5 mistakes small businesses make with credit cards
5 mistakes small businesses make with credit cards
Don't make these 5 common financial mistakes with your business
Accepting credit card payments effectively and securely in your small business can allow you to attract more customers and ensure their prompt payments, giving your business a chance to grow.
If you are running your own small business, you probably already feel like there are a multitude of possible mistakes you could be making, and you may have even made a few already. To help keep you from adding credit card mistakes to the list, here are five of the most common, and how to avoid them.
1. Your small business doesn't accept credit cards.
You already know how easy it is to pay your bills and make purchases using your credit card, and your customers do, too. Many studies have shown that consumer spending increases by 15 to 20 percent when a business starts accepting credit card payments. Customers also like the security of paying with credit cards, whether online or in person, because they aren't required to carry large amounts of money. If your small business doesn't accept credit cards, you are also losing time in waiting for cheque payments to clear or direct credit payments to be processed. When your business accepts credit card payments, it will receive the money in 24 to 48 hours.
2. You don't research your credit card processing options.
As with any new product for your small business, you can be making a big mistake if you don't fully research the options available to you for processing credit card payments. There are a number of providers and fee structures. It is important you choose the right one for the frequency and size of the credit card payments you are likely to be accepting. Also, in knowing the service fees associated with credit card transactions, you can adopt a consistent process for passing on, or absorbing, those fees. You may also want to look into the credit card processing options available through your current financial institution. Don't automatically assume phone and online processing will be included.
3. You have outdated credit card processing equipment.
Credit card processing equipment that is as little as a year old can be outdated, as new security technologies and processing methods are regularly introduced. Therefore, you can easily lose customers and their payments if you are not offering them the latest payment processing facilities. Your customers will be aware of the dangers of manual credit card processing machines and will be looking for businesses that have adopted processes to verify the new chip-and-PIN technology in their cards.
4. You can't spot credit card fraud.
One of the biggest mistakes you can make with credit cards in your small business is not being vigilant with regards to credit card fraud. There are both complex scams to be wary of and simple fraudsters who are using stolen credit cards in the hopes the owners haven't yet reported them missing. Therefore, it is important that you always check the signatures on credit cards accepted in person, as well as making sure the name on the card matches the name of the person using it. (This can often be as simple as checking whether a woman is using a card issued to a 'Mr. Jones' or vice versa.) When accepting online payments, make sure you also have comprehensive verification software in your online store. Telephone and online payments should also require the verification number printed on the back of all Visa and MasterCard credit cards. You can also conduct your own verifications by ensuring the billing address linked to the credit card is the same as the delivery address entered in the order.
5. You signed up for a credit card to increase your cash flow.
Applying for a credit card for purchases and to ease the cash flow in your small business can easily turn into a mistake if you don't manage it correctly. Therefore, always make sure to only make business purchases on your business credit card, as you can easily find yourself owing your business a lot of money in personal transactions. Don't get caught up in rewards schemes and try to use your business credit card for everything. It is important that you make sure you really can afford to pay off the purchases you are making, and that you have breathing space if your customers delay in paying you. Also make sure not to use your business credit card for cash advances. If you don't pay your credit card to a zero balance each month, you can accrue a lot of additional interest charges. While it can be hard to pay a small business credit card to a zero balance each month, you still want to keep track of your purchases, so consider a business overdraft. You will have more flexibility and the chance to tailor an option to your business. You can also negotiate a lower interest rate on your repayments.
Accepting credit card payments effectively and securely in your small business can allow you to attract more customers and ensure their prompt payments, giving your business a chance to grow. Just make sure not to use your own small business credit card irresponsibly.
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