For any small business starting out, cash flow can be a major issue. It seems like we’re always stuck somewhere between the past-due bills and outstanding invoices. One of the best ways that a small business can ease the flow of funds from customer accounts to their own is by providing the ability to pay with a credit card.
For online merchants who sell products this is a no-brainer. But service providers should consider this option as a way to get paid faster, especially when dealing with other small businesses trying to handle their own cash flow problems.
A lot of entrepreneurs will go right to the bank to set up this service, but in my research that was usually the worst option in terms of fees and commitment. When I looked at setting up a merchant account with Washington Mutual  the processing fees were much higher, and they wanted me to sign a two year commitment, with a $250 termination fee. Add to that a monthly service fee and it was going to cost me nearly $100 to process a $1,500 charge to one of my clients. When I saw that I nearly choked. $100 for some computers to pass a few packets back and forth, and change the balances in a few accounts?!?! I don’t think so ….
Here are a few easy ways to get started accepting credit cards, without the hassle or expense of setting up a merchant account with your bank.
The payment service from ProPay is geared towards the small business that only has a few credit card transactions a month, and small ones at that. The service is very affordable to start out, but the trade off is the amount you can process per transaction, and per month. In addition, the percentage charged on transactions is pretty high, starting at 3.5% for the basic level of service. For a small business just starting out and desperate for a way to process cards, this could be a good way to go, but watch out for the higher fees as you cross your processing limits. The tiered levels of service give businesses more options, but if you need to process more than a few times a month, or for more than a couple thousand dollars, you’re probably better off elsewhere.
PayPal’s merchant services integrate nicely with their existing payment services to offer businesses a more unified place to manage these types of payments. PayPal also offers a wide variety of ways to process the card. You can send email invoices, or let customers submit payment directly through your site. I haven’t completed the process of setting up a merchant account and processing a card, but the fees associated with the service are some of the lowest around. Once Google starts charging for their service, it will be worth taking a second look.
Last year Google launched their PayPal competitor and offered customers $10 off their first purchase when they used the service. The service has been widely adopted by online merchants as an alternative payment method. In addition to the payment service, Google Checkout also allows users to create and send invoices via email. The emails contain a link to a page where customers can submit their payment. The transaction is processed, and funds appear in your associated bank account in about 48-72 hours. In an attempt to draw customers to the service, Google is offering to process cards without a fee through the end of the year. If you’re an online merchant just getting started this is definitely the way to go. With the holiday shopping season coming up, this could mean literally thousands in savings on processing fees. Once the new year rolls around, Google’s service will still be competitively priced, and it will still be free to non-profit organizations who use it to process donation transactions through the end of 2008.
I ended up going with Google and processed my first transaction for free – no charge at all! I’ll keep doing that while I can and will reevaluate the services when Google starts charging me next year. My clients are already singing the praises of the service and thanking me for letting them keep their cash on hand. Now I get paid faster than ever before, and that makes me sleep better at night.
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About: Aaron Smith is the owner of Mixotic LLC. Aaron started his own business after seeing so many of the businesses he had worked for struggling with their technology, trying to figure out what tools to use, how to use them, and how to train staff. He believes that companies that don’t explore new technology solutions give up a competitive advantage.