In our businesses we often fail to identify the costs associated with performing necessary functions. Most of the time, the amounts are fairly small and would not be worth the effort to change. But even if we do not change, we need to know the costs. The old saying is true,“Whatever is measured, can be improved.”
Processing payments certainly fits in this area. And this article exposes the costs that are associated with processing various forms of payment. It is best to look at these and then make an informed decision on how to proceed.
Credit Cards – Every time you accept that credit card for payment, it will cost you. Typically c/c companies charge between 2-3% for Card Not Present transactions, plus they will tack on another transaction fee. This can add up to quite amount of money paid for the luxury of receiving the payments in 2-3 days.
On very small balances that may not seem like much, but when the payment is 5-10K or more and the charge is over $20, it becomes cost prohibitive to you as the vendor to be able to give any kind of loyalty or incentive to your prospect. So, the costs are even greater than the 2-3%, but you are also facing lost opportunities because your hands are tied in incenting your prospects when you have a high back end cost eating away at your profitability.
Billing and Processing A/R – When you go to the standard net 30 invoicing model, you are faced with all the employee time to invoice, call, wait, process, and enter the payments. Of course, there are other costs associated with this form of payment also. Envelopes cost, paper costs, toner, time, postage, phone charges, all make for higher costs than what is necessary to simply receive what is due you.
Added cost of slow paying accounts. Many accounts need more attention and greater work. Everything you do related to reconciling the bill has a cost attached to it. The more you try to collect, the more aggressive you are, the greater the costs. Ah, but there are even more costs involved. The cost of not being able to reinvest that money.
- The cost of an LOC for making your payments and payroll. Lost profit from the accounts that cannot be tracked down.
- Emotional cost – Let’s face it, you hate making the calls, your staff hates making the calls, your clients hate receiving the calls. No one is happy in this process.
And, on top of that, many of your clients are repeat buyers, some even on payment plans. Consider for a moment the insurance company, or your pest service, alarm company or your gym. You pay them every month. They almost exclusively use ACH for payment processing that makes it all so much easier, right? They just get the money from your account on a set day. No calls, no invoices that get “Lost”, no hassle, it just works.
You can do this a better way!
Set up an ACH Processing account and have the money flow into your account when you want it, without the hassle and with less cost than any other method (yes even cash!!)
Think about how much better it will be without paying percentages, without using unnecessary amounts of employee time, without having to wonder when the money is coming. Never hear again “The check is in the mail…”
We can help you with this. At ACHWorks, we have been processing both payments and payroll transactions by ACH (EFT) for 23 years. Our innovative approaches have continually led the industry.
Put us to work helping you to make more profit and have more of a life to enjoy it
Give us a call – ACHWorks Dave Kirk 916.638.8811 ext 109