Payment Processing For Small Business – Most companies are familiar with the concept of credit card processing. It allows customers to purchase goods or services using credit or debit cards in person and online. What you may not know, however, is that the task is much more complicated behind the scenes.
In this article, we’ll walk you through how credit card processing works and why it’s important to any business.
Payment Processing For Small Business
The basic concept of credit card processing is that customers tap, “load” or place their card on a terminal or enter card information online, payment is authorized and the transaction is completed. However, this only happens on the surface. The process is more complicated than it seems, and it can help business owners understand how it works.
Benefits Of A Merchant Account
So what are the steps involved in setting up a credit card? It can help to understand all stakeholders first.
Knowing the involvement of each party in the process will help us explain exactly how it works behind the scenes.
Even if everything seems to happen immediately and the payment goes smoothly by check or online, the whole process can take 24-48 hours.
This is the part that most of us are familiar with. At this stage, the issuing bank gives permission to the merchant to proceed with the transaction.
Learn How Online Payment Processing Can Help Your Small Business
The customer hands their card to the merchant to be tapped on a processor-provided terminal, or enters their credit card number on-site. An Internet connection or phone line is then used to send the credit card information to the merchant’s bank.
The merchant bank then forwards this information to the credit card network, and the credit card network requests authorization from the issuing bank. The authorization application includes the following information:
Verification is the last step that takes place in a store or online after a transaction is complete, but it is not the last step in the entire process. It allows the customer to go through the shopping process and find their product or service.
At this stage, the issuing bank uses fraud protection tools such as Address Verification Service (AVS) and Card Security Code to verify the credit card.
Payment Processing Explained: A Guide For Small Businesses
The issuing bank receives the authorization request from the credit card website and verifies the card details and checks if the customer has any funds in his account. The issuing bank then approves or declines the transaction and sends it back to the credit card network, which then forwards that information to the processor or merchant bank.
Once the merchant receives approval to proceed with the transaction, the purchase amount is deposited into the customer’s bank account.
These first two steps happen in a few seconds, but it’s good to know what’s going on behind the scenes, so that if something happens you can evaluate it with knowledge and understanding.
The final stages of the credit card process happen simultaneously and within 24-48 hours.
How To Choose Credit Card Processing For Your Small Business
At the end of each business day, the merchant sends all approved transactions to the payment processor or bank. The processor then sends the authorized transaction back to the credit card network, where each authorized transaction is forwarded to the issuing bank.
Here, the customer may see a hold or “pending” on their bank account until the transaction is completed. Within 24-48 hours, the issuing bank will refund the funds to the credit card processor’s network and the merchant’s bank.
Any fees owed to the credit card network or payment processor will come from these fees and the merchant will receive the remainder.
Once everything is done, the hold will be removed from the customer’s account and information about the transaction will be displayed in the customer’s account.
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Credit cards are not a new concept for small businesses. Most businesses offer some form of credit card processing, either online, through a terminal, or even over the phone. Since it is not common to carry cash and few people even have checkbooks, consumers expect businesses to accept credit cards.
Some form of credit card processing allows your business to have more sales opportunities, whether you are in the retail or service industry.
One thing that prevents some business owners from getting a credit card processor is the fees that come with it. These fees can vary widely and may be a percentage of each transaction or a flat rate per transaction as required by your service provider. Although it can add up and be intimidating, the increased sales you’re likely to get from credit card transactions will outweigh the increased cost. One of the most difficult aspects of running a small business is record keeping. Whether it’s inventory control or sales tracking, to make sure your business stands up legally, every service or service your business provides to its customers needs to be accounted for. Although this process is important, it can be time consuming for many small businesses. There are many areas of record keeping that can be improved automatically, but one area in particular that we will focus on today is invoicing.
Using invoices, small businesses can track when goods or services were sold, how much business was received for that item, and if there are any outstanding debts. The old way of invoicing was to send invoices to customers by mail or email, but today there are software packages like Freshbooks that allow users to customize and automate professional-looking invoices to suit their small business. The following are a few ways small businesses can use these resources to streamline some of the tasks related to invoicing and payment processing.
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For many small businesses, some of their customers may require monthly or weekly billing, making it difficult to know how often individual customers are being billed. When recurring invoicing is done automatically, customers are billed automatically each month at a pre-agreed amount. This eliminates the hassle of waiting for customers to pay and forcing the customer to enter payment information every month. No action is required on your end or the client’s end. The software will automatically process the payment
For customers who choose not to have payments automatically debited from their accounts, sometimes the payment dates don’t match and you should send them a reminder. It can be a challenge not only to find customers who are behind on payments, but also to contact them (sometimes multiple times) to increase their accounts. When you set up automatic reminders, all you have to do is tell the system how often you want the reminder to go off after a missed payment, and it will do it for you!
The adage “keep your options open” doesn’t just apply to the dating world. It can also be used in business. When it comes to making payments, your customers have different payment methods that suit them. Some customers prefer to use PayPal instead of a credit card, while for others it’s the other way around. However, it is important to ensure that your invoices allow customers to pay in their preferred way.
While invoicing is the way a small business gets paid, automating the invoicing and payment process is a way that can save your small business time and money. In the end, it all comes together properly; convenience for your small business team members and convenience for your customers. Tuxedo Impressions LLC ™ is here to help you make the inner workings of your small business more convenient. Contact us today for a consultation.
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A common self-help truth is that we accept the love we think we deserve. Stand in the way of obstacles and you will never find fulfillment in love – no matter what kind of love is directed your way.
How To Accept Payments Online For Small Business
Just as potential lovers must be willing to accept love, small businesses must be willing to accept payment. Fortunately for business owners, vendors known as payment processors make this process easy. Admitting love, of course, is a very serious matter.
Payment processing is a critical business activity that receives payments from customers for products and/or services. An online payment process includes the consumer, the merchant, the payment processor, the payment gateway (online transaction), the consumer’s bank or credit card company, and the merchant account.