There are two fundamental questions to answer when starting a new business:
- Who is your intended customer?
- How will your business accept payment?
For the purpose of this post we will explore the second question to help you understand the different types of payment that are available and the operational and financial implications payments can have on a business.
It is always a good practice to look at the existing marketplace to discover what the “industry standard” is on payment processing. Typically this can and will be discovered throughout the market research phase.
To help determine what kind of payment process will work for your business, review the following questions and try to weigh the costs and any associated benefits of each method:
- How do customers prefer to pay? According to a survey conducted by the Canadian Federation of Independent Business, retail and hospitality customers prefer to pay via credit card (35%), debit card (27%), and cash (19%). Other industry sectors prefer a cheque as payment (58%), with credit card (17%) increasing in some markets. Also consider if any other methods will increase sales.
- Will you get paid? Try to determine what payment methods can eliminate or reduce accounts receivables.
- What costs are involved? There a many products/equipment/programs and services to be able to take alternate methods of payment. These fees should be calculated and considered in monthly expenses or as a variable cost of sales.
- How onerous is this method? Will you need to train yourself or staff to new operational items when processing a sale? What are the indirect costs associated with this new process.
Considering both the clients preferred method of payment as well as any costs associated with the process will help in ensuring we are meeting the needs of our client base but also keeping a close eye on operational costs and looking for ways to streamline our operations and getting paid.
One of the goals of the Centre is to empower small and medium-sized enterprises and give you the tools to achieve success. For more information about Halton Region’s Small Business Centre resources, services, business events and seminars, contact us by dialing 311, 1-866-442-5866, online at www.haltonsmallbusiness.ca, by email at firstname.lastname@example.org or visit us at 1151 Bronte Road, Oakville. You can also follow us on Twitter.