Online payments are becoming more and more popular. A convenient online payment method encourages customers to pay their invoices earlier. Here’s how to cash in on the trend.
Popular online payment methods
Online payment methods are probably something you’ve used if you’ve ever made a purchase online. Among these are credit cards, debit cards, automated clearing houses (ACHs) like PayPal, and direct debits. Payment methods such as these are generally instant and allow customers to pay without having to visit their bank’s website.
A direct debit allows customers to authorise ongoing payments. Whenever a bill is due, money can be taken directly from their bank account.
Benefits of online payment
Online invoice payments help small businesses get paid twice as fast. It is possible for them to get paid immediately in some cases.
It’s easy and quick for customers to make online payments. They also have the option of using a credit card, which gives them greater financial flexibility.
How does online payment work?
A merchant service provider can help businesses accept online payments. Getting set up with a reputable provider shouldn’t cost you anything (but transaction fees will apply).
Select a merchant service provider who can integrate with your invoicing software. Most should. Once the service is switched on, a ‘pay now’ button will appear on your invoices. When you email the invoice to a customer, they can click the button to pay you instantly.
What is a merchant service?
Merchant service providers (like PayFast, Peach Payments, and Paystack) are specialist companies that handle online payments for you (online payment platforms). Generally speaking, some of them focus on debit and credit card processing, others focus on ACH processing, and a third category looks after direct debit. It’s unlikely you’d need to offer all of these payment options.
You’ll need online invoicing software to make it work. Just find the add-on apps and select your preferred provider. There is usually a wizard to guide you through the installation process. Or if you have a tech-savvy accountant or bookkeeper, ask them to do it.
What are merchant service fees?
While it should cost you nothing to set up a merchant service provider and accept online payment, there will be transaction fees. For debit and credit cards, the fee works out to between 2% and 4% of the invoice value. For direct debit, the fee will depend on the size of the transaction but should never get any higher than about R50 per transaction.
Just because you know how to accept payments online, doesn’t mean you have to do it every time. You can switch it on and off. To help keep costs down, businesses tend not to offer online payment on invoices of more than R50,000.
How do I account for the transaction fee?
When preparing your business accounts, you’ll need to treat the transaction fee as an expense. You’ll want to match it with the payment so you can correctly calculate your profit on the order. Smart accounting software can do that automatically for you.
Will everyone pay faster?
Not all customers will pay faster when you offer these “buy now” options. But other customers could pay you straight away.
That’s the thing with online payment services. You should find that you get paid faster overall, which is a plus. And you may just transform a consistently late payer into an always on-time payer. It’s all about making it easy for them.
Jump in and learn how to accept payments online
If you use software to send invoices, it’s easy to offer convenient payment options. It’s a bonus for your customers, and it will get you paid faster.
That could be really handy if, like many small businesses, you experience cash flow issues due to late payment. Learn more about online payment services.