The other day, a networking colleague of mine, said to me: “I know I have to accept credit cards but I would much prefer check or cash – after all ‘Cash is King!’” My response was simple “The processing fee is worth every penny.”
As you can imagine I had more than just a few real-world examples to back up my statement and in fact, some related directly to his own business experience, not just industry benefits and statistics on credit card processing.
I asked him if I could share some of these stories with our other clients and he agreed. In summary, here are just 3 reasons the fees are more than worth it:
1) Immediate recording of funds.
This colleague has over a dozen employees, full and part time. Just once, an employee failed to enter all the cash transactions into the system (both in recording and in depositing the funds.) As you can imagine, the ramifications were significant. In his case, “missing funds” were eventually tracked down and the money was returned; but correcting the problem took time and energy. It was not only stressful, it delayed other planned business projects that were slated for that month; projects that were going to generate more revenue.
When payments are made via credit card, rather than on cash, the opportunity cost of time, lost/missing funds and delayed plans would be less likely to happened.
2) On-time payment of invoices.
My client indicated that, on average, 10% of his invoices are paid after 30 days, and a significant portion of those are paid over 45 days. While they are all eventually paid, there is a time delay in waiting for a check (which in his mind is like cash because there is no “fee” to accept a check.
Think about clients who don’t pay invoices on time. Just one large invoice going unpaid for more than 15 days can impact the bottom line and cash flow; especially when employees are paid weekly or bi-weekly in most companies.
Multiply that scenario by tens or hundreds (or thousands) of client invoices.
Delayed payment and processing of invoices can be problematic to a business that runs a tight margin on cash flow. Plus, carrying an outstanding invoice as an A/R can initiate activation of a business’ line of credit – although often a low interest rate – typically they are more than a few points above typical credit card processing fees.
I won’t even go into the cost of bounced check fees, but they can add up.
3) Automation of Workflows.
Credit Card Workflow: Process a payment once, then batch (automatically) and receive the funds (automatically) on a predictable timeline; predictability of funding is essential to today’s business climate.
Cash Workflow: Process a cash payment, count the mid-day and end of day cash drawer, sort out missing funds (or re-count), write out bank slips and deposit cash. All of this takes time and effort – not to mention the personal risk of going to a bank with large sums of cash on hand.
While many do not think of the second scenario as adding cost, or time, it does. Simple in-office, or in the business workflow automation can eliminate wasted time and put productive staff to work bringing in more revenues, rather than adding non-tax deductible expenses*.
At the end of our conversation – it was a two way conversation – giving and taking and exchanging information to help us better understand our businesses, I reminded him of the cost analysis that I had done for him 2 years ago. Reminding him of these few scenarios, where literally pennies could save him hundreds of dollars in losses, expenses and time delays, he saw the value of credit card payments in a whole new light.
~ Mary Ann
* Most fees are tax deductible expense, employee time is just an expense.
PS Every cost analysis we do is completely free and confidential. Request yours today.