Starting an IT business requires you to make multiple decisions, from how much to charge for your services,
to how you want customers to pay. How you accept payments at your IT business is also an important business operations factor to consider.
Before you invest in a payment processing
system, you first need to figure out what type of payments will be convenient for your customers, as well as your business. For example,
Samantha Avneri, marketing director for Regpack, an online registration software company,
recommends accepting eChecks.
"One way to lower your overall or blended processing rate is to offer eCheck, and even to offer it as the default payment method," Avneri
says. "Many people are happy to pay directly with their checking account, which is a great way to lower the cost of offering payments
Once you've decided what payment methods to accept, it's time to look into merchant systems – keeping in mind that not all systems are
created equal. For example, some will only allow you to accept credit cards. However, other systems allow your business to accept a variety of
payment options, including:
- International payments.
- ACH / eChecks.
- Mobile payments.
- Digital wallet payments.
Another factor to consider is what type of equipment you need. For example, if you conduct all of your transactions online you probably don't
need a point-of-sale system. However, if you own a brick-and-mortar location where clients pay on site, you will need a system with the ability
to handle in-person credit card transactions.
Choose your payment processor wisely
Just like shopping around for small business insurance, be mindful when choosing your
payment processor. Not only should you evaluate costs such as transaction fees, but you should also make sure the processor you select will keep
pace as your business grows.
One option with a low barrier of entry for business owners is a payment aggregator, such as Square or PayPal, which allows you to accept
payments without having to set up a merchant account. While this type of payment processor has a quick application and approval process and is
convenient to use, the fees tend to be higher. They also aren't always the best choice for businesses that experience rapid growth.
"I’ve seen many small e-commerce businesses opt to set up shop using a payment aggregator, only to realize that this inhibits their
business further down the road," says Patricia Carlin, principal at PayArc, a payment
Depending on how fast you expect your business to grow and the amount of transactions you process, an aggregator may work just fine. However,
you should consider exploring merchant service options, too. Not only could a merchant account potentially be a better fit for your business, it
might also save you money.
Don't make decisions based solely on rates
While rates are a key factor in choosing a payment processor, don't base your decision on rates alone. Even if the overall rate seems low, you
could still get hit with other fees.
"A business shouldn't shop on rates," says Ellen Cunningham, marketing manager for CardFellow, a directory of credit card processing services. "It's easy for a processor to manipulate rates so that it sounds
lower than what a business will actually end up paying."
Instead, Cunningham recommends business owners search for a processor that offers the lowest markup over cost.
"Credit card processing is like anything else in retail, there is a wholesale cost and a markup," says Cunningham. "The closer you pay to
wholesale, the better."
Understand what fees will be involved
"Business owners need to consider not just the processing/discount rate, but the per transaction fees, monthly fees, minimum fees, annual
fees, compliance fees, equipment fees, and so many others," says Dawn McKee, regional chamber manager for GenCore Payment Systems. "Businesses will tell me that they are getting a low rate, and they sometimes are, but they are also
being charged for batching, high monthly fees, and leasing fees."
While there is no getting around the fact that you will need to pay fees in order to accept payments, you have more control than you might
think. Some fees may be fixed, but others can be negotiated or even eliminated.
Don't be afraid to ask for discounts. Merchant services processors do have some discretion when it comes to certain fees, so it never hurts to
ask them to cut you a deal. The worst they can say is no.
Protect your IT business with cyber liability insurance
One danger almost all business owners face is the threat of being hacked. If cyber thieves break into your payment processing system and steal
credit card numbers, you could be on the hook for thousands of dollars to alert customers of the breach and pay for anti-fraud protection.
Cyber liability insurance can pay for these types of expenses, as well
as the costs for:
- Security incident investigations.
- Crisis management.
- Cyber extortion and ransomware costs.
To learn more about what you should do in the aftermath of a cyber attack, read our article "How to Help Your
Clients (and Protect Yourself) After a Cyberattack."