibility as an entrepreneur, CEO of a small business, Captain of an emerging enterprise, TNNWC Member (I always throw that in) or an innovator about to launch an e-commerce or other type of start-up business to know the ins and outs of receiving, transferring and making payment, and to choose the best financial institutions and payment processors to handle your business -- you have choices. Be an informed consumer as well as a shrewd businessperson. --DC

Small business commerce is facilitated, especially in the growing world of entrepreneurial e-commerce, by payment processing. The more ways in which you, as a vendor or merchant, can accept payment from your customers, the greater the percentage of them who will likely complete sales.

Also, when you pay your vendors and suppliers, or even transfer funds between your own accounts, there are multiple ways, generally, in which you may choose to pay.

This money transfer mechanism (i.e., moving funds in any direction) does, however, come at a cost. In fact, there are several components to that cost that you should be aware of in order to minimize their effect on your profitability.

Note: What follows is neither legal, accounting, financial, investment or other "professional advice -- it is merely offered anecdotally, for your general information.

Here are some of the costs, both quantifiable and mysterious, associated with processing payments. If you know what to expect, you can make the necessary adaptations -- after all, entrepreneurship and business are both secretly exercises in problem-solving...

1. Discounts - when your customer pays you the full amount of the purchase price, your processor will charge you a fee; this fee can range from as little as 0.75% to as much as 5.0%.

2. Reserves - if you are new in business, or if you are running a business characterized as "high risk" (gaming, vice-related, and the like), your payment processor may hold back a reserve - a portion of your payment - on each transaction to accumulate a "cushion" against chargebacks and other perils associated with your business. If the percentage of this reserve is high, your payments received might be dangerously close to your costs. If a large reserve is to be accumulated, you should know that in advance, too. In this way, you'll know when your cushion is adequate for you to start receiving your full payment (less the processing discount).

3. FOREX Charges - If you issue payment (as a purchaser) in your local currency to a vendor in another country, you may well be hit by your vendor, the payment processor, and your very own bank for processing "foreign" transactions. If you accept payments (as a seller) from customers in foreign lands, you may be hit with any or all of these charges as well! If you buy from one country and sell in another (neither of which are your own), you are going to be hit on both sides -- be certain that you have a high enough profit margin built into your product or service to cover this charge, or charge (with full disclosure) a special fee for covering out-of-country orders.

4. Overdraft Fees - While it has become increasingly difficult to get lines of credit from banks, they are, in many cases, delighted to honor (rather than bounce) your checks drawn against either insufficient or uncollected funds - this is a big money maker for them. In fact, if your banker honors a direct debit request or pays against a check presented to it (drawn on your account) for, say, $4.99 US, it is likely that you will be assaulted with a fee of $35.00 US or more for having your bank "defend your honor". These charges add up. And they tend to come in multiples at "crunch" time.

5. Clearance Time - You and I both know that all electronic payments are actually (from a technological and logistical point of view) instantaneous. Yet, if you deposit a check in your bank today, the funds might not be "available" for several additional days. The banks used to call this "playing the float," and they invest those interest-free funds at a profit.

If you pay your bills via internet, it might take from 1 to 5 business days for your payment (from your own bank account, loaded with clean, cleared, hard-earned money!) to arrive at the merchant's, supplier's or service provider's account...it's like an alien abduction -- all of this "missing time." The money has definitiely left your account, but it has not arrived at its destination -- it is in the twilight zone. And if that happens to make you payment arrive a bit late, your recipient may well sock you with a penalty. This is very, very popular.

When someone pays you by PayPal, the funds go into your PayPal account...that account does not necessarily exist, but nonetheless, you'll have to transfer it from your PayPal merchant (recipient) account to your bank account; this process can take from one to five banking days, depending upon your bank's "policies."

If you want to really hurt yourself (and you should not really do this, as it is costly and masochistic), have payment sent to one of your PayPal business accounts, and then transfer it, via PayPal, to another of your own business accounts -- this whole process [rather like taking your loose change and moving it from the left pocket of your jeans to your right pocket] can take up to two weeks, from start to finish.

Saving the best and most time-honored merchant-crusher for last, some of your clients or customers will contact their credit card companies to dispute a payment made to you, and you might be charged back for the amount of that payment, plus a fee (naturally).

Two things to do, oh Captains of Emerging Enterprises:

1. Know all of the fees, reserves, "clearing time" and other policies of each institutional party in your payment process - receiving funds, transferring funds, and paying funds - so that you may be prepared;

2. Set clear payment guidelines (with full disclosure and within the confines of all applicable laws) on you website, sales page, blog, or cash register, for what you will charge for processing certain types of transactions, so that your customers and clients won't be either flummoxed or feel bamboozled. Sadly, this is a kind of "passing of the buck." But if you don't protect yourself, your profits will be whittled away by the unmitigated greed, lawlessness and whims (all fo these together hereinafter called "Policies") of the institutions who enjoy the use of our money, and who have the nerve (the nerve!) to insult to injury by charging us for their opportunism.

Learn. Adapt. Prosper. Choose the best merchant payment processing outfit that you can find! Some are saintly and others are, well, Scroogers.

Did I hear "Amen!" ?

Here's another treat. Read the ad copy carefully...

Faithfully,

Douglas Castle
http://aboutDouglasCastle.blogspot.com
http://www.TNNWC.com (join - it's still free of charge, and the best organization to be a part of. Be a Member of TNNWC and start enjoying the benefits immediately).

p.s. Next time I promise that I'll talk about getting credit and capital instead of just preventing erosion of your precious, hard-earned profits!
_______________
This article appeared in the Capital For Business Growth™ Blog.

Douglas Castle’s Blogs And RSS Feeds
For a complete list, click on the RSS icon below:

Tags, Labels, Keywords and Terms: capital, funding, credit, financing, project financing, trade financing, asset-based financing, letters of credit, credit guarantees, Exim financing, invoice discounting, leasing, factoring, purchase order financing, crowd funding, vendor and supplier credit, collateral, government programs, venture capital, business plans, business expansion, angel investors, investment banking, start-up incubators, barter, foreign exchange, Small Business Administration, tax incentives, strategic partnerships, banks and borrowing, credit unions, private placements, public offerings, social media for funding, equity, debt, leverage, cooperatives, collaboratives, minority programs, mortgages, loan-to-value ratio, debt service, licensing, selling rights, affiliate programs, TNNWC Group, Douglas Castle, liquidity, quiescent assets, intellectual property, mergers, acquisitions, micro funding, micro loans, cash advances, forms of entities, stock sales, bond sales, foreign exchange trades, commodities markets and prices, royalty-based funding, sale-leaseback transactions, international capital markets, stock loans, auctions, eBay, classified ads, cost of funds, dilution of ownership, types of equity, structured finance, mezzanine finance, private equity funds, hedge funds, accredited investors…

Powered By TNNWC Group™

For complete tactical and strategic business planning, marketing, media, lead-generation, technological and capital resources, scalable solutions and tools to support every entrepreneurial start-up, young enterprise, small- to medium-sized business and emerging high-growth company, talk to The National Networker Companies™/ TNNWC Group, LLC.

We are a collaborative entrepreneurial, creative organization offering you hands-on, personalized assistance in every aspect of achieving your monetization, profitability and financial sustainability objectives, domestically and globally.

We don’t just coach you or offer you pre-packaged, push-button solutions – we listen to you, analyze your exact needs, and work within your budget to: 1) create your tool kit and 2) work as your partner to implement your plan by supporting you in the most efficient and productive use of every tool.

Visit our website, which is located at http://www.TNNWC.com .

To receive our newsletters, publications, information bulletins and alerts, simply join us as a Member. Membership is free and the benefits are unequalled anywhere.

Just go to our home page, and click on the “JOIN US” button.

---------------