Monthly Archives: December 2016

Payment Types Should Your Business Accept

Most business owners would say that the most important thing they do is accept money. Without money, every other business activity is irrelevant because money is the lifeblood that keeps the business open. Of course, building relationships is important and essential but unless your business has a healthy stream of capital rolling in, you’re destined to close your doors.

You’ve probably heard that if you want your customers to do something you should make it as easy as possible for them to do it. If you want them to sign up for your e-mail list, give them more than one way to give you their information. If you want them to visit your store, make sure there’s plenty of parking, you’re open at convenient hours, and your location is as central as practical.

How you collect money follows the same rules. The easier it is for your customers to pay you, the better it is for you. But here’s the problem: the easier it is for you to get paid, the more you’ll likely have to pay for that convenience. Which of the many payments should you offer and why?

It Depends

Don’t you hate it when you can’t get a hard and fast answer? Unfortunately, it really does depend. It depends on the type of business, its size, the amount of employees and customers, the average cost of transactions, and more. But don’t worry; we can give you some general guidelines.

If, for example, your business only works with other larger businesses rather than retail customers, you probably don’t need to accept cash. Unless the business is exceedingly small, its accounts payable department isn’t going to pay anything in cash. You won’t need a layaway plan either.

A retail small business that deals largely with the general public on mostly low-dollar purchases probably won’t deal with purchase orders. That business may not accept them because they don’t have an accounts receivable department to track the PO and collect payment.

Should You Accept These Payments?

There’s plenty of ways to pay. Which should you accept?

Cash- Unless you’re a business that deals in high-dollar invoices and works with only commercial customers, you should accept cash payments. If you’re a retail business that has a self-service model, you may not accept cash either. Some gas stations that don’t have a store now only accept credit cards, for example.

Checks- If your business works with other businesses, you probably don’t have a choice but to accept checks. If you’re a retailer, you have a choice. Whole Foods has stopped accepting checks at many of its locations and many other retailers have as well. If you do accept checks, have a means of verifying the check before taking it as payment. There are now websites that will help you with this.

Credit Card- With more than 500 million credit cards in circulation in the United States alone, you should accept credit cards regardless of the business you’re in. Some businesses traditionally don’t accept cards but that’s changing too. But consider the amount of fees you will pay to take credit card payments and work those into your cost.

Mobile Payments- Only about 41% of people say that they have used their phone to make purchases in a retail store and of those, only about 14% say they do it regularly. If you’re not yet using Apple Pay or one of its competitors, don’t consider yourself a dinosaur but it’s hard to find people who don’t think mobile pay is only going to grow. You may not accept it now but keep a close eye on it.

Money Order- You might consider cashing money orders if your business works with a large amount of low income consumers who may not be eligible for a credit card or checking account and don’t want to carry cash. If you accept money orders, verify their authenticity.

ACH- ACH, or automatic clearing house, uses your bank account to transfer funds to you. Employers often use this payment type to pay their employees. If you’re a freelancer, ask the business you’re working with if they make ACH transfers. If they do, you’ll likely get paid faster than through other means.

Payment Plan- Avoid this, if possible. Small businesses don’t usually have credit departments and you don’t want to get into the business of tracking down late payments and everything else that comes with setting up payment plans. If they want a payment plan, they should use a credit card.

Layaway- Just like a payment plan, unless you’re a large business, you probably want to bring inventory in and sell it as fast as possible. If you’re offering a special price, you might work out a deal to honor the price and order the item once they have the money to pay if you’re out of stock.

Bitcoin- If you’ve never heard of bitcoin you should definitely not accept it as payment and even if you have, it’s best to stay away from it for now as well. Virtual currency is so new and so volatile that it’s not worth the hassle. There are also security concerns.

Sales Tax Nexus

If you want to incite stress, a tension headache, and maybe a bit of anger, strike up a conversation with fellow small business owners about sales tax. For businesses that sell outside of their home state, it’s a giant nightmare that is nearly impossible to navigate without help.

Today’s word of the day is nexus. Nexus is simply a connection. Once you establish a nexus with another state, you have to pay taxes in accordance with that state’s laws. The bad news: If you establish a nexus with all 50 states, you have to know the tax laws for each of those states and pay appropriate taxes based on your business activity in each. Or you have to hire a company to take on the task for you.

In more academic terms, nexus is, “maintaining, occupying, or using permanently or temporarily, directly or indirectly or through a subsidiary, an office, place of distribution, sales or sample room or place, warehouse or storage place or other place of business.” How do you create a nexus?

1. Selling Stuff- If you sell a product or service to a client or customer in the state you are located in—you have a nexus. Some states have tried to claim that you have nexus if you sell anything at all over the Internet to their residents.

2. Physical Presence- Do you have an office in the state?—nexus.

3. An Employee- Do you have an employee in the state even if they don’t have an office?—nexus.

4. Warehouse- Are you storing your goods in the state?—nexus

5. Independent Contractor- It doesn’t matter what you call them. If they’re doing work on behalf of your company—nexus.

6. Drop Shipper- Do you work with another company that ships products for your company from that state?—nexus.

7. Trade Show- Did you go to a trade show in that state and make a sale? (or not make a sale?)—you guessed it—nexus.

8. Amazon Fulfillment- Do you sell products through Amazon and they’re warehoused in that state?—nexus.

9. Affiliates- Do you have affiliates whom you’ve never met or don’t even know about who are selling your products on their website based in another state?—that’s nexus.

The Depressing Truth

If you or anybody connected to your business does any activity in another state, you’ve probably created a nexus. Because states are generally strapped for cash, they’re looking for any and all sources of income. Because of that, they’re cracking down on businesses that have traditionally made sales in multiple states but never paid sales tax.

The other problem is that these laws aren’t created at the federal level. These are state-level laws and each state is free to do it however they would like. That doesn’t make for an easy task for any business owner.

Even behemoths like Amazon are having trouble with compliance. You don’t have to look too hard to find stories of Amazon leading the charge against what the company calls “heavy handed” state tax laws. Over the years, the company has refused to conduct some business activities in certain states and has gone as high as the U.S. Supreme Court trying to block states from requiring customers to pay sales tax on online purchases. In 2013, the Supreme Court refused to hear an Amazon appeal against a New York state law requiring state tax on online sales.

What to Do

As a small business owner, you probably don’t have time to navigate the complicated maze of compliance in each state. First, are you getting enough business from other states to justify the cost of compliance? If your business is primarily online, the answer is probably yes but if you’re selling a handful of product in another state, it might be too early in your growth cycle to justify the cost and hassle.

If it does make sense, there are services that can help. One of the most popular with small business owners is Avalara. The company automates sales tax filing for each affected state. Simply sign up, upload your sales data to its platform, and Avalara will generate your sales tax return forms for each state. Another is a free service called TaxCloud. Both services integrate with a number of popular ecommerce shopping carts, and when integrated will automatically calculate the right tax as well as file your returns and remit moneys owed. At this time (summer 2015) TaxCloud is authorized to file taxes for its clients in about half of the states in the US, but is working to expand that number.

You can get similar services from local bookkeeping and tax preparation business as well as other online sources. You can do it yourself but that will require going to each state’s taxation website, figuring out what constitutes a nexus, and finding and preparing the forms.

Increase Your Small Business Profits

As a small business owner, you know that sales, alone, aren’t an indication of your business success. The true measure of success is your business’ profits. True, increasing your total profit for the year usually requires increasing sales, but here’s the rub: if you’re not careful, the cost of increasing sales could lead to decreased profit margins or even a loss. So how can you boost your small business profits this year? Here are eight strategies to fatten up your bottom line.

1. Attract new leads with information marketing

Today’s customers are hungry for information. They want to educate themselves before they talk to a sales person or make a purchase. Providing them with that information can make your business more profitable because it helps you win the customers’ attention, contact information and ultimately their orders. Do it by offering information-packed downloadable special reports, white papers or checklists for free. The information doesn’t have to be long. It just has to be informative and promoted with an attention-getting headline. Promote the giveaway on your website and through social media and require at minimum an email address to gain access to the information. Be sure the giveaway includes a call to action to turn the lead into a paying customer. And don’t forget to follow up on the leads.

2. Use the leads you already have to get paying customers

No matter how you get your leads, if you’re like many small businesses, you don’t follow up on them as much as you should. In fact, chances are you only follow up on the leads you believe are hot leads, and then you may only follow up once or twice. The problem with that approach is two-fold. First, you waste the marketing dollars you spent to get the lead. Second, it keeps you from having ongoing communications with prospects who could become customers. Those possible customers include individuals who are just starting to research their intended purchase, and those who are ready to buy, but who have other more pressing things demanding their attention when you call. Ignore them and you’re likely to lose the sale to a competitor.

To solve the problem – and increase your profits this year – formalize your lead follow-up procedures. Have a plan for following up with the hot leads. List the steps you’ll use to stay in touch, including what to do if you don’t get a response after the first call or two. Plan how you’ll handle leads from customers who don’t appear to be ready-to-buy. Decide how you’ll keep in touch, what information you’ll send them or point them to. Have everything written and scripted out, and automated as much as possible so you’ll easily be able to start the process for each new lead. If you don’t already have it, develop a monthly or twice-monthly email newsletter that you can send out to all prospects who have asked for information about your products and services. The newsletter will let you stay in touch with and convert luke warm, not-yet-ready-to-buy prospects into paying customers.

3. Increase order size and/or frequency

The math on this is simple. If you have 100 customers who each spend $50 within one month, you take in $5,000. If you get those same 100 customers to spend $70 a month, you take in $7000 for the month – which translates to more profit for you without increasing your marketing budget. To get order sizes to increase, learn (and train your employees) to upsell and cross sell. If you’re a physical therapist, for instance, you might encourage patients to buy stretch bands, icepacks and other equipment from you so they can continue their exercise program at home. You might also be a reseller for nutritional supplements. Fliers in your waiting area and placing posters where patients will see them while doing therapy can all help sell additional services without your therapists having to “sell.” If you sell products through an online shopping cart, add a function that automatically suggests related products to the shopper.