The advancement of technology has transformed how businesses make and receive payments. Sometimes, it’s not always clear which payment methods are best— but knowing which methods to use and when can be crucial to your business’s success.
Factors to consider when choosing a payment method:
- Security
- Cost-effectiveness
- Speed
- Compatibility with your vendors
It can be challenging to figure out how to choose the right payment method for your small business. This article will help you understand more about the best payment methods for small businesses and when to use them.
ACH payments
ACH payments offer a seamless way to transfer funds electronically within the U.S. (through the Automated Clearing House Network) and are typically low-cost. Small businesses can use ACH for recurring payments such as payroll, vendor bills, and subscriptions, reducing manual effort and streamlining operations. ACH payments are trackable, secure, and reliable. However, the one limitation is processing time can be slower than credit card payments or wire transfers. They usually take 3-5 business days to receive, so if you’re looking for instant payments, you might want to consider other options, like credit card payments.
Credit card payments
You can also pay business bills with your credit card to maximize cash flow and defer payments. Credit cards are paid off monthly, so if you schedule a payment at the beginning of the month, you don’t have to pay your bill until your billing date. That means you have more cash on hand to use now, while earning points, rewards, and travel benefits.
Although credit cards are among the fastest payment options, they tend to be more expensive ( around 1.5% to 3.5% of each transaction). Another limitation is that some vendors and suppliers don’t accept cards for business payments (that’s where online payment tools come in, which we’ll get to in a minute).
Debit card payments
Debit cards may look like credit cards, but they work differently.
Though they tend to carry similar transaction fees, unlike credit cards, businesses need funds in their bank account to pay with debit cards.
Debit cards are sometimes used by businesses instead of credit cards for several reasons, such as poor credit histories or personal preferences.
Debit cards replace a business’s need for cash. You pay a vendor and it immediately comes out of your bank account. That way you get a financial overview directly from your bank account without having to worry about any surprises.
The main limitation to using a debit card is cash flow. If there are high upfront costs– for supplies, rent, salary, or other expenses—your business might need to reconsider other payment options to stay afloat.
International wire transfers
While some businesses only work with local vendors, others rely on international suppliers. International wire involves sending electronic payments to a vendor or supplier in another country, either in local currency or U.S. dollars.
Making international wire transfers through your bank can cost you anywhere between $35-$50. Fortunately, there are some payment solutions where you can make wire transfers at a competitive rate…this brings us to online payment solutions.
Online payment tools
Online payment tools can help businesses simplify payments, save time and organize it all on one platform. In addition, they solve some of the problems you might have with other payment methods.
You can use online tools to overcome limitations, such as when your vendor only accepts checks, but you want to pay with a credit card. If you use the right payment solution, you get to pay vendors however you choose, and they’ll send a check or bank transfer—protecting all your personal and business information along the way.
The right payment method makes the whole process smoother
To sum it all up, you should take into account the method’s convenience, speed, affordability, and security. In turn, knowing which payment methods to use and when you should use them can help you strengthen your vendor and overall business relationships.