In business, getting yourself paid and managing your money is a tricky thing to think about.
Considering your regular customers, the cash flows and even the account management of all your business property just to keep things running along is somewhat a challenge for owners.
As a result, getting yourself aware with the activities at the same time understanding management of your funds likely to become your first priority, even though you have hired experts like bookkeeper and accountants for them to manage all your books, as business owner you need to familiarize things and understand the basics of bookkeeping and the management of money principles and understanding credit, reading your bank records and tax.
Well it doesn’t end there, your accounts payable and receivables. You need to give extra careful in giving options on payments for your customers on the things that they purchased and establishing a sound payment terms and debt terms in event of clients nonpayment.
You Need Bank Account
After choosing your official business name and registered it, naturally like what every owners have, a commercial bank is needed.
Applying for a bank account and this should be a business account, and for sure this should be easy.
Do this by selecting a bank that you want to partner with, consider choosing banks that are friendly to business, after finding your bank, call and set and appointment for you to open your business account.
There’s not much requirements in opening account, but make it sure to bring
- your personal identification cards
- and your registered business name
- and the license documents,
because those papers are required specially when opening a commercial account in bank.
Your next move is to deposit funds in your account, and if your credit record is good you can ask for a credit attachment in your account, this is useful when you do purchases for your business in times of slow sales for you to cover until such time that revenue increases. Lastly, inquire about credit merchant account card, debit and any other small scale business services.
You Need Bookkeeping
Setting your financial books for your business is important, and so far you have two options to choose:
- do it by yourself
- or hire experts and professionals like bookkeeper or an accountant.
You can do both if you want, keeping your records and hiring experts that will prepare annual financial statements and tax payments.
But if you want to do it your own and keep your books, make sure to invest on software related to accounting like “Quickens or Quickbooks”, surprisingly both are amazing and easy to use and will make your recording enjoyable.
Most software related to accounting has options to
- create invoices,
- track account balance in bank and even the account information of the merchant,
- you can also keep track your receivable and payable.
But, if you don’t have enough knowledge on bookkeeping even though you are using an accounting software, hiring a bookkeeper is the best suggestion for them to do your books on monthly basis and chartered accountant that will audit your books in quarterly then prepare a year end statement of the business and its tax returns.
Finding an accountant in your area is not a problem, if you are located in United States, you can directly contact Accountants Association or if you are in Canada, still there are professional organizations that will help you along the way with your needs.
If your weekend is spend on washing windows for you to earn extra bucks, there’s a need for accounting services. It is way advantageous to invest in understanding basic ledger and recording business cost and its sales.
Since you are doing it by your own, make sure to use commonsense approach in terms of calculating the investment amount for your business VS possible profits and revenues, never forget to keep your business and tax books in a secure place for possible loss and damage due to unexpected events.
Accepting Debit Cards, Cash and Checks
Business arena has become super competitive.
You should go along with the trend and provide your customers with options for them to pay what they purchased from you, options like
Remember that having these options requires extra cost like transaction fees, account fees, merchant fees and equipment rental based on percentage of the total transaction.
Take note, the expense should be noted as part of the business operation. However there are available options for you to reduce charges on transactions by choosing the most excellent offers at the best price. Remember that not all merchant accounts, banks and processing payment services charge the same and it varies in different terms.
You can visit your local bank with small business association and see if discounts on members are available. Remember that consumers expect options in terms of paying their goods, and in the absence of options, expect less sales.
Cash is essential to complete a transaction, using it is great as it does need any processing time.
Cash comes first, it can be used anywhere, to pay your bills, invest in building business and increase revenues and gain profits. The only downside for cash is risk of getting robbed or even loses it.
If situations like that happen, claiming your insurance benefits could be difficult as you will need a transaction evidence or any other supporting documents connected into for you to claim things.
Even though receiving cash are not your preference for your business, still there are customers who will pay cash to compete their order, the point here is to deposit your cash everyday and make this a habit. Investing in safe storage for your cash is good, when the bank accessibility is not good.
For those who are running business that involves services, check is the most popular way that people uses in order for them to pay for the services. There are few precautions when you received check to ensure that you don’t get a bouncing check, specifically when dealing you new customers.
Basic precaution is to ask for identification card, and write your clients license number at the back of the check. If check amount exceeds few dollars, ask the client to get his/her check certified, or just pay with bank draft as option, this is good way precaution especially when clients are new to you.
Make a habit of checking the dates and the amounts of dollars to ensure everything is alright. Checks with wrong date and amount is time consuming as you need to get another check with that simple error.
Accepting debit card is another payment option, but before you can accept this kind of option, you need to rent or buy debit card terminal (DCT). Most of the banks and other credit unions with business clients offer services and equipment for debit cards.
Some will charge about $40 a month for the terminal equipment that is connected to your telephone line and $100 per month for the cellular terminal. Include the cost of telephone and other cellular services per month.
Not just that, charge for transaction fee by bank and made payable every debit card transaction, the range of transaction fee is 10 – 50 cents for every completed transaction.
Opening Merchant account for Credit Card
In this generation, market consumers replaced the use of paper money in favor of the plastic one for them to buy goods and other related transactions that needs payment.
For the record, opening a new option for your customers to pay its purchases like using credit cards plays a crucial role for your business to succeed.
The idea is true if you do businesses online, since credit cards and other electronic cash are present on almost all website that offers products and services and your card is the main requirement for customers to complete the transaction.
Again if you want to open this payment option for your business to accept credit cards from clients, opening a merchant account for credit card should be done. The first thing to do is to visit your credit union or bank by just contacting account broker on merchant account and inquire about your plan to open an account.
Though providing credit is good, but there are few obstacles, if your credit score is poor, you may encounter difficulties in opening merchant account or you will then be asked to present security deposit.
And after doing the application and still banks and credit union turned down it, our next suggestion is to open account that offers service for online payments in which on the next part we will define it more clearly.
The main advantage of having a merchant account for credit card is that it enables your business to accept payments done thru credit cards.
Businesses who accept credit cards as payments increases sales by 50 percent.
Remember you can accept payment thru credit cards over telephone, online, in person and by mail.
You can sell your services on installment basis by charging to customers’ credit card on monthly agreement.
- Naturally, these amazing benefits has extra cost:
- considering the payment for the application fee,
- the set up fee,
- rent or purchase of the equipment and the software used,
- statement fee and the common transaction fee that ranges 2-8 percent of the total sales.
As business owner you need to view this as cost for the business operation.
These types of services are popular to both merchants and consumers. I presume “PayPal” is among the most popular services in terms on online payments with 188 million 188 million legit members and growing in 202 countries that offers both business and personal account services.
Accounts have the capability to transfer funds electronically among all of its members, but only business accounts has the feature to accept credit cards as payment from members.
“Getting payments in an instant,” this is what I like with online payments, quick and very cheap for you to pen, regardless of credit rating or sales volumes. You can receive payments directly from your clients with just an email account.
The funds can be directly transferred or deposited to your account and do as you please or level your funds for you to draw using a debit card link to you.
The disadvantage for these types of services is customers are redirected to payment providers’ site before the transaction is completed.
The process can create a confusion to people for them to just abandon a purchase.
online payment advantage overshadow disadvantage.
Establishing your Payment Term
Every business needs to establish their payment policy. This is the way you can standardized everything or the way you are get paid, and also it becomes flexible to you to meet customers need in an individual based manner.
Extending credit, deposits and progress payments these are the coverage when setting up your payment terms.
Establishing a comprehensible and well written term with customers before completing a transaction is important. It should be printed and attached in the transaction documents such as contracts.
Securing your Deposits
This is for businesses that are engage in services. Make a habit to ask for initial deposit before providing any services, especially when the job involves products that should be paid during the execution of the service.
Asking for an initial deposit in value of the needed materials for the job becomes reasonable, and if ever the service involves labor, securing at least less than half of the total contract value in advance will do.
The deposit contract should be clearly stated and also with the information on orders or contracts that are cancelled, refund policy should be clear. By securing initial deposit, it is the best way for you to safeguard in case of out of pocket situation and if ever the contract is cancelled.
Progress in Payments
The progress in your payments is the best way to ensure yourself from possible financial risk. Prearranging contract and your payment terms is the best way to secure payments.
By agreeing certain amounts on varies terms in the completion of the project. Computing for the percentage amount can be effective like
- 15 percent deposit,
- 30 percent upon delivery of materials
- and 55 percent upon completion,
if situation arise and funds are not available you can also add 30 days substantial completion.
Or in any case, you can arrange a concrete payment process based on a specific scope that both parties could work on.
Regardless on the type of system used, payment progress for large jobs can lessen exposure to your risk in financial issues.
Extending a Credit
There are case in which extending clients credit is not needed not unless you have deliver a specific service like pest control that is billed by month or major service contract to be completed in certain stages.
But as business rule,
paid should be in full when transactions are completed.
In case of B2B sales, commercial customers generally desire a credit revolving account basis, terms such as 40, 60 or 120 days after the completion of service.
Ideally, business owners want to get paid as fast as possible, so you can offer discount if invoices are completed within week or other related terms. And if you don’t want to extend credit, make sure to conduct credit score check for your customers, especially when it involves large money at stake.
Collection of Debt
Even though how very careful things are done in terms of extending privileges on credit to clients, it is assume that it is not 100 percent that all of them will be paid at the due date.
What will you do in order to get paid?
The key to successful business is communication with customers that has debt. You can add pressure and get through them via nonthreatening calls in telephone, personal visits and letters.
Legally intimidate your clients will not do any good, but you can explain why they need to pay, to keep relationship in business intact. And if situations arise that they cannot pay their credit rating will be much affected or you have to do the last resort of collecting payments by suing them.
Another good option used by business owners is to hire third party collection agency that will collect outstanding debt to clients. Normally, these agencies charge percentage computed on the total amount as service fee, it can even range up to 50 percent.
The decision of taking delinquent payments is within the jurisdiction of the business owners, filling charges on courts for claims can be done. Remember that in some countries, small claims have certain limits as to the amount that you are allowed to sue.
Think of filing fees paid as upfront. But after winning the case, it will be added as reward.
Table of Contents
- 1 You Need Bank Account
- 2 You Need Bookkeeping
- 3 Accepting Debit Cards, Cash and Checks
- 4 Opening Merchant account for Credit Card
- 5 Online Payment
- 6 Establishing your Payment Term
- 7 Securing your Deposits
- 8 Progress in Payments
- 9 Extending a Credit
- 10 Collection of Debt