You need an efficient way to get paid for your product or service in order to stay in business. Cash, checks, credit cards, and online payments are the primary ways to get paid.
Here is a look at how to set up a professional, easy-to-use payment system for your business.
Setting Up Your Business to Receive Payments
There are three important steps for setting up your payment system.
- Obtain a business bank account. If you are a single-person business owner, it might seem easier to use your personal bank account and keep track of business income and expenses by listing the business payments and withdrawals separately. This is not a good idea. You can get into trouble when your personal bank account doubles as a business account for these reasons:
- Mingling the accounts makes it hard to figure out your taxes.
- It makes it more challenging to determine if you are making a profit.
- It is hard to set aside money for business expensed and expansion because it is so tempting to spend your company money on personal needs and bills.
- Request a Tax ID number. Taxes are a universal part of the business experience. To get started, you need to request a tax ID number from the IRS by completing IRS Form SS-4, which you can get online without charge. With this in hand, get a state tax ID number. You can find the right website by visiting the Tax, Accounting, and Payroll Sites Directory and clicking on State and Local Tax.
- Apply for a fictitious name. You need this if you do business under any name other than your personal name. Register it locally and at the state level.
If your business only accepts cash and checks, this is all you need to do. However, with so many business transactions being done now with credit and debit cards, or other online payment methods, you should consider setting up a merchant account and an online payment system too.
Both make it convenient for consumers to buy. They also provide the added benefit of getting customers to make impulse purchases. By accepting payments via credit or debit cards, you make it easy to accept payment whether your customer is local or on the other side of the world.
Accepting Credit Card Payments
To make use of credit and debit cards, you need to set up a merchant account. This allows you to accept Visa, MasterCard, American Express, Discover, and other types of cards.
The merchant account service provider is a middleman between your business and your customer. The merchant account service provider will process payments, debit the money from the customer's card, and deposit it into your business account. The equipment you need varies.
Merchant account service providers provide these main types of accounts:
- Retail merchant account for storefronts
- Internet merchant accounts for online payments
- Mail or telephone, called MOTO, merchant accounts
- Mobile credit card processors, in many cases
- Startup fees, monthly fees and per-transaction fees vary by merchant.
Other Payment Options
Here are two more ways to accept money that are becoming more prevalent.
- For websites: With so much buying and selling taking place online, it is important to accept online payments. PayPal is probably the most frequently used by online businesses, but there are numerous others. In addition to PayPal, look into Google Wallet, WePay, Dwolla, Clickbank, and Stripe, among others. Make it easy for people to pay you.
- For businesses in the field: Mobile credit card processors are relatively new. Not all traditional merchant accounts offer them. These let you take payments wherever your smartphone or tablet operates. These are becoming a necessity for food trucks, repairmen, and street vendors. The processing and fee structure is very similar to a traditional merchant account service provider.
The more ways you can accept payment, the easier you make it for customers to do business with you. In the age of the Internet, it is not uncommon for freelancers and small merchants to conduct business globally. Be open to new ways of accepting payment to make your business and services accessible to the largest number of consumers.