Missing just one payment could be a real issue for a small business, so knowing how to collect payments and send invoice reminders politely is essential. The key is to make the process simple and hassle-free for both customers and team members.

Small businesses collecting payments online and in store header

Small businesses now have many options for accepting and collecting payments, whether online or in-store. But which are the most efficient and effective? As with most processes, payments are becoming increasingly digitized and Canadian consumers are continually opting for digital payments. Even amongst the older Canadian generation (55 years and older), the use of mobile payment methods increased from 14% to 46% between the beginning of the pandemic and the end of 2022.

Although contactless payments have been around for two decades, they have really taken off in the last few years: 84% of merchants in Canada now accept contactless debit or credit card payments. It is clear that Canadian businesses must be adaptable and able to facilitate new payment methods to guarantee a positive buying experience for consumers. So what should small businesses do to ensure their payments go through successfully and their business can continue to thrive? Implementing payment processing software could be a good place to start.

Tips for businesses:
An efficient payment processing software will ensure swift transaction processing, minimizing customer and business waiting times. This will help to enhance operational efficiency and allow for higher transaction volumes. Typical features of these solutions include payment processing, credit card authorizations, settlements and transaction reporting and analytics.

Credit and debit cards

Small businesses are able to accept credit and debit card payments by using an online merchant gateway for online payments, setting up a POS system for in-store payments, or using a mobile card reader for smartphone payments. Accepting credit and debit card transactions is key to staying competitive as this payment option can increase the likelihood of a customer sale. In Canada, it is especially important to accept these payments in contactless form, as research shows that contactless payments increased by 13% in 2020, likely due to the restrictions caused by the COVID-19 pandemic. It also allows the business to choose the correct payment system to fit their business needs. 

However, it is also important to consider that most payment gateways require setup fees as well as the usual credit card processing rates. Although these fees are relatively small, over time they could affect profit margins, so it’s important to budget for them, perhaps using budgeting software.

Direct debits

Small businesses can leverage direct debit as a seamless payment collection method. Direct debit services allow businesses to set up automatic withdrawals from customers' bank accounts. This method ensures timely and consistent payments, reducing the risk of late or missed payments. This is also a particularly effective option for service-based or subscription-based businesses as it automates the billing process.

The benefits for small businesses include improved cash flow management, as payments are automatically processed on scheduled dates, minimizing delays. It also enhances customer convenience, as they don't have to initiate payments manually each time. Direct debit reduces administrative burdens associated with chasing payments, enabling businesses to focus on core operations.

Bank transfers

Another option for payment collections is through bank transfers, whereby companies provide customers with their bank account details or utilize online invoicing systems. Businesses can include clear instructions on invoices, specifying the necessary details for a successful bank transfer. This payment method would be most useful for service providers such as construction companies or those who work using billable hours, such as accounting or law firms.

Bank transfers also promote financial transparency, as both businesses and customers receive confirmation of the transaction. This method reduces processing times and allows for quicker access to funds. Additionally, bank transfers can enhance security, minimizing the risks associated with cash transactions. 

Cash or cheque

Accepting payments in cash or by cheque is a method used mostly for in-store payments. For cash transactions, businesses should ensure secure cash handling procedures, such as using cash registers and providing receipts. Accepting cheques requires clear instructions on cheque writing, and businesses may utilize cheque scanners for faster processing.

The benefits of accepting cash or cheques include catering to customers who prefer traditional payment methods or those who may not have access to electronic alternatives. It also eliminates transaction fees associated with electronic payments, preserving revenue for the business. 

Alternative payment methods

Alternative payment options are gaining popularity and new technologies are continuously emerging to provide consumers with new ways to pay. Digital wallets, for example, are gaining traction amongst Canadian consumers.

Small businesses can embrace alternative payment methods such as digital wallets like Apple Pay, online payment systems like PayPal, or payment apps like Cash App, to enhance customer convenience and streamline transactions. To integrate these options, businesses can set up accounts with the respective platforms and display accepted logos at checkout. 

These options also offer enhanced security with encryption technologies, mitigating risks associated with traditional payment methods. Additionally, when exploring new payment options, make sure to look out for features such as transaction records and simplified bookkeeping processes. Embracing these alternatives not only meets the evolving preferences of consumers but also positions the business as modern and adaptive in the digital age.

Tips to request payment from clients

Requesting payment from clients is a crucial aspect of ensuring a healthy cash flow whilst maintaining customer satisfaction. It is essential to establish clear payment terms upfront, detailing due dates, accepted payment methods, and any potential late fees in a written agreement. Issue professional invoices with comprehensive information, utilizing invoicing software for consistency and efficiency. In order to keep customer relationships intact, small businesses should follow some key do’s and don’ts when they are requesting payment from clients.

Do’s and don'ts when requesting payment from clients

Overall, businesses must stay up to date with the most used payment methods to satisfy customer needs and keep themselves positioned in our increasingly digital world. Payment processing software is a tool which enables organizations of varying sizes to process payments via either the internet or traditional point of sale (POS) interfaces. However, it is also important to highlight that every business will have different needs and the best payment type depends on their business model. For example, a restaurant wouldn't be able to offer direct debit payments, while an eCommerce business can’t accept cash payments. In some cases, perhaps a combination of the payment types covered would be the best solution.

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