Small company Credit Crunch

Among the goals of any well run company should always be expense control. I had a boss that always stated it was all the small expenses that kill a business. Receiving money with regard to goods or services is the main goal of a company. In a small business dealings, selling a widget to a customer, cash is usually the preferred method since there is no cost when a business accepts cash for goods. Many other forms of transaction are acceptable in the retail and wholesale markets.

In the wholesale market segment a buyer may get consideration and specific terms with regard to payment of goods sold, like 30 or 60 days before payment is actually due. By delaying receipt associated with payment this costs the seller cash. In the retail world cash can be king but credit card payments are generally accepted. When a business chooses to accept credit card payments and you swipe your own card in the little machine within the counter, a third party merchant services providers (MSP) is utilized. They help the process of taking your money from the bank card account and paying the dealer, but there is a 3rd party handling charge.

The merchant services/credit card company charge structures vary in a couple various ways.
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All the different credit card companies and MSP’s cost some nominal fee for acting as the conduit for the money flow on each transaction. It could be 1% to 3% +/- depending on the credit card firm and MSP contract and the quantity or number of transactions. Each MSP has a multi tear, multi phase formula for each and every transaction, so the devil is in the details. The 3rd celebration merchant service fee structure (the credit card swipe machine) also varies depending on volume and type of deal. Whenever I pay with the debit card, and the retailer requires me “debit or credit? inch I always tell them to do whichever is much better for them, and then I do debit so the retailer does not have to eat a 3rd party transactional fee. In most cases the employee at the rear of the counter does not even know that debit card transactions save the business money and they should suggest that way of payment if a customer has no choice.

A small business that accepts multiple types of credit card payment must factor in the cost associated with merchant service fees. If they do accept credit it is likely covered in the mark up and revenue margin for all the products they sell. If this expense is not factored into the company plan a 3% fee on each transaction could be very costly in order to small business owners over time.

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