How Small Businesses Can Get Paid. Let Us Count the Ways

by Pam Baker

There are oodles of payment solutions for small businesses on the market today. Here’s the lowdown on how to choose which one is right for you.

Like most other small business owners, you have an unrelenting zeal for what you do, and the commitment to work endless hours to do it. Unfortunately, the bottom line dictates whether or not you can continue to pursue your passion. So, while you may or may not be in business "for the money," you still have to chase payments to survive. Fortunately, there are more ways than ever to collect and bank all the monies owed to you.

"Small and medium-sized businesses can accept payments in an almost infinite amount of ways," says Rob Nathan, chief technology officer at CardConnect, a payment processing company. "From traditional countertop terminals to advanced Web-based integrations, business owners have the tools available to allow their customers to easily make payments."

How to Choose a Small Business Payment Solution

Unfortunately, there are so many ways to get paid that it can be confusing as to which solution is the right one to use in your company. The best way to sort all this out is to consider which payment options appeal the most to customers, not in general, but specifically in regards to how they interact with your company.

"Payment services are popping up every day," says Bryan Colligan, architect and visionary of SeQR Pay Mobile Commerce Platform.  "Context matters when choosing a payment service, especially the 'where' and 'when' for a small business. How are your customers connecting with your product: in person, in a brick-and-mortar store, on the Web, print advertisements, or on their mobile device?"

Nail down the where and when customer transactions occur, and you’ll pretty much know which payment options to offer and what solutions you’ll need to handle them. At least you will know in general what you need; you still have some work to do to determine and select specific vendors and brands.

Small Business Payment Options

First, let’s take a look at all the payment options currently available. Jamie Sutherland, president of U.S. Operations at Xero, spells them out:

  • Cash: Self explanatory
  • Check (paper): Still the dominant form of payment for invoices in the U.S.
  • Card: Can be used as either in-person payment or as Card Not Present
  • ACH: Via a service like PayPal or provided by banks
  • Wire Transfer: Available via banks
  • Mobile: payment made via a mobile device

"Mobile payment is an often-used term that can have a broad array of meanings depending on context," explains Sutherland. "This is not necessarily a payment type, rather a vehicle for payment. In fact, you can execute all of the above payment types via 'mobile', and thus they can be considered mobile payment. It is helpful however, when thinking about mobile payments, to differentiate between mobile-initiated payments, and mobile payment acceptance."

The smart way to handle payments is to narrow the options to fit your business. If you are a B2B business, then accepting paper checks, ACH and wire transfers may be all you need. If you operate only a brick-and-mortar store, then maybe all you need to accept is cash, checks and cards at the point-of-sale.

If you sell exclusively online or you sell through a website associated with your brick-and-mortar operation, you’ll need an ecommerce solution. It is relatively rare for a small business to accept all forms of payment, and that’s a good thing because they all come with costs and risks that most companies would prefer to curtail.

Payment Options: Pros and Cons

Here are the pros and cons of each small business payment form, as provided by Sutherland.


Pros: Quick, easy, convenient
Cons:Cumbersome, not suitable for transactions between remote parties, prone to counterfeiting/theft

Check (paper)

Pros:Convenient, audit-able
Cons:Slow, inefficient, risky (non-sufficient funds)

Credit Card

Pros: Fast, easy, convenient, suitable for remote transactions, great for unknown buyer/unknown seller
Cons: Expensive for merchants, risk of charge-back (fraud)

ACH (electronic payment transfer such as direct deposit and PayPal)

Pros: Fast, convenient once enabled, great for unknown buyer/unknown seller if provided by third party taking on risk
Cons: Cumbersome to set up, expensive unless done directly through a bank, difficult to scale without an existing network like PayPal or Bill.com

Wire Transfer

Pros: Fast, secure
Cons: Very expensive

"Small business owners should think about several things when determining how to bill a customer," advises Sutherland. "Speed of payments, total dollar value of payments, frequency of payments and who is paying are just a few things to consider. Additionally, it is important to understand your customer base and to offer them payment solutions that make sense. Sadly, there is no one-size-fits-all solution."

"Lastly, you should make sure your accounting system lets you leverage the payment methodologies that work best for you and your customers," he added.

Banking and Accounting Integration Matters

Unfortunately, that’s not how most small business operators go about selecting what payment options they will accept and what payment solutions they’ll use. "Most small businesses opt for what they think is easier to do," says Laurie McCabe, analyst and partner at SMB Group.

Translated that means small businesses tend to stick with payment solutions they are most familiar with rather than payment forms that might actually be easier on them. "As people get a little more sophisticated, they’ll start looking for a solution that will integrate with their online banking and accounting solutions," says McCabe.

Unfortunately, most small businesses are either not yet savvy about new solutions or are too busy to stop and think it through. "Businesses with fewer than 20 employees are generally not quick to understand the needs for integration until they hit that certain 'holy crap' level of transactions," says McCabe. "Don’t slap something on. Figure out what will integrate with other solutions to save yourself a lot of headache."

You'll also likely find substantial costs savings too, many of which may come from surprising places such as eliminating costs associated with the way you are collecting and processing payments now. "There are many advantages in new payment solutions such as mobile, in that you may not even need a point-of-sale system anymore," says McCabe.

Look for Ready-made Payment Solutions

There are a lot of payment solutions to choose from these days. To help you get started, here are some general guidance rules:

1. If your customer transactions are done in person, then "look at using Square or PayPalAnywhere," says Colligan. But there are other choices in this category, too. Square has received the most media attention, but other mobile readers, especially those handled by your bank, are worth a look.

2. If your customer transactions happen inside your bricks-and-mortar store, "then point of sale (POS) systems like Shopkeep, Salesvu, Vend, Square Register and now even Breadcrumb, by Groupon, may make sense for you. These have a monthly fee and standard processing fees," says Colligan.

3. If some or all of your customer transactions take place on the Web via your website, then you need a good ecommerce system. Consider checking with your website hosting company for integrated systems they might provide—but don’t necessarily limit yourself to those. Shop around and find the solution that’s right for you, and look for one that integrates with your accounting and banking solutions, too.

4. If you accept mobile payments for some or all of your customer transactions, you need an ecommerce system that extends from your website to mobile as well. You may also need to add a mobile payment service to your POS element. It all depends on whether your customers purchase goods or services from you on their mobile device as they would from their desktop computer, or whether they show up in your establishment to pay you with a phone tap. Be sure you are clear about what you need, and what your customers expect, before you go looking for a "mobile" payment solution.

5. If your market responds to print advertisements, "then you probably need a call center solution," says Colligan. The prices for call center solutions vary greatly so make sure you shop around and that you understand all the fees involved.

6. If you use an accounting program and/or an accountant, then you already have a good place to start looking for payment solutions. Accounting software often offers integrated payment solutions, and professional accountants often have their own software preferences—or they can point you to solutions that other companies like yours use successfully.

In the end, the small business payment solution you want should make it easy for customers to pay and easy for you to process and account for it on the backend, too. Take the time necessary to ensure you’re getting everything possible from a solution before you buy.

Pam Baker has written for numerous leading publications including, Institutional Investor magazine, CIO.com, NetworkWorld, ComputerWorld, IT World, Linux World, Internet News, E-Commerce Times, LinuxInsider, CIO Today Magazine, NPTech News (nonprofits), MedTech Journal, I Six Sigma magazine, Computer Sweden, the NY Times, and Knight-Ridder/McClatchy newspapers.

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This article was originally published on Monday Jun 3rd 2013
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