Start up guide on how to take payments

The number of payment methods and payment providers have exploded over recent years, with now many more options for start-ups to consider.

Competition has driven down transaction fees and it easier for businesses to offer multiple payment methods.

But, as a start-up it’s important to consider all the options and their pros and cons, both for your business and for your customers.

In this blog we cover some of the payment options open to start-ups. The best options for you may depend on what your business sells and where your customers are based.

Invoicing and payment on completion

With many Business to Business (B2B) transactions, work is often paid for upon completion. The key to invoicing is the speed of invoicing and collecting payments on time. Below are out tips on getting paid on time.

Small business tips to getting paid on time

Agree payment terms in advance - Talk to your customers about what the terms are right from the start.

Use credit checks - Its easy these days to find out if new clients have a good credit record using agencies like Experian or Equifax.

Send invoicespromptly – This should be obvious, but many new business owners don’t invoice quickly enough or lose track of things and sometimes even forget to charge some clients.

Make the invoice clear and self-explanatory – Ensure you include all the necessary information on the invoice. This may include customer purchase order numbers, reference numbers and a clear description of the work carried out and crucially your payment terms and bank details.

Provide customers with easy ways to pay - Many individuals and businesses favour electronic payment methods over cash and cheques these days, whether by bank transfer or card payments, give you customers options to pay.

Chase payments if they’re late – Don’t be afraid to send reminders to customers if payment isn’t made by your deadline. Email may be the first chaser and if this doesn’t work, then phone the customer and find out why they haven’t paid. Under the Governments Late Payment Directive you can charge interest if payments are late, so make this clear on the invoice and to your customers.

Contactless card machines

Card machines enable customers to make contactless and card payments with very low fees. Many card machines have low upfront costs, reducing the amount that you need to invest. Some will offer monthly rental with no upfront cost.

There’s a much wider choice of card machines today. As well as machines for counters/tills, small businesses can now also take advantage of mobile card readers that work just as well.

Most providers of payment terminals will quote you a basic rate for credit and debit card processing. Expect to get quotes such as 15p per transaction and/or a percentage per transaction. It all depends on what the value of an average sale is, how many transactions you do and the type of customer you serve.Sometimes, the fees you will pay can also be dependent upon things like your turnover and your risk.

In terms of overall fees, you must consider the cost of ownership and total fees paid based on the number of transactions you think you’ll have. This means you need to be aware of all costs including an initial fee, ongoing fees and any penalty or termination fees.Just be cautious of great headline fees as many of these lead to other fees later being inflated.

Do your research on the latest deals and providers of card machines and pick the best one that suits your business and its transactions.

Your card terminal can help you to keep an eye on your daily sales activity. Often you can print out the days transactions showing payments taken and refunds given.

Online payments

Now more than ever, online payments can be crucial for a business. Even if you don’t have a dedicated ecommerce site, promoting and selling goods through social media can generate revenue, but you will need a quick and easy method of payment for customers to transact with you online.

Business owners can send payment links to their customers, allowing customers to click on a link and be redirected to their preferred means of payment (e.g. PayPal, Stripe, Worldpay) to complete the transaction. Your customers will want to complete transactions quickly and efficiently. Not having a slick payment process can easily mean a loss of potential sales.

Here are some of the top providers in 2021 for small business online payments:

• Stripe
• PayPal
• Worldpay
• Sage Pay
• Square
• Braintree
• takepayments
• Handepay
• Shopify

Tips for taking online payments

To ensure that people visiting your website complete their intended purchase, you need to do the following:

1) Make it as easy as possible

One of the biggest barriers to making online sales is asking people to sign up to an account. People these days have short attention spans and don’t want to be forced down a ‘sign up’ route to maybe make a one-off purchase. Simplify the user journey and experience on your website by offering people ‘guest checkout’. This will undoubtedly boost the conversion rate of your site and your chances of the person completing the purchase.

2) Design and consistency are key

Wherever you host your payment page i.e. on your website or on a third party site, the page needs to look like it belongs and fits with your brand and your website. Go the extra mile, by ensuring the payment page matches your brand colours, your logo is on it and the design is consistent with other parts of your website wherever possible.

3) Assure people of the safety

Use a reputable payment company and assure your potential customers that their data and payment process is secure.

4) Speed of payment is important

Putting long forms in to collect data will put people off completing a purchase. Only ask for the minimum amount of date that you truly need to process the transaction. Again, people have short attention spans or may want to protect additional data and therefore making the process data heavy will stop people from completing the online purchase.

Combining online and physical payments

By combining the use of card payments and payment links, gives your potential purchasers a wider choice of payment options. There are companies out there that offer this flexibility that have easy-to-use interfaces and gives your potential customers the ability to choose the payment option they prefer.

Taking payments over the phone

Over the phone payments are still incredibly popular and are very beneficial for certain types of businesses such as remote or delivery based businesses, where the customers are remote or don’t have internet access or just want to speak to a human to process their payment for them.

Some customers, simply prefer some human interaction before paying and if they’ve called to talk about your products or services and they have decided to purchase, it’s often quicker and easier for them to just pay there and then.

However, some people may be uneasy about you taking payments by phone, but again being able to give customers a choice of payment methods to suit their individual requirements can be key to transactions being completed.

Over-the-phone payments - done properly - require a virtual terminal. Many providers of terminals offer these facilities.

Monthly payment options

One option that many small businesses overlook is offering a monthly payment plan for larger purchases. It is amazing the flexibility that you can offer a customer when a monthly payment option is listed along with full price.

If you are dealing with consumers or other small businesses, offering a monthly payment option or being able to spread payments can significantly increase sales on higher-priced products.

Customers may be able to afford a single payment but feel happier if they are able to spread the payment as it feels less of a big financial committment. It’s something worth considering.

Many of the big payment names will give you the option of monthly payments, so if this feels right for your business and your customers, look for a provider that includes this as an option.

Transaction fees

For start-ups, minimising upfront costs can often be essential. Many methods require either no upfront investment or a small upfront investment. The one really important area to look at is the transaction fee. When you look at the payment providers out in the market and you compare transaction fees, you will see that some newer companies / disruptors will offer transaction fees that are lower than many established companies such as banks. This can be beneficial for start-ups to go down the route of using newer, more innovative payment providers.

The payment process

You need to understand as a business owner how the payment works for both your customers and you. Make sure you carefully understand what the payment process entails, looking at the different payment methods you may want to adopt such as online, face-to-face, or over the phone.

Start-up’s payment options summary

There is no doubt that there is a myriad of payment options still available to start-ups and small businesses. Making it as easy as possible for your customers to say yes is important for any business, including giving options on the number of ways a customer can pay for purchases.

You need to ensure you find the right ones for your customers to ensure they can complete purchases quickly and efficiently to avoid them stopping the purchase process. But it’s also key to find the best payment options for your business, that don’t charge a fortune, offer you support and potentially the best reporting and technology.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.