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Wednesday, March 18, 2015

Cash, Check or Credit

Does your business accept cash, credit cards and checks? As a business owner, you need to be smart about how you handle these transactions. Learn about how you can manage these transactions in our three part article series from the Small Business Administration.


Credit and debit cards are popular, convenient, flexible, and have
become increasingly important in business commerce. If your business is considering what forms of payment to accept, or if you'd like to expand the payment options of your cash-only business, be sure to go over the pros and cons of accepting card payments.

Pros of Accepting Card Payments:

  • Card payments are evolving into the most common method of customer payment.
  • Businesses can easily accept card payments.
  • The convenience of using credit cards generally increases the likelihood of consumer "impulse purchases," which ultimately contributes to an increase in a business's average sale. Customers are more likely to make these purchases if they have access to credit or their available bank account funds.
Cons of Accepting Card Payments:

  • Card payments come with an increased risk of fraud. Although
    there are laws and security measures that help protect and secure customer information, card payments are inherently more susceptible to foul play than cash. Read more about your responsibilities to protect your customers' privacy and secure their personal information.
  • Businesses that accept card payments encounter small processing fees for purchase transactions. These fees seem insignificant but they can certainly add up, especially if your business accepts a lot of small purchases on credit cards. Setting up the necessary equipment to accept cards also carries additional costs.
  • Card transactions add another layer of detail to your business's bookkeeping practices. Your business will have to take into account the additional time and resources it takes to maintain these records.
The Bottom Line
Accepting card payments will, at least initially, cost your business money and add extra processes in your daily operations. Many small business owners look at this as a necessary operating expense. As card payments become more popular, customers will likely begin to expect a plastic option as a rule, rather than a courtesy.

Wednesday, March 11, 2015

Cash, Check or Credit? continued....

Does your business accept cash, credit cards and checks? As a business owner, you need to be smart about how you handle these transactions. Learn about how you can manage these transactions in our three part article series from the Small Business Administration.


Although credit and debit card payments are on the rise, the expenses and additional record-keepinginvolved with card payments are not ideal for all businesses. If you want to expand your customer payment options beyond cash but aren't ready to make the leap to card payments, accepting checks is another option to consider, but to protect the financial health of your business, make sure you understand the laws that regulate check payment policies.

Policies for Accepting Checks
If your business accepts personal checks, establish a detailed check acceptance policy to help identify and avoid bad checks. Don't just make a document and file it away--be sure to train your employees on the new policies and post reminders in visible and prominent locations. 

Common check policies include variations of these guidelines:
  • Checks must be from a local or in-state bank
  • Checks should not be written and accepted for more than the purchase amount
  • Checks should not be accepted that are starter checks, unnumbered checks, or non-personalized checks
  • Accepted checks should be deposited as quickly as possible. Banks may refuse to honor checks dated back six months or more
  • Instruct your employees to carefully examine every personal check for information that is essential for chasing the check:
o   Personalization - The customer's complete name and address must appear on the check
o   Date - The check date must be current.  Do not accept post- or future-dated checks
o   Bank I.D. numbers - The check must have a bank identification number, or routing transit number, that runs across the bottom, along with the customer's account number and check number.  This information is used by a bank to identify the transaction and resolve payment issues
o   Payee - The "Pay to the Order of" section must indicate your business's name
o   Dollar amounts - Both the written and numeric amounts must match
o   Customer Signature - The check should be signed in your presence and verified with photo identification

Verifying identification can help your business safeguard against fraud.  However, some state laws regulate which forms of identification businesses can require to see.  Depending on your business location, it may be illegal to require customers to show a credit card as a condition for accepting their check.  Commonly accepted forms of identification often include a state-issued driver's license, I.D. card, or military I.D.

Follow these tips when verifying customer identification:
  • Make sure the signature on the customer's identification matches the signature on the customer's check
  • Use discretion when recording personal information like phone numbers, identification numbers and expiration dates
  • Trust your instincts and be on the lookout for suspicious behavior or fraud "red flags." For questionable transactions, call the customer's bank to verify legitimacy of a check
 Bounced Checks
What should you do if a check is returned because a customer's account is closed, or has insufficient funds to pay for the transaction? In addition to instituting a check policy, some new businesses are employing the help of electronic check verification companies to identify flagged individuals. For a monthly fee, businesses can compare a customer's name against a database of individuals that are known to have written bad, stolen or forged checks.

Even with precautionary measures in place, businesses that accept checks may still have a bad check occasionally slip by. If a check fails to clear on your first attempt, your bank will generally attempt a second deposit. In some cases, the customer can quickly resolve the problem by transferring or depositing funds to cover a bounced check. If the issue is not resolved by the customer, you can consult your local law enforcement agency to understand your rights and options. Some states require businesses to mail a registered letter and allow a designated waiting period to lapse before further action is taken. 

If the issue remains unresolved, consider filing a suit with a small claims court or employing a collection agency to resolve the payment. Many businesses choose to employ a collection agency to avoid a lengthy and expensive court settlement.

Dissatisfied Customers
Occasionally, you'll find a customer has stopped payment on a check if they believe the products or services bought did not live up to expectations. If this is true, customers may be entitled to a refund or a reduction of the amount owed. 

Wednesday, March 4, 2015

Cash, Check or Credit?

Does your business accept cash, credit cards and checks? As a business owner, you need to be smart about how you handle these transactions. Learn about how you can manage these transactions in our three part article series from the Small Business Administration.


 Cash is the most commonly accepted and reliable form of payment for a business. Many small businesses operate as "cash only" merchants. Years ago this wouldn't have been uncommon, but with advances in technology, business owners must ask themselves if they're hurting their bottom line by limiting payment options. 

If you're thinking about starting a cash only business or if you're considering expanding your payment options, be aware of the pros and cons of only accepting cash.

Pros of accepting only cash:
·   Cash payments ensure that businesses receive funds immediately. With each transaction, your business immediately receives the appropriate payment amount without the worry of waiting periods or not getting paid at all.

·   Cash is the simplest form of payment and therefore involves less bookkeeping. For a business, that not only means less stress and hassle, but it also may save money in the time and labor it would take for a bookkeeper to record other payments methods.

·   There is limited risk of fraud when accepting cash only. There are cases of counterfeit cash payments, but compared to other payment methods, fraud is much less common in cash transactions.

·   Cash only businesses don't have to worry about third parties or fees associated with other payment options.

Cons of accepting only cash:
·   Customers who do not have enough cash on them will have to walk
away from a purchase they would otherwise make.

·   Your business may lose customers by only accepting cash. As card payments become more and more popular, many consumers expect this to be an option when making purchases. If they find that a particular business only accepts cash, they may feel inconvenienced and shop elsewhere.

·   Keeping large sums of cash on your business's premises increases the amount of time you'll spend managing finances and also creates an added security risk.

·   The IRS requires that you file a Form 8300 if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions. The same rule applies to cash equivalents such as traveler's checks, bank drafts, cashier's checks, and money orders.  The form requires the name, address, and Social Security number of the buyer.

The nature of some small businesses may make it smarter to stay cash only. Flea markets, street vendors, and lawn service providers are just a few examples of common cash only small businesses. At the end of the day, you will have to decide which payment options will create the most success for your business.