Small Business Payments Made Easy: Your Complete Guide
Money makes the world go round, so getting paid and paying for things is essential to running a small business. In fact, according to the Reserve Bank of Australia, in 2022, Australians made over 4 billion non-cash payments, with card payments accounting for 75% of those transactions. With so many payment options available, figuring out where to start can take time. In this comprehensive guide, we'll cover everything you need to know about small business payments, from payment processing times to different payment providers and their features.
How Payments Are Processed
Accepting customer payments involves a payment processing system that facilitates the transfer of funds from the customer's credit or debit card to the business's bank account. Payment processing typically involves the following steps:
- Authorisation: When a customer makes a payment, the system checks whether the customer has sufficient funds to complete the transaction.
- Authentication: The payment system verifies the customer's identity to prevent fraudulent transactions.
- Capture: Once the payment is authorised, the system captures the funds from the customer's account.
- Settlement: The payment processor settles the transaction by transferring the funds to the business's account.
- Disbursement: The funds are deposited into the business's bank account.
Small businesses can accept payments using various methods, including POS systems, mobile payments, and e-commerce platforms. POS systems allow businesses to accept payments in-store, while mobile payments enable businesses to accept payments using smartphones or tablets. E-commerce platforms allow businesses to accept payments online.
The payment processing system is essential to any small business's operations. Choosing the right payment provider is crucial to ensure a smooth payment experience for the company and its customers.
What to Look for in Payment Terminals
Payment terminals or card machines are essential for businesses that accept in-store card payments. When choosing a payment terminal, it's important to consider the following features:
- Terminal Options: There are various types of payment terminals, including countertop, portable, and mobile terminals. Businesses should consider which type of terminal best suits their business needs.
- Enhanced Security: Payment terminals should have security features such as encryption and tokenisation to protect customer data.
- Payment Methods: Payment terminals should be able to accept various payment methods, including debit and credit cards, as well as contactless payments, such as Google Pay and Apple Pay.
- Transparent Pricing: Pricing is always an important topic; with payments, the fees can quickly add up. Look for payment providers with low ongoing transaction fees and affordable terminal options.
- Compatibility: Payment terminals should be compatible with the business's POS system, allowing easy integration and reporting.
When choosing a payment terminal, businesses should also consider the cost of the terminal, the fees charged by the payment provider, and the level of customer support provided by the provider. By considering these factors, small businesses can choose a payment terminal that meets their needs and provides their customers with a secure and seamless payment experience.
What to Look for in Online Payments
Online payments have become increasingly important for small businesses in recent years, particularly with the rise of e-commerce. When choosing an online payment provider, look for robust security features, including SSL encryption and fraud protection, to protect the business and its customers from cyber threats.
Online payment providers should be able to accept various payment methods, including credit and debit cards, PayPal, bank transfers, and direct debit. It's also vital that you can easily integrate the payment option with your website and app.
Some popular online payment providers for small businesses include Square, Stripe, and PayPal. By choosing an online payment provider with the right features, small businesses can provide their customers with a secure and convenient payment experience, increasing sales and customer satisfaction.
Review of Different Payment Providers
Many payment providers are available for small businesses, each with features and pricing structures. Here is a review of some popular payment providers:
Square offers a variety of payment solutions, including card readers, online payments, and invoicing. They charge a transaction fee of 1.75% per transaction for card payments, with no monthly fees or setup costs.
Stripe offers online payment solutions, including credit card processing and subscriptions. They charge a transaction fee of 1.75% + 30 cents per transaction, with no monthly fees or setup costs.
PayPal is a well-known payment provider offering various payment solutions, including online payments and invoicing. They charge a transaction fee of 2.6% + 30 cents per transaction fee for card payments, with no monthly fees or setup costs.
Small businesses should consider the provider's fees, features, and customer support when choosing a payment provider. It's also important to ensure that the provider offers a secure and reliable payment platform to protect the business and its customers. Small businesses can streamline their payment process and provide a seamless payment experience for their customers by choosing a payment provider that fits their needs and budget.
Payment Processing Times
Payment processing times can vary depending on the payment method and payment provider. For example, card payments typically take 1-3 business days to settle, while bank transfers can take up to 5 business days. Mobile and online payments usually settle faster, often within 1-2 business days.
Small businesses need to consider payment processing times when choosing a payment provider. Longer processing times can impact cash flow and delay fulfilling customer orders or services. Businesses should also consider any hold periods that the payment provider may have, which can delay the availability of funds in the business's account.
Some payment providers offer faster payment processing times for an additional fee. Businesses should weigh the benefits of faster processing times against the cost of the service.
Cost of Taking Payments
The cost of taking payments can vary depending on the payment method and payment provider. When choosing a payment provider, small businesses should consider the following fees:
- Transaction Fees: Transaction fees are charged for each transaction and are typically a percentage of the transaction amount. Different payment providers may have additional transaction fees, so comparing prices is important when choosing a provider.
- Monthly Fees: Some payment providers may charge a monthly fee for their services, regardless of the number of transactions processed. Fixed costs are usually balanced against transaction fees. So, the more your monthly fixed fee is, the cheaper your per transaction fee is.
- Chargeback Fees: Chargeback fees are charged when a customer disputes a transaction, and the payment provider must refund the customer. Besides the refund, there is usually a $30 processing fee. A customer has 90 to 120 days to make a chargeback claim from the transaction date.
- Setup Fees: Some payment providers may charge a setup fee to activate an account or to purchase the initial hardware, such as a hand-held terminal.
- International Fees: International fees will apply if the business accepts customer payments in different countries.
It's essential for small businesses to carefully consider the costs associated with taking payments and choose a payment provider that offers competitive fees and fits within their budget. Businesses should also consider any additional services or features the payment provider provides and whether they justify additional costs.
By choosing a payment provider with transparent and competitive fees, small businesses can ensure that they are not overpaying for payment processing and can allocate resources towards growing their business.
Bank payments are a popular payment method for businesses and customers alike. Bank payments involve the transfer of funds directly from the customer's bank account to the business's account. This payment method is often used for larger transactions, such as business-to-business payments, as it typically has no transaction fees.
Bank payments can be made through various channels, including online banking, mobile banking apps, and phone banking. Customers need to enter the business's bank details and the amount they wish to transfer. The transfer can take up to 2 business days to settle, but most Australian banks now offer real-time payments depending on the amount paid.
To accept bank payments, businesses must provide their bank account details to their customers. It's important to ensure that these details are accurate and up-to-date to avoid payment delays or errors. Businesses can also consider using payment providers that offer bank payment solutions to simplify the payment process and reduce administrative burden.
Bank payments are becoming extremely popular now that real-time payments are supported in Australia. Look for new bank payments to hit your radar over the coming 12-24 months. With bank payments being free or near nothing, they could be an excellent option for your small business.
Direct Debit vs. Payto
Direct debit and Payto are both popular payment methods for small businesses. Direct debit involves setting up a recurring payment schedule with a customer. At the same time, Payto is a new and more modern version of direct debit with more control for businesses and consumers.
Direct debit can be a convenient payment option for businesses with regular customers or subscription services, as it ensures timely payment and reduces the need for manual payment processing. However, direct debit can also involve additional administrative work to set up and manage the recurring payment schedule.
Payto, on the other hand, allows businesses to accept payments from customers with just a link or QR code, making it a convenient payment option for one-time or infrequent payments. Payto can also reduce the risk of payment fraud, as customers do not need to enter their payment information directly on the business's website.
When deciding between direct debit and Payto, small businesses should consider their payment needs and customer preferences. Offering both payment options can also provide flexibility for customers and improve the business's cash flow management.
It's important to note that direct debit and Payto involve transaction fees, which can vary depending on the provider. Small businesses should compare the costs and features of different payment providers to choose the best option.
Both direct debit and Payto can be effective payment methods for small businesses, depending on their needs and customer preferences. By offering multiple payment options and choosing a reliable payment provider, small businesses can provide a seamless payment experience for their customers and improve their cash flow management.
As a small business owner, having questions about payments and payment processing is natural. Here are some frequently asked questions to help you navigate the payment landscape:
What payment methods should I accept?
This will depend on your business and your customers. Generally, accepting major credit cards, debit cards, and mobile payments like Google Pay and Apple Pay is a good starting point.
How long does it take for payments to process?
Payment processing times can vary depending on the payment method and provider. Generally, card payments take 1-3 business days to process, while bank transfers can take around 1-2 days.
How do I choose a payment provider?
Consider transaction fees, features, customer support, and security when choosing a payment provider. Look for providers that offer transparent pricing and reliable payment processing.
What can I do to prevent payment fraud?
Ensure your payment provider has strong security measures, like PCI compliance and fraud detection tools. Additionally, educate yourself and your staff on common payment fraud tactics and take steps to protect your customers' payment information.
Can I accept payments internationally?
Yes, but be aware of any additional fees or regulations that may apply. Look for payment providers that offer international payment processing and transparent pricing.
By understanding the payment landscape and choosing a reliable payment provider, small businesses can streamline their payment process and provide a seamless payment experience for their customers. Be bold and ask questions and seek out resources to help you navigate the world of payments.
Thriday is an all-in-one financial management platform designed specifically for small businesses. With Thriday, businesses can accept payments through multiple channels, including card machines, online, and mobile payments. All you need to do is join Thriday for free and then nominate your bank account* for disbursements from your selected payment provider.
In addition to payments, Thriday offers a range of features to help businesses manage their payments and improve their cash flow. This includes real-time reporting and analytics, tax tracking, and BAS lodgment. Thriday is a reliable and affordable solution for small businesses who want to automate banking, accounting and tax.
Payments are a crucial aspect of small business operations, and choosing the right payment processing solution can make all the difference. By understanding how payments are processed, what features to look for in payment terminals and online payments, and the costs and processing times associated with different payment methods, small business owners can make informed decisions about their payment processing. Ultimately, by choosing the right payment processing solution, small businesses can provide a seamless payment experience for their customers and focus on growing their business.