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Thursday, August 22, 2013

Eliminate Risk As A Solopreneur And Get Your Money Faster

As a solopreneur, collecting payments and receiving funds quickly can often mean the difference between success and failure. This article will discuss 3 ways you can get paid faster, and reduce the risks of chargebacks, customer disputes and fraud.

1) Merchant Accounts – Should you accept credit cards?

A merchant account allows your business to accept credit cards and other forms of electronic payments. You can receive funds from transactions as soon as the next business day. In today’s market many business owners can’t survive without a merchant account. The risk associated with accepting credit cards through a merchant account is related to “chargebacks” or customer disputes.

Eliminate Risk As A Solopreneur And Get Your Money Faster

The seasoned solopreneur and most small business owners are familiar with merchant accounts and merchant services. Unfortunately there are many horror stories on the Internet from business owners that signed up with the wrong company, or were set up with the wrong type of merchant account. Below are some tips to help avoid common pitfalls.
  • Choose the right account type – Retail, Internet, Telephone Order…There are many different types of merchant accounts and the pricing can vary drastically depending on how you accept cards. Many providers might offer a low advertised rate for “swiped” transactions, but if you key in the card number or accept cards over the Internet the rate is much higher. Be sure to go over in detail all of the rates and fees listed on your contract with your sales associate. 
  • Make sure your business type is accepted – A common complaint from small business owners, especially start up Internet businesses has to do with merchant processing companies “holding funds” from merchant account transactions. All merchant accounts are monitored by a “risk management team”, and your business type, average transaction size or sales activity upon review may become unacceptable to the processor, even if they have approved you for an account. It’s important to be very clear to your sales associate when explaining what your business does and how it operates.
  • Negotiate your rates aggressively ­ - There are hundreds if not thousands of merchant service providers that can offer your business credit card processing services through a merchant account. The true “cost” of transactions is public information and is published on Visa and MasterCard websites. Low risk traditional businesses should request to be on a type of pricing called “Interchange Plus” or “Cost Plus”. That will ensure you are always paying the lowest discount rate possible when accepting credit cards. High risk merchants should plan to pay a little more and be on a “tiered” pricing model.
2) eChecks – Accepting checks over the phone, fax or web

Accepting checks as a small business owner can be risky, the time it takes to find out if the check is going to clear can make the practice prohibitive to many business models. The headache of tracking down payment for a bounced check also makes this form of payment difficult for many solopreneurs. However, in today’s world of electronic payments, the pains of accepting checks have virtually disappeared. Below are 3 ways you can accept checks quickly, easily and with no risk.
  • ACH processing using fax, email or e-signature – With ACH processing you can initiate debits and credits to personal and business checking accounts, you can use a virtual terminal to complete the transactions, you can also use an API function with some gateways. You need to get signed authorization on an ACH authorization form, but this can be done electronically.
  • ACH processing using the telephone  – If you don’t have the opportunity to get a signature from your customers authorizing the transaction, you can sign up for checks by phone service, where we you can record your customers authorization over the phone. You can use your own recording service, or the check processor also offers recording services. This is great for telemarketing or call centers.
  • ACH processing on your website – Accept checks electronically on your website. Most check processors offer an API and many plug into existing gateways you may already be using like Authorize.net, NMI or USAePay. Your customers can enter their checking account information on your website, and you get paid the next day, with no risk of a returned check.
All of the solutions above are available with a check guarantee service, which means the processor guarantees the payment of the e-check. You no longer have to worry about whether there are funds in the customers bank account, because you get paid either way. Be prepared to pay a hefty rate for check guarantee service, the rates range from 2.5% up to 7%.

3) 3rd Party Aggregator or “E-Wallet”

The most popular 3rd party payment aggregators on the market are PayPal and Square. Basically aggregators have their own giant merchant account, and they allow smaller “sub-merchants” to process payments through their merchant account. They are then responsible for paying out their sub-merchants. This is a great solution for businesses that may not be able to be approved for their own merchant account, or businesses that want to remain as anonymous as possible. There are hundreds of payment aggregators like PayPal available to business owners, below are some things to look for when choosing a provider.
  • Payout times – Many aggregators will delay payments up to 30 days so be sure to read the fine print. These payout times are sometimes negotiable after some processing history has been established.
  • Payout limits – Companies like PayPal and Square put restrictions on the amount you can withdraw/process through the account, especially for new users. Make sure these limits will work for your business.
  • Time in business & online reviews – Be sure to research your 3rd party aggregator extensively, especially if you are looking for an alternative to PayPal or Square. Choose a company that is at least 3 years old and be sure to look for online reviews regarding the strength of aggregator.

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