(610) 444-2597 | (302) 428-0126 | (717) 341-1738 info@paisleysolutions.com

A Guide to Payment Processing

If your small business accepts credit card payments in-person and online then chances are you are connecting to a payment processor or merchant account provider (MAP) to facilitate electronic payments (credit cards, ACH, or digital wallets). Our team of professional bookkeepers is commonly asked about the best payment platforms to ensure smooth and accurate bookkeeping. 

We recommend that service-based businesses, retail service businesses, and others that use a payment service provider (PSP), shop every two to three years to ensure they are being charged competitive transaction and bank fees — your business’ profitability depends on it! 

Furthermore, make sure your small business properly records transaction and merchant fees as “cost of goods sold” to maintain a reliable income statement and avoid overspending.

 

Paisley Solutions, based in Kennett Square, PA, works with all types of business owners and non-profit organizations in Southeastern Pennsylvania, Delaware, and Maryland. Contact us today to find out if your payment processing solutions are working for your business! 

10 FAQs About Payment Processing for Small Businesses

  1. What is Payment Processing?

A company that authenticates payment information and disburses funds to your business via behind-the-scenes processes that take place after a customer provides their card information for a transaction. For a fee, the payment processor routes customer information to their bank and then back to your business’s bank.

  1. Why Does My Business Need to Use a Payment Processing Service? 

Payment service providers offer a number of benefits to small- and mid-size businesses, including 

  • Increased sales volume and higher tickets
  • Streamlined back-office operations
  • Increased customer loyalty
  • Strong payments security

 

  1. Why Does Credit Card Processing Cost Your Business Money?

Payment processors utilize a sophisticated network that quickly submits a customer’s credit card data, authenticates the credit card, ensures that there are sufficient funds available in the customer’s account, and if there are no errors or concerns, approves the customer’s transaction. Payment service providers help businesses quickly and efficiently process sales while reducing risks of fraud or insufficient funds, and they pay a variety of fees for this service, including: 

  • Interchange Fee – Goes to the card processing network
  • Assessment Fee  – Goes to card brands
  • Value-Added Fees – Goes to the payment processor

 

  1. What Additional Fees Do Payment Process Companies Charge Small Businesses? 

Merchant account providers often charge a number of additional services and/or equipment fees that you should calculate into your cost-of-goods sold. Pay careful attention to whether these fees are charged to you per sale or one-time. Processing fees and payment structures do change so it is crucial that your business shops for comparative rates every few years to protect your profitability. Additional fees charged by payment process companies may include: 

  • Statement fees
  • Setup fees
  • Programming fees
  • Equipment fees
  • Charge-back fees
  • Monthly maintenance fees

 

  1. What Types of Payment Platforms are Available for Payment Processing?

  • Direct: Owned and operated by the provider on the front side (where customers swipe card) and on the backside (where the payment gets authorized and settled)
  • Gateway: Provider borrows another third-party platform to handle the back end of the transaction
  • eCommerce
    • Needed to facilitate when the card isn’t present (Necessary to operate an online business)
    • Small businesses can use a shopping cart add-on service

 

  1. How Do I Select a Payment Platform that Meets My Business Needs? 

There are several factors that you should consider when choosing the best payment platform for your business, including: 

  • The way businesses accept payments
  • The volume of transactions a business runs’
  • Add-on features a business wants
  • Level of service a business needs

 

  1. What Factors Determine the Transaction Fees My Company Pays?

Your payment processor will charge you merchant fees for each transaction processed and there are a number of factors they consider to determine the cost of their service. Fees are determined by the level of risk they carry, including: 

  • The type of business – Restaurants pay more than retail stores.
  • The amount of your average ticket – The larger your average ticket, the lower the charge
  • How your business is processing payments – Swiping a card at a physical store vs online card-not-present (CNP) transactions. 

 

  1. Which Questions Should I Ask When I Shop for an MSP or PSP?

Work with your bookkeeper and review accurate financial reports or statements to ensure you understand your business’s cash flow and debt ratio. You’ll be better prepared and know which questions to ask when you begin to shop for a payment processing service. 

  • When does the payment hit your bank account?
  • Are they compatible with your business needs?
  • Are there other fees?
  • Does the provider offer customer support?
  • Is there protection against fraud?
  • Are there other security measures?

 

  1. How do I find a Payment Processing Provider for my Business?

Consult with your trusted bookkeeping team or ask other business owners that process a like amount of transactions and dollars about the merchant service credit card processors they trust. You’ll want to review each credit card processor’s details and select a provider with transparent pricing, reasonable rates, and fewer processing fees. 

  • Your Bank
  • Quicken
  • Costco
  • Sam’s Club
  • PayPal
  • Square
  • Local Chamber of Commerce for Referral

 

  1. How Do I Compare Payment Processor Plans and Pricing

Consider processors that provide customer support and do not require long-term contracts. To find the best merchant service for your business make sure the provider’s fees and terms are flexible enough to allow your business to grow and expand. PCmag.com and Fundera by Nerdwallet are reliable online sources that you can use to compare MSP and PSP charges line-by-line and determine the best credit card payment solution. According to Merchant Maverick the top five small business credit card processing companies, include: 

  • Payment Depot
  • Fatt Merchant
  • National Processing
  • Dharma merchant services
  • Square