When it really comes down to it, there are basically two types of business challenges: those that come from the outside and those that come from the inside of us.
The outside challenges look like your competitors and clients, technology and time. The inside ones are the limited beliefs and false assumptions that you have about yourself and your abilities.
The outside challenges are easier to deal with because they’re easier to see. You identify them, make a plan, work the plan, then move on to the next thing.
The inside ones are sneaky because they disguise themselves as the truth. They can stop you in your tracks if you don’t recognize them for what they are.
Here’s an example of what I mean.
The outside challenge: merchant fees, aka what you pay to accept bank payments and credit card fees
Say you invoice your clients via PayPal. For online, pay-as-you-go plans (no monthly, setup, or cancellation fees) PayPal will deduct 2.9% plus $0.30 per transaction whether your client pays by credit card or directly from their bank account. When you invoice directly from QuickBooks, their service, Intuit Payment Network, charges 3.25% for credit card payments and $0.50 for bank payments. For pay-as-you-go plans using your smart phone to swipe credit cards, Square One comes in at 2.75% and Intuit GoPayment is the lowest at 2.7%
So the challenge is the cost of accepting credit card payments from customers.
The plan: research the different vendors and compare fees
Work the plan: choose the lowest rate that reflects how you invoice your clients.
Done!
The inside challenge: resenting those merchant fees
First off, let me say that I understand. This is a typical reaction when you’re in start up. I felt it the first time I saw the 3.25% deducted from my first client’s payment. Been there, done that!
You know that you’re resenting the fees when you try to find ways of avoiding them. This is NOT a good use of your time. If you think that you are losing a lot to fees, that the fees hurt, you’re caught in a limiting belief. You’re not losing and they don’t hurt. In fact, offering your clients the option of using a credit card actually increases your profit.
Let me put it into perspective for you:
I’ve paid a high of 3.25% and a low of $0.50 per transaction and it’s evened out to an average rate of 2.09% because some of my clients pay by credit card and some pay by bank transfers. About ¾’s of my clients use credit cards, so I’m thinking that offering and accepting credit cards is a really good idea.
Some of your clients might be in boot strap/start up mode and have a credit card that isn’t charging them interest for a year. Your credit card policy allows them to invest in your services even if their current cashflow is a bit tight. Or they want to use their cards to rack up airline miles or rewards points. And then there’s the convenience of clicking to pay instead of writing a check, addressing an envelope, putting a stamp on it, and getting it in the mail.
And here’s the last bit of why taking credit cards is a good idea. What with the new IRS regulations, business owners are no longer required to prepare and submit 1099’s for eligible vendors that they pay via credit card or PayPal. The IRS is getting all that info direct from those third-party vendors.
Congratulations on reading this far down in the minutiae of cost analysis! If you have any follow up questions, please post them in the comments sections and I’ll be more than happy to answer them.
Hey Monique! Great article. So, I hadn’t seen the comparison between PayPal and other vendors before and that was helpful. I use paypal to take credit cards but have been advised to use merchant accounts because they provide easier service in taking credit cards and billing. However, there are also usually monthly fees that go with them. When do you think is an appropriate time to move from PayPal to a Quickbooks or other account where you can take card numbers over the phone and process them more quickly?
hi janelle,
i love that you are thinking about this!
when i started out in my business in late 2011, i was using paypal. my business coach, http://www.ChristineKane.com, discouraged the use of paypal on the grounds that it projected an unprofessional image and i have come to agree with that assessment.
i’ve been invoicing my clients directly out of quickbooks since the beginning of 2012. quickbooks offers merchant services with NO MONTHLY FEE, just fees per transaction: 3.25% for credit cards and $0.50 per bank payment (i.e., cash transfers from a bank account). the advantage to this choice is that you record the sale in quickbooks AND email that invoice to your client AND receive payment from them AND record the payment, all within the precincts of one platform. no double work or data entry errors by creating an invoice in excel or word or paypal, then recording the sale in quickbooks. way to clunky!
they also offer a lower discount rate (jargon for the % they charge you per transaction), but that’s where the monthly fees kick in. so this is where you do some analysis (and i can help with that) and see if you come out ahead with a pay-as-you-plan, or a plan with monthly fees.
as far as when the appropriate time to move from paypal to quickbooks or other account, i have one word for you: NOW!
hope this helps. let me know if you have more questions.
Thanks for the great information! We are are currently using Authorize.net but debating switching over the Quickbooks merchant services.
hey jason,
if you’re using QuickBooks, then syncing up with QuickBooks merchant services is a great idea! reduces all kinds of cross-platform incongruities and kludgyness, thereby saving you time and money.
thanks for stopping by. i’m glad the info was helpful.