I recently had the pleasure of discussing digitalization with our friends at Primaris Market Development and I wanted to share the discussion with you. In a nutshell, COVID-19 forced the economy to an almost 100% digital economy and the vast majority of businesses were not ready for such a fast transition. Interestingly, however, the economy was already heading in that direction – COVID just showed us a glimpse of what that futuristic economy looks like. As businesses, we must adapt to this digital economy if we are to not only survive but thrive; it is where our economy is going and we cannot afford to get left behind.
In this discussion, Chad Tongco of Primaris and I discuss digitalization, the importance of it, and some of the experiences we have had as we continue to digitalize our respective businesses. Although digitalization should be an organization-wide endeavor, Chad and I discuss the PARC framework specifically to help focus the discussion on the relevance to small businesses. Each business will have a slightly different path to digitalization but the PARC framework will help small businesses focus their digitalization efforts. I hope you find the discussion interesting and helpful as we all continue to adapt and thrive!
Click the image below to watch our full discussion.
Stay safe and stay blessed!
It’s a nightmare that many businesses have faced: they perform a large job, collect payment on a card, but the money does not hit the account. Being patient, these business owners wait another day but still nothing, so they call in and after waiting on hold, they learn the funds are being held for one of many potential reasons. After spending even more time on the phone and more days of headache and stress, the business finally gets the revenue it earned and needs to continue operating smoothly, albeit rather late. The question every business owner asks is, how can this be prevented and what needs to be done to achieve that goal?
The first thing every business should do is ensure it has a good relationship with its processor and although there are many reasons why this is important, one particular reason is due to the fact that a good relationship with your process will ensure they understand your business. For example, let’s assume an HVAC business normally processes $50k per month with an average ticket of $750 and a ceiling per ticket of $5k. If this business at random tries to process a credit card payment of $12k, funds are likely to be held until the transaction is verified. If this HVAC company has a good relationship with their processor, they would be able to call this person right away and have them help resolve the issue which saves significant time and headache. Although it can vary significantly, it is common for this strategy to reduce the wait time to only two extra days compared to an entire week. If there is no true relationship with the processor, you will be sent directly to phone support alone which can be extremely frustrating when your money is being held.
There is another important way to prevent funding delays, however, yet very few business practice it. In the above example, one of the best things the HVAC company can do is contact their processor and let them know in advance they have an unusually large transaction coming up. If this HVAC company has a good processor, the business can reach out to the processor and the processor will request some information, such as an approved estimate/invoice, the customer information, and payment terms, and the processor can then have everything ready to confirm and validate the transaction. In this situation, the processor is able to have everything lined up so the moment when the funding delay is triggered and the transaction review begins, all of the information is already available. When this happens, the funds transfer on schedule and the business owner is saved much time and headache.
In summary, if you want to prevent and greatly reduce the risk of funding delays to your business, you need to do two things:
By doing these two simple things, you can prevent many issues and maximize the value of the processor that you use. As always, if you ever have any questions related to funding delays or other parts of payment processing, please do let me know and I would be more than happy to help!
One of the concerns that business owners have regarding the payment process is how much will it cost them to merely collect payment for goods and services rendered. While there is some variability based upon factors like processing volumes, the number of transactions, the type of card used, and so forth, one program that has some interesting merit to it is called 0% processing. Under this system, the business pays only the monthly cost – they do not have to pay any rates.
In the 0% processing system, there is a cost to process the payment but this cost is passed on to the business’s customer. For example, let’s take a small coffee shop that is getting ready to sell a large mocha latte for $4.95. Under the 0% processing structure, when the business rings up the latte, it will charge the customer roughly $5.40 (3% + $0.30) but the business gets the full $4.95; the remaining $0.45 goes to the merchant services company to cover the processing costs. Conversely, under a regular pricing structure, the merchant would collect $4.95 for the latte but then pay the processing costs out of that so its profit would be less. Restated, in a 0% processing system, the processing costs gets passed on to the customer. The only cost the business pays is a small monthly cost that varies based on the system used – a very simple system costs cost very little per month while an elaborate software would cost more.
With that basic understanding of the system, the next question is does it make sense for your business? It largely depends on the price sensitivity of your customers (also known as elasticity) – for businesses like coffee shops, retailers, and restaurants where the elasticity tends to be lower and where businesses have many low-ticket transactions, yes, 0% processing makes a lot of sense. Conversely, where price sensitivity tends to be great and where businesses have few but large-ticket transactions, 0% processing may not work as well for them. 0% processing also depends on the business’s brand and business model, so there will inevitably be uniqueness to each situation.
If price sensitivity is not a major issue in your industry, 0% processing makes quite a bit of sense. Additionally, for small ticket industries where the average ticket is less than $150.00, 0% processing also makes sense. When pricing is an important part of the sales process or if the tickets are large, businesses will be better off building 2-3% into their pricing before the sale or simply adding a convenience fee at the time of sale.
If you have any questions about 0% processing or adding convenience fees, please let me know and I will be more than happy to help in any way possible! Have a wonderful week and a blessed day!
Merchant Masters DFW provides online and in-house solutions with superior technology, high-level security, and unparalleled customer service that will elevate your POS Systems and Terminals to the next level.