Types of Business Payments
If you are in business, you need to get paid. That is the simple part. The more complicated part is how you get paid.
Cash, everyone loves cash. It is the international form of payment. It may be called different names in different countries, but it is still cash. You can touch it, feel it, fold it, clang it. And it is accepted just about any place for any thing. If your business accepts cash as an acceptable form of payment, the most important aspect to this collection method is storage and security. No matter how well intended people are, cash can push them to their limits. They owe more debt or back taxes than they want to admit. Or they would really like a technology upgrade at home.
Cash unprotected is a danger to a business. It requires a strict code of storage. Use a drop box bag from your bank to place it in, once counted, go directly to the Bank. Most businesses will make at least one daily visit to their bank. Use the ATM, the Drive-Thru Lane or the Night Drop. Often the Night Drop Bag is free and it may require you to apply for a key from the bank to use it. Most owners handle this themselves in small businesses or assign this task to the most trustworthy of employees. Balance your deposit slip amount to the amount in your intake software. Unless money is taken out for a worthy business purpose, both need to match.
If your business is larger and/or takes in a lot of cash daily, there is an alternative offered at most banks. You can contract with a cash pick up service, such as Brinks, or have them install a Cash Vault or Safe in your place of business. Cash Vaults count the money as you deposit it and that money becomes the property of your vault service. Your bank account is usually credited that cash same day or next day. The service company will need to make daily or weekly visits to pick up the cash, depending on your contract. This is a more expensive method of depositing your cash but clearly is convenient and usually one of the safest. But, again, you likely need to be bringing in thousands of dollars daily in smaller denominations to make this cost feasible.
The easiest method of payment is more likely accepting credit cards. There is no physical money passed and you do not need to worry about making deposits at the bank or cash disappearing. But, it comes with a cost. The Merchant Credit Card Providers always charge a fee. Most are transaction based but can be volume based if you run a much bigger organization. Those fees can range anywhere up to 5% or so. For a small business, that may be a high ask. Particularly for sole proprietors it can mean the difference between a gain and a loss. Most retail businesses, however sized, need to accept credit cards from purely a competitive standpoint. There are independent processors and bank processors so do your research, ask for multiple quotes, and read the details. Most processors will deposit your daily intake within 24 - 48 hours directly into your bank account.
The check is in the mail. A saying we hear often. Checks offer a lesser opportunity for disappearing on you but may take 3 - 5 days to clear at your bank. Local checks on a local bank clear faster, those from across the country take longer and community banks may be quicker or longer to clear. It really depends on your bank’s clearing risk policy. So, make sure to ask your banker about clearing times. And, if you prefer checks, remind your clients often to make the checks payable to your business NOT you as an individual. There is a reason you have an LLC or a corporation. Make sure your policy is clear on this.
Depositing checks is similar to depositing cash. Use an ATM, a Drive-Thru, a Night Drop, or you can likely sign up for the scanning service at your bank. Similar to how many individuals can scan a check on their smart phone to their bank, your business may be able to use phone scanning or a business specific scanner. The latter may require a fee and will need to be set up at your place of business with the proper technology requirements. Again, ask your banker, some banks will offer the scanner free to very small businesses but there usually is a monthly fee just like using a credit card processing method. But not having to frequent a bank for check deposits has its benefits - no potential for your employee making the deposit to embezzle or get into any type of accident and usually availability and clearing times are quicker. Certainly, the scanner option is worth a discussion.
And, last but not least, are EFTs as they are called in the industry. Electronic Funds Transfer is an expeditious manner to transfer funds. Cash is never in hand. Wires, ACH (Automatic Clearing House), PayPal, Zelle are the most commonly known types of EFTs. Zelle may not work with business accounts and not every bank participates. Wires, ACH, and PayPal all have fees. The fees may be to both the sender and the receiver or just the sender. Again, do your research, know the specifics of each method. Your banker should be able to review these options with you and discuss the fact that wires are essentially immediate and very difficult, if not impossible, to retract. ACH is easier to retract and is not immediate, usually 24 - 72 hours. There are benefits and costs to most of these options. The more you know, the better off for your business.
When it comes to being paid for your product and services, what matters most is that you are paid. However, you have many choices on how to be paid. Do the research with your banker and choose the method or methods that are most effective for your organization.
Like the Pied Barbet in our photo, you work hard for your money and need to be rewarded for making informed choices.
Be well.
