Many first-time business owners say that they are willing to accept any payment option as long as they get paid. However, this is not realistic because there are so many payment options floating around, and it is not possible to accept all of them. Further, all the payment options available to businesses have nuances that business owners need to understand before they choose any of them. Some payment options are less secure than others, while some are very expensive to process. Before allowing customers to use a payment option, therefore, it is important to examine it carefully. This guide is meant to help you understand the most popular payment options and decide which of them would be best for your business.
Cash has been the major form of payment for a very long time. It is sad to see that it is going out of favour with younger people. Cash is a great option for businesses that do lots of smaller transactions for which paying the processing fees for each transaction would not make sense or be financially feasible.
Cash is such a great payment option because everyone understands it and it does not require anything to process. Businesses only need to collect the money and deposit it in a bank account at the end of the day, week or month.
Cash does come with some downsides, though. One of these is documentation. Documentation is very important for taxation, auditing, as well as finding out the general health of the business. Because everything is done manually when you accept cash, the documentation can be tedious and prone to mistakes and this is one of the reasons why businesses are moving away from cash.
The second major problem with cash is theft. Businesses that accept cash transactions must hire the right people and do their due diligence during the hiring process. For businesses that accept cash, the cash will be sitting in a register or somewhere someone might steal it. This means businesses have to incur extra costs to add safes and other security measures to protect themselves from cash theft.
Credit and Debit Cards
Credit and debit cards solve many of the problems businesses face when they accept cash and they are also convenient for customers. While payments made using credit and debit cards can be expensive for businesses to process, plastic payments have become so popular that businesses have to adjust and receive them.
Using credit and debit cards produces records which makes things easier when businesses are auditing their accounts or need to produce reports. This saves businesses a lot of time, money, and headache as it is easier for businesses to account for everything paid by their customers.
Credit cards also eliminate the risk of cash being stolen, although they do introduce the issue of fraud, especially in online businesses that cannot verify the identity of a cardholder easily. The good news is that there are a few things businesses can do to protect themselves from credit card fraud.
Lastly, businesses have to incur the expense of purchasing credit card readers. However, this is something a lot of businesses don’t have to worry too much about because these expenses are often included in the calculations for starting the business.
Tech companies like Google, Samsung, and Apple hedged that mobile payments would transform the way we transact and how businesses accept payments. The adoption of mobile payments has been low, and this is thought to be because of the use of credit cards. Mobile payments seem to add some friction to the payment process that a lot of people do not like.
However, experts attest that these tech companies were right because there has been some growth in the number of people using mobile payments over the last few years. This number is expected to keep ticking upwards as Gen-Z gets enough buying power. Gen-Z seems to be the group that will embrace everything that can be done on a mobile device, including mobile payments.
Apart from the equipment and tech to accept these payments, there aren’t any significant downsides to using mobile payments. Businesses get all the same upsides they get by accepting credit and debit cards, without any of the downsides.
Businesses also get benefits like easier reporting, transactional security, reduced instances of fraud, and many others.
Interest in cryptocurrencies such as Bitcoin and Ethereum has been growing for years now and it is great to see businesses starting to accept it as a form of payment, at least on their online platforms. Cryptocurrencies do have their own complications – one of the most notable ones being their volatility – but they also have a lot of benefits for both businesses and their customers.
For example, they help those doing international business from having to deal with exchange rates or currency conversions, it allows businesses to save money on transaction fees, it enables faster transactions, and so much more. Businesses that want to ensure their customers remain anonymous also benefit greatly from accepting cryptocurrencies.
Businesses that decide to accept cryptocurrencies must understand that the government treats cryptocurrencies used to purchase goods or services as income and businesses must report this income for taxation purposes. Canadian businesses need to understand what is considered business income, how to calculate their Canadian Cryptocurrency tax as well as what to do in case of underreporting or failure to report.
This Canadian cryptocurrency tax guide from WealthSimple takes an in-depth look at crypto taxation in Canada to help businesses and individuals understand it. In addition to their detailed guides, WealthSimple also provides businesses with some helpful tools to help them invest in crypto and stocks, pay taxes, and everything in between. They handle investments for individuals as well as some of the largest companies in the world and ensure all investments and assets are protected using the latest security measures.
Checks remain an option for many businesses but they are not an ideal payment option, primarily because of how insecure they are. Sometimes Checks often contain a lot of personal and sensitive business information on them which means misplacing one might lead to personal identity at best and lots of financial issues for the business in the future.
Another downside is that checks can be faked very easily. Because of how good some people have gotten at faking checks, businesses might not know they have been defrauded until after they try to cash the check.
Even with all their downsides, checks remain a viable option for business customers who make large, regular payments to a business. The good news is that businesses and customers can use high-security checks to prevent fraud.
For many people, bartering is an outdated practice that should not be mentioned in the same context as modern payment options. However, bartering can be a useful payment option for businesses that might not have cash but that have something other businesses may want.
For example, a web designer might decide to write website copy for a marketing firm if they decide to do an SEO audit on their website. Bartering is less favourable than other payment options and this is why many businesses would not accept it but it can still be useful in specific cases.
The Money orders are very similar to checks because they are paper documents used to make payments and are accepted by both parties as legal payment methods. Money orders are very secure as they come with several security features to prevent counterfeiting and to ensure only the intended recipient can receive the payment. For the security gestures, money orders come with a serial number, polarized ink, and a security code.
The sender has to also provide details about themselves as well as about the sender to ensure the right person cashes a money order. Identification may also be required to send and cash a money order, which improves its security further.
Money orders are a great replacement for cash and checks; they cannot benefit anyone who steals them and they do not reveal details that can be used in an identity theft scheme. Money orders also do not bounce like checks could because they are already paid for by the time they are sent out.
Bank transfers in Canada are done through the Electronic Funds Transfer System (ETF) which is the bedrock on which most of Canada’s payment industry is built. ETF connects accounts directly so that senders can send money instantly. ETF will check that the sender’s account has the necessary funds before withdrawing the funds to send them to the recipient. This means there is no way to send money using ETF if you do not have enough money in your account.
There are lots of ways that customers can pay businesses for services rendered and for goods purchased. It is up to businesses to weigh the pros and cons of each method to choose those that work best for them, and that is fast, secure, and easy for them and their customers to use.