3 payment methods that hurt small businesses
October 21, 2019
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If there’s something absolutely everybody in the world can agree on it’s this: getting paid is great. So how could making money hurt you, or your business?
It’s not about the money. It’s about how you get ahold of it.
A few decades ago, that question wouldn’t have made sense. After all, your payment choices were mostly limited, especially when it came to global payments. In most cases, you sent a check or a wire transfer, end of story. You didn’t ask if those methods were good or bad for your business; these were the only ones available.
Nowadays, you don’t have to settle for mediocre choices simply because nothing else is available. However, habits are hard to break and you may find yourself reaching for that check without realizing that there are way better methods out there to pay your business partners.
But how can these payment method hurt your business?
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Credit cards are ubiquitous and many consumers love using them. Unfortunately, card companies are aware of this fact and make sure that businesses pay their dues for the privilege of using their products.
On average, retailers pay around 2% extra for every MasterCard, Visa, and Discover transaction when the card is physically present. For online payments, card companies charge between 2.30-2.50%.
If your business sells lots of small items at a relatively low price (e.g. convenience stores, small apparel retailers, restaurants, etc.) you can lose a significant amount of money on credit card transactions.
Unfortunately, due to their popularity, you can’t ban credit cards entirely without alienating potential customers. However, there are a few tricks you can use to reduce your costs. For example, you can set a shopping limit for credit card transactions (e.g. no credit cards under $10) that would help keep your related costs to a minimum.
Whether sending or receiving, checks take forever to arrive. Unless it’s handed directly into the recipient’s hands, you’ll have to rely on postal services – and we all know that those aren’t known for their speed.
And once the check arrives, you’re not in the clear. First you have to go to your bank to deposit the funds. Standing in line is nobody’s favorite activity, and even when you make it to the front of the line, you aren’t done waiting.
Most banks put a hold on funds for 3-5 business days so they can check that there’s enough money in the sender’s account to cover the amount paid. If there’s enough money, the bank releases the funds and you’re free to use them – about 10 business days after you’ve “been paid.”
But what if there aren’t enough funds in the sender’s account? Then the check bounces, the funds never arrive, and you’re back to square one. You can start chasing the payer, asking for your money. But since they sent a bad check to begin with, there’s a chance it won’t be that easy to get your money.
While there are ways you can avoid accepting a bad check, it’s easy to see that even good checks aren’t exactly good for your business. They take ages to arrive, deposit, clear, and during all that time, the payment isn’t there to fill your cash flow needs.
If you can, why not avoid checks altogether?
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Bank wires or wire transfers are much more convenient than checks. They’re considerably faster, since you can leave the postal service out of the equation and “only” have to wait for the banks to do their job.
It's here: The Definitive Guide to Foreign Exchange for 2019.
If your bank has an online payment service, bank wires are even more convenient. Sending a wire from the comfort of your office is a lot more desirable than mailing or depositing a check.
On the other hand, bank wires are far from perfect, especially if you’re sending a global payment. The SWIFT network, used to forward international payments, is slow, outdated, and riddled with insecurities. The network consists of a chain of banks that forward each transaction from start to finish. But, there’s no tracking service for your payment as it bounces from bank to bank. So, you never know where your money is, or when it will arrive.
Not to mention the less-than-desirable foreign exchange (FX) rates. Banks are not known for giving very favorable FX rates to their customers. Add to the mix the uncertain amount of fees the receiving bank may impose on the payment, it’s quite likely that you’ll lose a lot of money on each and every transaction.
Luckily you don’t have to contend with that. Thanks to financial technology (fintech), there are many other options available for sending and receiving global payments. Like Veem.
Veem is a global payments network connecting over 150,000 businesses in 100+ countries all over the world. Veem offers fast, easy, and trackable global payments with favorable exchange rates and no hidden fees. In addition, Veem integrates seamlessly with the most popular accounting software like Xero, NetSuite, and QuickBooks, saving you even more time and effort on every payment.
Stop hurting your business with bad payment methods and give Veem a try. You worked so hard to get your business off the ground: why threaten its success with outdated payment methods?
Simplify your business payments with Veem.