Our blog from April 27 – Key questions to consider when planning your business –
outlined some key questions to consider while planning to open a new business. This week’s post will focus on the financial question, how will you and your business get paid?
This question includes important factors such as method of payment and related costs, and terms and conditions of payments, such as deposits and advanced payments.
There are many payment options available to business owners. Before signing up for one, it is important to consider the target market customers and determine how that specific market would want to pay?
There are various methods of accepting payment. These include:
- Generally considered the best method as there are no additional costs to accept payment.
- Very popular with consumers
- There are variable costs associated with accepting debit/credit cards depending on if the payment is made in person or over the phone/internet.
- If the card is a premium/affiliate credit card then the costs could increase depending on the service provider.
- Be sure to investigate before signing up to a merchant account.
- Very common in business to business transactions.
- Some businesses may request a “certified” cheque to ensure payment, however, the term “certified” really means that the institution “certifies” that the funds were in the account when the cheque was written.
- It does not certify that the funds are guaranteed to be available when endorsed. Be sure to understand the risks before accepting cheques.
- Credit/debit card
- Electronic funds transfer
- Money order/Bank draft
Electronic funds transfer (EFT)
- EFT are also a business to business financial instrument and are useful for international/third party managed transactions.
- They reduce risk of non-payment.
- This type of transaction does have costs associated to the third party service provider such as a financial institution or broker.
Bank drafts/money orders
- These methods are as liquid as cash and guarantee payment will be made.
Payment terms and conditions should also be addressed to avoid any misunderstanding with customers. These should be visible and available to all customers.
To discuss these and other topics for business start-ups The Halton Region Small Business Centre has resources to help. 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 resources, services, business events and seminars, contact us by dialing 311, 1-866-442-5866, online at halton.ca/smallbusiness, by email at firstname.lastname@example.org or