The trend of accepting online payments for sales has seen a revolution in the past decade and has rocketed further in a post-Covid world. This is good news for small business owners because online payment companies have invested considerably to improve their services. Offering your customers a range of online payment methods via invoicing software will have an impressive impact on your success, thereby helping a business to entice new customers by guaranteeing faster payments. So, when it comes to invoicing clients, accepting online payments for your small business is a no brainer.
1. What is an online payment system?
Online payments refer to money that is received electronically via the internet. A price is agreed between a seller and buyer for services/products sold before processing a payment. You can choose multiple methods of payment which is most suited to the type of business structure you have. This can range from banking transfers and apps to credit or debit cards. It also includes other payment gateways such as PayPal or Stripe. Paying cash, in contrast, isn’t always appropriate for invoicing customers. Therefore, offering payment over the internet or via invoicing software is convenient and easy for both parties.
One of the most important considerations when choosing an online payment system is that it has a secure encrypted connection. This is so the personal details of both seller and buyer is not stolen or easily hacked. For instance, PCI compliance requirements are necessary for credit cards. If you’re intending to offer a customer recurring payments whereby their data is stored, you need to have tighter security features installed.
Popular payment methods include:
- Credit and Debit Cards
- Mobile payments
- Bank transfers
- Recurring/subscription billing
When you give your customers versatility of various payment options, you’re increasing the chances of invoices being paid on time!
2. Benefits of Accepting Online Invoice Payments
In contrast to manual invoicing, which can take weeks to receive a payment while incurring extra costs, there are many benefits to accepting online invoice payments:
1. Quicker payments: as a general rule, a small business will receive quicker payments using online invoice payments. Plus, clients usually prefer it too as it allows them to instantly click a Pay Now button. This makes transactions easy to pay, even when outside business hours.
2. Online security: making a payment online is professionally regulated so offers a business high security. A customer’s bank will use verification before processing a transaction.
3. Lower costs: as online payments are automated, it means any business owner doesn’t have to pay any extra costs. For example, paying an employee to process the transaction or ringing a client/supplier to chase a late payment.
4. Straightforward tracking: you can be anywhere in the world and you’ll still be able to know when clients receive their invoices. You’ll also know when they’ve read and paid for them, even when it’s an outstanding bill.
5. Invoicing reconciliation: this refers to when a payment is matched to its invoice. An automatic reconciliation happens when your online invoicing software and payment methods are integrated. The result of which means you don’t have to manually check your records.
3. How do I accept online invoice payments?
The process for accepting payments online will depend on what methods you choose to use. If you manage your invoices via a company such as Xero, then payments are authorised and transferred automatically once a payment from an invoice sent to a client has been paid. Comprehensive invoicing software should offer you a variety of payment options alongside invoice creation. These could include the usual credit/debit card, bank transfers and direct debit, but also via card readers, digital wallets and QR codes.
4. Transaction Costs to Consider
Every time a payment is processed, a transaction fee is charged. These fees will depend on which payment system you use. Therefore, it’s important to check these rates beforehand. Usually, you are charged two fees. The first is an interchange fee that a credit card company will bill you a certain percentage for each transaction. This is based upon the type of card and how much is spent. The second fee is from the merchant service provider; for example, the bank you use. This can also be a percentage or a fixed fee.
It’s unlikely you’ll receive charges for cash and Direct Debit transactions. However, using an invoicing management system will charge a fee for each transaction processed.
5. How secure are online payments?
With cyber crime on the increase, businesses need to be aware that they can be vulnerable to data breaches. For instance, those that rise from invoicing clients and accepting online payments. Verifying a request to change bank details as an example, can help to prevent a digital attack. Similarly, be vigilant to any irregularities with a supplier’s details. These could include a change of names or the invoiced amount. You should also regularly check bank statements to be vigilant of online fraud. If you allow credit card payments, make sure you’re PCI compliant which protects you against fraud.
In general, using an invoicing software will safeguard you against a cyber-attack. Paper invoices on the other hand, are easier to manipulate sensitive information. Always make sure that confidential data is secure.
In addition to costs, security and suitability to your business, it’s a good idea to ask your clients which methods they’d prefer when paying their invoices. Some customers may only want to use a specific payment method and so you can integrate these when you start accepting online invoicing payments. The more payment options you decide to use, the better opportunities you have to revolutionise your business and get your invoices paid on time.