Directly after the Back to School rush, businesses start to shift their focus to the holiday season, and before Halloween is even over, the madcap spending season starts en force. We can complain about the holiday creep, but it exists because consumers are in the headspace to spend over these next few months, and preparation equals profitability. Thanksgiving is right around the corner, and with it arrives our extended dedication to shopping: Black Fiveday (the new Black Friday which includes Small Business Saturday and Cyber Monday). Whether you have a brick and mortar location or are an online retailer, here are Merchant Maverick’s top 10 tips to prepare for the holiday season.
Get Organized Before The Holiday Rush
Don’t wait until the last minute to make a detailed game plan for the holidays. I don’t know about you, but during stressful seasons of life, the longer my to-do list grows, so grows my anxiety. Whatever you are putting off or saving for later, take care that your to-do list does not become an albatross around your neck during the busiest shopping time of the year.
Getting organized could include updating your website, changing vendors, or stocking up on inventory. Do you have a plan for employee scheduling? Are the invoices are piling up?
Don’t wait to figure this stuff out. Get everything current and unload those worries from your brain because the time to make any needed organizational changes is now: delays could cost you in more ways than one.
If you run an eCommerce business, we have special tips just for you on how to get your online store ready for the holidays.
Analyze Your Current & Past Cash Flow
Small businesses need to crunch numbers and analyze cash flow in order to make smart financial holiday decisions.
First, look at last year’s sales and numbers: when were your busiest shopping days? How much did you earn during the holiday season? What kind of holiday expenses should you prepare for? Once you have an understanding of your cash flow history, you can plan and set important holiday sales goals.
Analyzing cash flow means asking yourself the following questions:
How much do I expect to earn?
What inventory needs stocking?
How much more can I add to my marketing campaigns?
Do I have enough to offer employee bonuses or gifts?
And finally, look at your January sales. There might be a slump coming, so prepare for it now by knowing how much you’ll need to earn to get through any potential slowdown. Read our post about The Top 10 Strategies To Improve Cash Flow for expert tips and advice.
If you’re not sure how to calculate your cash flow, check out How To Calculate and Analyze Business Cash Flow.
Stock Up On Inventory
The favorite items in your shop will fly off the shelves (that’s the hope, right?), so when those customers and clients arrive at the last minute looking for that favorite item, have it available.
If you are advertising a specific item, stock up. Suppliers and vendors are in the same boat as you as things get busy. Go and write down shipping deadlines for your vendors and suppliers, and prepare for being busier than you imagined. Do you need some financial help to get you up and running? Check out our article on how to finance your holiday expenses.
Optimize Your Online Store
eCommerce is a crucial component of holiday shopping in general, and every year the amount of money spent shopping online grows. For example, according to statistics from Shopify, online shopping accounted for nearly $124 billion holiday shopping dollars in 2018. (That’s up from only $80 billion in 2015.) An updated, clean, and friendly website with clear shipping information should be a priority.
This is a great time, too, to check and make sure the process is streamlined and quick for your customers. Run trials, tests, and work out any technical problems before the holidays get too busy. Check out our post on How To Prepare Your Online Store For The Holidays for more website tips.
Create A Holiday Marketing Strategy
It is never too early to start thinking about a holiday marketing strategy. Consumers are bombarded with advertising these next two months because most major businesses know this is the time to make some major revenue, but the influx doesn’t mean marketing isn’t effective. Your buyers are out there. Your marketing strategy needs to find them.
Your business can use a holiday marketing strategy for branding, and the message should be personal and unique: what is something about your business that is different than all the others?
Be sure to design your marketing materials to include information about shipping deadlines or sales. Consumers are frantic to know where they can get items they need, fast, and without expensive shipping. Don’t make them hunt for the info! Make those details part of your marketing strategy.
Show Your Employees Some Holiday Cheer
There is a very famous Victorian story about someone who seriously lacks holiday cheer and has to go on a journey through time to learn an important lesson about how that’s not very nice. (And if your favorite movie version of the classic doesn’t star the Muppets, then meet me in the comments section. Second-favorites must have Bill Murray.)
Mr. Dickens’s timeless classic teaches us an important lesson: There is one name synonymous with holiday grumpiness and no one wants to be a Scrooge. Scrooge, of course, learns in the end that a Christmas ham goes a long way.
Any type of recognition to your employees that 1) the season is stressful and 2) you are thankful for them, shouldn’t be an afterthought. Also, don’t assume you know what kind of holiday cheer your employees need! Be inclusive to all holiday celebrators (or non-celebrators) and talk to your employees about their plans and wishes.
Don’t Forget To Give Thanks To Your Customers
You work hard. You do. We see it. But your customers also make your business thrive, so why not take this time to thank them for their contribution! Little thank-yous can go a long way, but there are also ways to incorporate those thank-yous into your marketing strategy. For example, offering coupons or discounts to returning customers establishes two-way gratitude. You are thankful they shop with you; they are thankful for the discount or freebies and will come back.
If you run a brick and mortar store, a “Thank You!” event where you serve drinks or snacks is a great way to show your gratitude and pull customers into your shop. At the very least, include a small thank you postcard/email with information about your business with every purchase.
Embrace The Spirit Of Giving
There are several ways you can embrace the spirit of giving this holiday season. One option is to dedicate a certain percentage of sales (or sales on a certain day/during specific times) to a charitable organization of your choice.
Another option is to match employee charitable giving contributions. Small businesses are the backbone of the community, and reaching out into that community to help only strengths you and the people you serve. It’s an added bonus that Millennials make shopping choices based on a company’s record of charitable giving (70% say charitable giving factors into purchases). It’s a second bonus that your giving is tax-deductible.
Buy New Business Software
If you need to change your business software to upgrade your holiday shopping experience, now is the time. Maybe purchasing a new payroll system, bookkeeping, or inventory software is a little holiday gift to yourself, and you’ll find many software businesses offer major discounts during the Black Fiveday Shopping Event.
At Merchant Maverick, we keep an ongoing list of the best Black Friday, Cyber Monday, and other holiday deals for small businesses. Whether you need a new payment processing, POS, accounting, eCommerce, website builders, time tracking, we’ve got you covered.
Make Time To Enjoy The Holidays
Last, but not least, enjoy the season!
Whether you are looking forward to Christmas, Hannukkah, Turkey or Boxing Day, don’t forget to take some time for you and make space to slow down. Spending time with the people we love, eating great food, laughing and embracing old and new traditions: the season is special because of all the amazing things we celebrate. Cherish the moments that bring you joy amidst the craziness of this year’s holiday shopping madness.
No matter what you need to do to get ready for the rush, take some moments to breathe. Then take notes on your successes and struggles this year to help you plan for next year.
The post Prepare Your Small Business For The Holiday Season With These Top 10 Tips appeared first on Merchant Maverick.
So, you’ve started a nonprofit. You’re passionate about your cause and have put together an inspiring team, united by your shared mission to make a positive difference in the world. But you need some money to help finance your venture. Unfortunately, in our profit-motivated society, it can be extremely difficult to find a lender or other party who has financial incentive to extend you some capital. Whether you need an infusion of capital to maintain your existing nonprofit, or you want to secure financing to get your fledgling nonprofit off the ground, you may have to turn over a lot of stones before you find an interested lender. However, obtaining financing as a nonprofit is not entirely impossible, as long as you know where to look.
Is a business loan a viable option for a nonprofit organization? Where else can nonprofit businesses get financing? Read on to learn the answers to these questions.
Why Nonprofits Have Trouble Getting Business Loans
Nonprofit organizations are, of course, not about turning a profit. Any money they make—if they bring in any money at all—is meant to be reinvested in the organization. Banks, which are all about profits, have little to no interest in helping nonprofit organizations. Lenders consider nonprofit organizations to be “high-risk borrowers,” because they do not trust that you will make enough money to repay a loan. If they do not receive any additional financial incentive to do so—for example, a government subsidy or a “corporate giving” PR campaign—banks typically will not lend to a nonprofit that is not bringing in significant revenues. Such is capitalism.
7 Ways To Get Financing For Your Organization
Fundraising, donations, and member fees are typically the main sources of funds that drive a nonprofit organization. If you need additional money on top of what your organization is able to bring in through these channels, you’ll face a pretty steep climb. However, while it’s not easy, there are ways to finance your nonprofit, even if you can’t get a loan. Also, a loan is not necessarily out of the question, particularly for a more established nonprofit. The appropriate type of funding for your organization will depend on various factors, which I’ll describe in more detail in the sections below.
1) Community Development Financial Institutions (CDFIs)
Short for “Community Development Financial Institution,” a CDFI is a financial institution with a mission to facilitate community growth by providing financial assistance to businesses and consumers in low-income or disadvantaged areas. CDFIs are typically not-for-profit or nonprofit organizations, but may take the form of traditional banks/credit unions or venture capitalists. Usually, they do not operate on a national scale, so you will need to seek out CDFI opportunities in your local area.
CDFIs may be microlenders offering loans of $50K or less, while some CDFIs also issue larger loans to more established businesses. City First Bank in Washington D.C. is an example of a CDFI that offers loans to nonprofits.
While CDFIs can be a viable source of capital to nonprofit organizations, particularly to those that operate in disadvantaged regions, there are some downsides. CDFIs usually charge higher rates than banks do (though lower than you’d get with short-term or payday loans) and typically require you to submit a lot of documentation. It can also take a long time for the funds to come through.
Learn more about CDFIs by reading our comprehensive CDFI loans article, and search for CDFIs in your region on the CDFI Fund website.
2) Banks & Credit Unions
Though it’s much harder to qualify a loan from a traditional bank, there are some banks that offer loans to nonprofits. Big corporations — banks included — often like to flex their philanthropic muscles via nonprofit grants or loans programs. However, banks may charge higher interest rates on loans to nonprofits due to the higher risk involved, and you will likely have to have an established nonprofit with documentation to show your revenue, expenses, fundraising plans, and other financial information.
Credit unions, being nonprofit themselves, are more likely than traditional banks to offer nonprofit loan or grant programs (or serve as CDFIs). As nonprofits, credit unions do not have to pay taxes and can offer very competitive interest rates. A credit union may also be more likely than a bank to extend a loan to a newer or smaller nonprofit. Credit union loans are typically offered in smaller amounts than bank loans and you may have to have a checking or savings account with that credit union in order to qualify.
It’s important to only apply for funding to banks and credit unions that specifically advertise that they work with nonprofits/have a lending program for nonprofits. These institutions will better understand your needs as a nonprofit, and will be more likely to accept your application.
Learn more about credit union loans for businesses (including nonprofit businesses) and how they differ from bank loans.
3) Crowdfunding Platforms
For startup nonprofit organizations that are less likely to qualify for bank loans, crowdfunding can be a good option. There are various types of crowdfunding, but charitable/donation lending is the one most suited to nonprofit businesses. Depending on the crowdfunding platform you use, you may be able to obtain free capital for your nonprofit, in the form of online donations you do not have to repay. Or, you may qualify for a no-interest crowdfunded loan, and you’ll only have to repay the principal on the loan.
It is extremely important to familiarize yourself with the laws regulating nonprofit fundraising in the state or states in which you will be operating. You may have to register your charitable nonprofit with the state before you begin soliciting donations.
If you’re ready to explore fundraising online, start by looking at these 6 platforms that do crowdfunding for nonprofits.
4) Nonprofit Grants
Business grants are another form of funding that nonprofits may be eligible for. Grant money for nonprofits can come from government sources, business associations, corporations, or other nonprofit organizations. Typically, grant money is intended for very specific purposes, and government grants, in particular, require a rigorous vetting and application process. Additionally, they will want to see what you’ve achieved with your nonprofit thus far. Most non-government grants are for smaller amounts (less than $50K) and may resemble a contest or competition in which you’re competing with other organizations. Make sure you check that the grant you’re interested in is open to nonprofit businesses; some grants only apply to for-profit businesses.
When searching for grants, you can check grants.gov, the centralized source for all U.S. government grants. You should also do a more targeted search for grants in your particular region, as many grants only apply to applicants living in a certain state, city, or municipality. For example, the state of Maryland has a lot of business financing programs including grants, many of which apply only to applicants in certain counties. If you operate in an economically distressed region or serve a disadvantaged demographic, you might also be eligible for special grant opportunities. For example, there are business grants for women, business grants for minorities, and business grants for veterans.
You can learn more about business grants for nonprofit organizations by reading our nonprofit grants article.
5) Nonprofit Loan Funds
Nonprofit loan funds are another viable source of capital for nonprofit organizations to investigate when looking for funding opportunities. These institutions, often nonprofits themselves, offer loans to nonprofits in need of funding, and especially to nonprofits in underserved communities. Typically, nonprofit loan funds charge less interest than do traditional lending institutions; in some scenarios, the loans may be interest-free.
Some nonprofit loan funds include:
Nonprofit Finance Fund
Growth Partners Arizona (formerly the Nonprofit Loan Fund of Tucson and Southern Arizona)
The Loan Fund (New Mexico)
Open Road Ventures
Propel Nonprofits (created from the 2017 merger of Nonprofits Assistance Fund and MAP for Nonprofits)
Nonprofit loan funds differ from nonprofit grants in that you will have to repay whatever you borrow. Nonprofit loan funds may also be CDFIs. As with other loans, nonprofit loan funds typically require an operating history—meaning your nonprofit startup may not be eligible.
6) Online Loans
There are various types of online business loans that your nonprofit may be eligible for. Generally, online loans have higher rates and more relaxed requirements compared to loans from banks or credit unions. More established nonprofits may be eligible for a medium-term online loan with a decent interest rate, while newer organizations may have to settle for short-term, high-interest loans. Despite their higher price tags, one benefit of online loans is their speed and convenience; often, an online loan’s time-to-funding—the amount of time from when you apply to when you receive the funds in your account—is only a few days.
For nonprofit startups without any track record, a personal loan could be an appropriate online loan option. You can apply for this type of loan from a personal lender, and the only thing the lender will typically care about is your personal credit score. Personal loans are usually for $50K or less. As these loans come with high interest rates and a short repayment schedule, you might only turn to this type of loan as a last resort. Still, if you choose a reputable personal lender, you will get a better deal than you would from a payday loan or from a cash advance on your credit card.
Some, but not many, online lenders have special loan programs for nonprofits. Accion is an example of one online lender (also a CDFI) that lends to nonprofits.
Note that online loans may require you to sign a personal guarantee which states that you—not your organization—are personally responsible to repay the loan balance.
7) Corporate Giving Programs
Even if you cannot secure a sizable loan or grant, you can benefit from contributions from corporations and even smaller businesses in your community. Whether motivated by generosity or just good PR, it doesn’t really matter: businesses increasingly want to “give back” to their community, and that includes helping nonprofits. Companies in your city or county may have various programs or policies you can benefit from as a nonprofit:
Sponsorship of fundraising events (dinners, dances, 5Ks, etc.)
Paid-release days (days employees are paid to volunteer for a charity)
Taking advantage of corporate giving programs requires some creativity and hard work, as you will have to work together with local businesses to figure out how they can best serve you, typically in combination with your own fundraising efforts. You will also have to generate awareness in your organization about corporate giving programs in your region and frequently reach out to local businesses. The good thing is that businesses are generally happy to display their generosity to the community, as this benefits their organization as well.
How To Improve Your Chances Of Getting Approved
Once you decide to apply for financing, it’s time to find a potential lender and start putting together your application package. If you take the time to properly prepare for the application process, there is a much higher probability that a lender will decide to take a chance on your nonprofit. Here are a few important tips to keep in mind.
Make Sure You Meet The Borrower Requirements
Nonprofit loans are a very specific type of financing, and if you bark up the wrong tree, you’ll just be wasting everyone’s time. Make sure that your organization meets all the minimum borrower requirements for whichever loan you’re considering before you apply. Or if you’re applying for a personal loan, check your credit score to make sure you meet their minimum accepted score. A lender will not make a special exception for you, no matter how awesome your nonprofit sounds.
Choose The Right Type Of Financing
In addition to meeting the minimum requirements for a loan, you also need to choose a loan that will work best for your needs. For example, maybe a line of credit will better meet your organization’s needs than a term loan. Even if you are pre-approved for a loan offer, you must also consider whether you can reasonably afford the loan repayments and are comfortable with the repayment timeframe. If not, you should apply for a smaller loan or consider applying for grants, ramping up your fundraising efforts, etc.
Have A Strong Business Plan
Just like a for-profit business, a nonprofit business needs to have a solid business plan in place, especially when applying for financing. The lender will want to see a specific plan detailing both how your nonprofit organization meets a need in the community and how you plan to use proceeds from a loan, all supported by thoughtful research and strong financial documentation. They’ll also want to see that your organization can successfully raise funds.
Have Your Documents Ready
Whether you’re applying for a loan or a grant, you will be asked to submit certain documents. It is best to have all of these materials on-hand when you apply so you are ready to supply them when asked. Some items you might need include:
Driver’s license or other government issued ID
Your organization’s fundraising case statement
Proof of 501(c)(3) (nonprofit/tax-exempt) status
Recent tax returns
Recent bank statements
Other financial documents such as income reports and cash flow projections
Proof of collateral
Keeping strong records, particularly of your organization’s financial information, will make you better-prepared to supply documentation that supports your nonprofit’s need and eligibility for financing.
Need more loan application help? While we wrote the following articles mainly with for-profit businesses in mind, the same tips for business loan applications generally apply to nonprofit business loan applicants as well:
How To Get A Small Business Loan: The Step-By-Step Guide
20 Tips To Improve Your Business Loan Application
Although the nonprofit’s business model is in some ways very different from that of a for-profit business, nonprofits operate similarly to regular businesses in many respects. Working capital, operational expenses, and expansion of services are valid reasons to seek financing, regardless of an organization’s business model. While your financing options as a nonprofit are somewhat limited, you may actually have an advantage over for-profit businesses when applying with organizations such as CDFIs, microlenders, and nonprofit loan funds, and also when applying for government grants.
Has your nonprofit been successful in obtaining financing? Have a favorite nonprofit lender? Sound off in the comments!
The post Why Nonprofits Canât (Usually) Get Business Loans — And How To Get The Financing Your Organization Needs Anyway appeared first on Merchant Maverick.
When you launch a new business, you’re probably aware of how a business credit card can help you smooth out your cash flow to help you get yourÂ enterprise off the ground. You may also be aware that a business credit card can help you out in other ways — by helping you buildÂ your credit score and earn rewards for your business spending.
However, with your other responsibilities, you may not have the time to spend studying the business credit card universe to determine which cards have the most to offer a young business.
Thankfully for those of you who prioritize pursuing your passion over comparing credit card offers, Merchant Maverick exists! Let us separate the winners from the losers and give you the scoop on the business credit cards best suited to entrepreneurs and startup businesses.
Chase Ink Business Cash
Overall Best Startup Card
Amex Blue Business Plus
Long 0% Intro APR
Chase Ink Business Preferred
Big Signup Bonus
Capital One Spark Miles Select For Business
Brex Corporate Card
No Personal Guarantee
Capital One Spark Classic For Business
Wells Fargo Business Secured Credit Card
Secured Card For Bad Credit
Chase Ink Business Cash: Best Overall Card For Startups
Chase Ink Business Cash
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: $500 cash back if you spend at least $3,000 in the first three months of opening your account
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: N/A
Foreign transaction fee: 3%
5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone purchases each account anniversary year
2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants each account anniversary year
Due to both its overall combination of features and its 5% cash back earning rate on several common purchase categories for new businesses, we’re picking the Chase Ink Business Cash as the best overall credit card for entrepreneurs and startups.
To start off, the Ink Business Cash offers an introductory 0% APR for 12 months on purchases and balance transfers and a bonus offer of $500 cash back when youÂ spend $3,000 on purchases in the first 3 months. The card also lacks an annual fee, which is remarkable for a business credit card that offers this much value.
Startup businesses stand to reap some great rewards when using Ink Business Cash to pay for building up a young company. The card offers 5% cash back on the first $25,000 spent in combined purchases at office supply stores and on internet, cable, and phone services each year. No other business card offers such a high level of cash back for the spending necessary to build your office.
You’ll also earn 2% cash back on the first $25,000 spent in combined purchases at gas stations and restaurants and 1% cash back on everything else. All in all, few cards tailor their reward structures to the needs of startups better than Ink Business Cash. Despite this, the card offers a very competitive variable APR of 15.49% to 21.49%.
You can redeem your cash back for statement credits, travel (via Chase Ultimate Rewards), shopping at amazon.com, and gift cards. The card also includes handy benefits such as an auto rental collision damage waiver, travel and emergency assistance services, roadside dispatch, and purchase protection.
American Express Blue Business Plus: Best For Long 0% Intro APR
Blue Business Plus Credit Card from American Express
15.49% – 21.49%, Variable
Required credit: Good, excellent
Bonus offer: None
Purchase intro APR: 0% for the first 12 months
Balance transfer intro APR: 0% for the first 12 months
Foreign transaction fee: 2.7%
2 points per dollar spent on all purchases, up to $50,000 per year
1 point per dollar on all purchases after $50,000
Notable perks & benefits:
Expanded buying powerÂ â buy above your credit limit with no penalty fees
TheÂ Blue Business Plus Credit Card from American Express has one distinguishing feature that should be of particular benefit to those starting a business.
The card offers a 15-month intro 0% APR on purchases and balance transfers — the longest such period offered by any business credit card issuer. So while circumstance may force you to carry a balance on your card as your business gets on its feet, you’ll have 15 months before you start having to worry about paying interest.
As for spending rewards, they’ll come in the form of Membership Rewards points. You’ll earn 2X points on your first $50,000 in annual purchases with no category restrictions whatsoever. All purchases beyond this $50K annual double points limit will earn you 1 point per dollar spent.
Just as with some other Amex business cards, the Blue Business Plus lets you spend above your credit limit. There’s also no annual fee. On the downside, there’s no bonus offer, and the card carries a foreign transaction fee of 2.7%.
Chase Ink Business Preferred: Best For Big Signup Bonus
Chase Ink Business Preferred
18.24% – 23.24%, Variable
Required credit: Good, excellent
Bonus offer:Â 80,000 points if you spend at least $5,000 within the first three months of opening your account
Purchase intro APR:Â N/A
Balance transfer intro APR:Â N/A
Foreign transaction fee: None
3 points per dollar spent on the first $150,000 in combined purchases on travel, shipping purchases, internet/cable/phone services, and advertising purchases made with social media and search engines each account anniversary year
1 point per dollar on all other purchases
Notable Perks & Benefits:Â
Points are worth 25% more if redeemed for travel via Chase Ultimate Rewards
Points can be transferred to other travel programs on a 1:1 point basis
Business credit cards don’t typically come with bonus offers as generous as that offered by Chase’s Ink Business Preferred card.
The card offers 80,000 bonus points when you spendÂ $5,000+ on purchases in the first 3 months. Because your points are worth 25% more when you redeem for travel through Chase Ultimate Rewards, these 80,000 points can be worth $1,000 when spent on travel. For entrepreneurs needing to travel for business, this $1,000 bonus can be a godsend.
As for earning points, you can earn 3 points per $1 on the first $150,000 spent annually in combined purchases on the following items:
Advertising purchases made with social media sites and search engines
You’ll earn 1 point per $1 spent on all purchases in these categories after the $150K annual high-earning limit and on all other purchases. The card also carries some great travel benefits, has no foreign transaction fee, and you can transfer your points to various airline and hotel travel reward programs on a 1:1 basis.
Sadly, the card carries a $95 annual fee, no introductory 0% APR, and a higher purchase APR than that offered by Chase’s Ink Business Cash card.
Capital One Spark Miles Select For Business: Best For Travel Rewards
Spark Miles Select FromÂ Capital One
15.24% – 23.24%, Variable
Required credit: Good, excellent
Bonus offer:Â 20,000 miles if you spend $3,000 on purchases within the first 3 months of opening your account
Purchase intro APR: 0% for the first 9 months
Balance transfer intro APR: N/A
Foreign transaction fee: None
1.5 miles per dollar spent on all purchases
Notable perks & benefits:
Free employee cards
Redeem miles for any airline tickets, hotel stays, vacation packages and more with no expiration date
Transfer points to over 10+ travel partners on a 1:1 basis
The beauty of Capital One’s Spark Miles Select For Business lies in its simple travel rewards earning scheme: Earn an unlimited 1.5X miles on your every business purchaseÂ with no blackouts or seat restrictions and no minimum to redeem. Considering that you can redeem rewards directly for flights, this card can really benefit the startup that incurs a lot of travel expenses.
The Spark Miles Select card has no annual fee, no foreign transaction fee, and carries a 0% intro APR for 9 months on purchases, but not on balance transfers. However, there is no balance transfer fee.
The card’s bonus offer —Â 20,000 miles ($200 for travel) when you spend $3,000+ on purchases in the first 3 months — is more modest than that of many of the other cards featured in this article.
Brex Corporate Card: Best For No Personal Guarantee
Brex Corporate Card
N/A (this is a charge card)
Required credit: No credit requirements,Â though your business must have at least $100K in the bank
Bonus offer:Â None (though over $25,000 in discounts and credits for Brex’s partner services becomes available to you upon approval)
Purchase intro APR: N/A (this is a charge card)
Balance transfer intro APR: N/A
Foreign transaction fee: None
7 points per dollar spent on rideshares and taxis (all points multipliers are for Brex Exclusive members only)
4 points per dollar spent on travel booked through Brex Travel
3 points per dollar spent at restaurants
2 points per dollar spent on recurring software/SaaS purchases
1 point per dollar spent on everything else
Notable perks & benefits:
No personal guarantee required
Get 5 free cards when you open your account (additional cards cost $5 per user per month)
And now for something completely different. The Brex Corporate Card is a unique product — created in 2018 — that aims to disrupt the world of business credit cards. How does it do so?
The card does not require a personal guarantee. That means that in the event that your business goes under, you won’t be personally liable for the debt on your card and your personal assets will be safe!
Brex doesn’t even check your personal credit score when you apply for the card. Instead, Brex relies solely on the health and potential of your business when considering your application.
The Brex Corporate Card is a great fit for tech startups with at least some history, but not so much for entrepreneurs just starting out or the mom-and-pop dry cleaning place down the street. Your business will need at least $100,000 in cash assets in order to qualify for the card.
The Brex card offers some truly impressive points-earning rates on common startup expenses as well:
7 points per dollar spent on rideshares and taxis
4 points per dollar spent on travel booked through Brex Travel
3 points per dollar spent on restaurant purchases
2 points per dollar spent on software subscriptions
1 point per dollar spent on everything else (Brex Exclusive membership not required)
The only drawback is that to earn points at these rates (except for the 1 point per dollar on general spending), you need to make Brex your exclusive corporate card. You won’t be able to use any other cards for company-related purchases.
The Brex card is a charge card, so you won’t be able to carry a balance from month to month. Thankfully, there’s no annual fee.
Capital One Spark Classic For Business: Best For Average Credit
Entrepreneurs trying to realize their plans while dealing with average credit will find a lot to like about theÂ Capital One Spark Classic For Business credit card.
Being a card for business owners with average personal credit, the Spark Classic For Business doesn’t come with much in the way of bells and whistles. There’s no signup bonus, no intro 0% APR, you’ll get only 1% cash back for your purchases, and the APR is high (currently 25.24% variable).
However, if your credit is less than good and your startup doesn’t fit the profile of a business that would be eligible for the Brex card, the Spark Classic For Business is one of the few ways you can actually fund your business operations. Furthermore, the card has no annual fee, no foreign transaction fees, and there are no transaction fees applied to balance transfers (though the high APR still applies).
While the Spark Classic For Business can be a godsend, try not to carry a large balance from month to month.
Wells Fargo Business Secured Credit Card: Best Secured Card For Bad Credit
Wells Fargo Business Secured Credit Card
Prime + 11.90%
Required credit: Poor
Bonus offer: None
Purchase intro APR: N/A
Balance transfer intro APR: N/A
Foreign transaction fee:Â None
If you choose cash back rewards:
Unlimited 1.5% cash back on net purchases
Receive cash back automatically as a credit to your account or to an eligible checking or savings account each quarter
If you choose reward points:
1 point for every dollar spent on net purchases
1,000 bonus points when your company spends $1,000 in a billing period
Redeem points for gift cards, merchandise, airline tickets, and more
10% bonusÂ if you redeem points online
Extra bonus points or discounts fromÂ Earn More MallÂ retailers
As hard as it is to access startup capital when you’ve got average credit, it’s even worse when you’ve got bad credit. That’s where secured business cards like theÂ Wells Fargo Business Secured Credit Card come in.
With theÂ Wells Fargo Business Secured Credit Card, you make a security deposit of between $500 and $25,000. This becomes your credit limit, as you are essentially borrowing from your own money. Not ideal, but when your credit is bad, entrepreneurial beggars can’t be choosers.
If your credit stinks but your startup business is thriving, check out the Brex card instead. But for entrepreneurs with bad credit just getting out of the gate, the Wells Fargo Business Secured card is a solid option in the secured business card market. You can choose to enroll in either the Cash Back or the Rewards Points program. The first option gets you 1.5% cash back on every dollar you spend while the second option gets you 1,000 bonus points when your company’s spending is $1,000+ in any monthly billing period. Not bad for a secured card!
Unfortunately, there’s a $25 annual fee for each card you get (you can add up to 10 employee cards).
What You Need To Apply For A Business Credit Card
Here’s what you’ll need in order to apply for a business credit card.
Your business name — Note that your business doesn’t necessarily have to be a corporation or even an LLC. You sole proprietors and freelancers can just give your own name (or another name if you’ve filed for a DBA)
Your tax identification number — This can be your Employer Identification Number (if your business is a corporation/LLC/partnership) or your Social Security number (if you’re a freelancer/sole proprietor)
Your business type — Corporation, limited liability partnership, sole proprietorship, etc
The nature of the business you’re in — Designing apps, running a restaurant, selling hats for dogs on Etsy, etc.
Your role in the business
Your business phone number/address
Time in business
Number of employees
Annual business revenue — Brand new businesses can just put “$0” here
Your estimated monthly business spending
Remember, though you’re applying for a business credit card, your chances of getting approved will depend to a significant degree on your personal credit, and you’ll have to sign a personal guarantee, thus making you responsible for your business debt. (Note that this is not the case for the Brex card)
Great business ideas can come from anybody and anywhere. Unfortunately, startup capital is notoriously hard to access for those who were not born into wealth or privilege. Business credit cards may be an imperfect instrument for entrepreneurs trying to stake their claim to the ever-receding American Dream, but if you’re careful, they can help you manage your expenses and set you up for greater success.
Still trying to make sense of the world of credit? Here are some helpful articles for you!
Doâs and donâts of business credit cards
Best business credit cards for 2019
Using personal cards for business
The post The Best Business Credit Cards For Startups And Entrepreneurs appeared first on Merchant Maverick.
When looking for a voice over internet protocol (VoIP) provider, you’ve probably noticed that there are numerous services vying for your dollar. Because your dollar is important, we at Merchant Maverick created this holistic guide to the top VoIP providers.
At its core, VoIP doles out an alternative to traditional phone services over an internet connection. Providers can bundle in an array of features including voicemail, virtual attendants, call screening, and team collaboration tools. This article will take you through the top 10 VoIP providers for small businesses, giving you a well-rounded, but easy-to-read, guide on which VoIP service is best for you.
Curious what options top the field when it comes to VoIP? Then keep reading — we’ve got you covered!
The Quick List:
Small businesses wanting basic VoIP features at a reasonble cost
Organizations looking for a balance between price and features
Businesses that want general webinar features
Larger companies that want meeting support
Business that need low-priced VoIP with additional al a carte options
Business looking to combine meeting and webinar features
Companies wanting reasonably priced international calling
Vonage Business Cloud
Organizations that need integrated video and chat support
Skype For Business
Businesses that pay for Office 365 already
Businesses that pay for G Suite already
eVoice is a service owned by j2 Global, Inc., which is publicly traded on the Nasdaq. It was founded in 2000 as an Internet-enabled voicemail system before relaunching in 2010 with a wider array of features.
The company targets individuals, entrepreneurs, start-ups, and businesses. All eVoice plans include call-forwarding, a virtual answering service, advanced call routing, voicemail, custom greetings, call screening, web portal, mobile app, and call queuing.
eVoice features four plans with annual and monthly payments options. Here’s a quick breakdown: Lite ($10.82 or $12.99 a month), second tier ($24.99 or $29.99 a month), third tier ($41.66 or $49.99 a month), and fourth tier ($66.66 or $79.99 a month). Plans begin with two users, 300 minutes a month, and six toll-free/local numbers. They max out with 15 users, 4,000 monthly minutes, and 45 toll-free/local numbers.
eVoice does not require connection or setup fees. However, you will need to pay $29.95 per number each month if you wish to activate international lines. Calling international numbers also requires additional per-minute fees.
Users generally comment on how they like eVoice’s straightforward pricing, professional-sounding greeting system, and voicemail transcription. However, some find the company’s customer service to be lacking.
Based out of Scottsdale, Arizona, Nextiva is a privately-owned company that has been providing telecommunication services since its founding in 2008. As of 2017, the company boasted 150,000 clients. Among these clients include Delta Airlines, Yum Brands, and the Cleveland Cavaliers.
Nextiva’s all-encompassing option is its “Business Communication Suite.” Besides phone service, this package features plans that include services such as sales and service CRM and team collaboration. You can also sign up for just the “Customer Relationship Suite” which includes everything except for phone service and team collaboration. A third option, to gain access to only Nextiva’s team collaboration beta, is also available.
This means that you’ll need to shell out for the communication suite if you want to take advantage of Nextiva’s VoIP features. All of Nextiva’s communication suite plans include these VoIP features: unlimited calling, unlimited Internet faxing, voicemail with email delivery, free local phone number, free toll-free number, option to keep your existing number, advanced call management, auto attendant, call logs, multi-site support.
Three plans live under the communication suite banner: Basic ($20 – $35 a month), Pro ($25 – $38 a month), and Enterprise ($30 – $55 a month). Note that while every plan includes Nextiva’s VoIP service, not all plans include some features like customer surveys, website live chat, and detail analytics.
Users note that Nextiva has great customer service, good call quality, and solid reliability. However, some have commented on the service’s difficult setup.
GoToWebinar is a webinar conference serviced owned by LogMeIn, a cloud-focused, Nasdaq-traded company headquartered in Boston. The company owns an array of products including GoToConnect, GoToMeeting, OpenVoice, and Jive.
GoToWebinar advertises three separate pricing plans targeted towards companies that need to reach a large number of people. All plans include reporting and analytics, polls, handouts, Q&A, full-service registration, automated emails, custom branding, integrations, VoIP, phone and toll-free, online and local recording, GoToStage, and a channel page.
Here’s a quick rundown of those three plans: Starter ($89 or $109 a month), Pro ($199 or $249 a month), and Plus ($429 or $499 a month). The initial plan can reach up to 100 participants, while the next level up supports 500, and the top level 1,000. The higher-level plans also include features such as custom URLs, recorded events, transcripts, and web browser access.
If you need to reach more than 1,000 people (and up to 5,000), GoToWebinar offers an “Enterprise” plan. Public details regarding the plan’s cost/features are not available because this plan requires a sales consultation before purchase.
Users remark on GoToWebiner’s ease-of-use, high-quality audio and video, and its recording features. On the flip side, some wish it had more customization options and that support could be contacted via email or chat, not just by phone.
RingCentral is a cloud-based communications company located in California and founded in 1999. It has been publicly traded on the New York Stock Exchanges since 2013.
All plans from RingCentral come with unlimited phone calls within the US and Canada (international calls are charged on a per-minute basis), a toll-free or local number, and voicemail-to-text.
There are four pricing tiers available from RingCentral: Essentials ($19.99 – $39.99 a month), Standard ($19.99 – $49.99 a month), Premium ($29.99 – $54.99 a month), and Ultimate ($39.99 – $69.99 a month). Things start out at supporting 20 users and up to 100 toll-free minutes a month. The top-tier plan supports 200 people per meeting and 10,000 toll-free minutes a month.
There’s also an “Enterprise” option on tap for larger companies. You’ll need to ask for a sales consultation to receive info about pricing and plan details.
RingCentral also claims that it will price-match competitors’ plans. However, the company is unclear about how it decides what is or isn’t a qualifying match.
This provider is one of the few that advertises a free trial. You can test out any plan for up to 15 days and can cancel before the end of the trial period with no penalty. Note that the trial does limit you to five users and 50 minutes of talk time per user.
RingCentral generally receives positive marks for its dependability, robust feature set, and good-quality audio. As for negative marks, some comment on the service’s spotty two-factor identification and difficulty when trying to cancel.
Located in San Jose, California, Zoom is a video communications company founded in 2011. It is traded on the Nasdaq.
Zoom’s communication software features video conferencing, online meetings, phone systems, chat, and mobile collaboration. It is one of the few companies on this list to offer a completely free plan with no expiry date (note that this plan limits meetings to a maximum of 40 minutes).
You have four choices if you decide to go with Zoom: Basic (free), Pro ($14.99 a month per host), Business ($19.99 a month per host; requires a minimum of 10 hosts), and Enterprise ($19.99 a month per host; requires a minimum of 50 hosts).
Beyond Zoom’s core plans, you can also rent Zoom Rooms for $49 a month. This feature outfits a conference room with software meant to simplify the video conference process. You can also sign up for webinars (starting at $40 a month) that allow you to reach up to 100 interactive video participants and up to 10,000 view-only attendees.
Zoom further offers an audio-specific plan that starts at $40 a month. These plans come with local toll numbers, call out, and global toll-free and local dial-in for premium countries.
Users generally find Zoom to have high-quality audio and video, excellent file sharing features, and easy-to-use screen sharing. Others have voiced frustrations that the Basic plan caps meetings at 40 minutes and that UI is cumbersome to use.
Zoho is a privately-owned company that dates back to 1996. The meeting platform was launched in 2009 and the company claims to have more than 7,000 employees globally. Outside of online meetings, Zoho offers a slew of products that range from sales tools to HR solutions to email and office software.
The company promotes two key services under its meeting banner: One is specifically for meetings, and lets you collaborate digitally with clients and teammates located in across the globe. The second is focused on webinars and enables you to deliver presentations and product demos to potential prospects and leads.
Zoho’s meeting tools include RSVP scheduling, screen/application/webcam sharing, VoIP, chat, international dial-in numbers, and a toll-free add-on. For webinars, you can expect registration moderation, a customizing registration form, reminder emails to all attendees, screen/application/webcam sharing, and VoIP. All webinar plans also include the ability to store up to 25 recordings.
Zoho features five available packages in all: Meeting ($8 or $10 a month per host), Webinar – 25 ($15 or $19 a month), Webinar – 50 ($23 or $29 a month), Webinar – 100 ($31 or $39 a month), Webinar – 250 ($63 or $79 a month). The Meeting plan allows for up to 100 participants and storage for 10 recordings. The webinar plans can reach up to 25, 50, 100, or 250 attendees.
Like with RingCentral, Zoho Meeting also offers a trial version. You’ll have 14 days to test out their services and, as an added bonus, no credit card is needed.
In general, users like how Zoho Meeting is simple and easy-to-use, does a good job making webinars interactive, and is able to integrate with other Zoho products. Some have noted that Zoho Meeting lacks a desktop app and its customization features are very basic.
8×8’s cloud-based phone services are focused on international calling. This means that small businesses that frequently call overseas will want to take a good glance at 8×8’s services and plans.
All plans come with high definition secure voice, mobile & desktop apps, presence detection, voicemail, team Messaging & business SMS3, high definition audio and video meetings with screen sharing, and G Suite/Office 365 integrations.
8×8 has four plans on offer: 8×8 Express ($12 a month per user), X2 ($23 or $23 a month per user), X4 ($43 or $45 a month per user, and X6 ($107 or $110 a month per user). Plans begin with unlimited calling within the US and Canada to unlimited calling within 47 countries. Higher-level plans include various features such as call recordings, unlimited internet faxing, call quality reporting, and post-call surveys.
If you’re on the fence about 8×8 the company’s lowest tier (8×8 Express) has a 30-day free trial available.
Users frequently comment on 8×8’s easy setup, great reliability, and solid array of desktop, web, and mobile apps. However, some have found customer service difficult to interact with when problems do arise.
Vonage Business Cloud
Vonage is a New Jersey-based communications company that was founded in 2001. It is traded on the New York Stock Exchange. Besides its business offerings, Vonage provides a range of residential solutions as well.
Within Business Cloud, users can expect these features across all plans: unlimited calling, unlimited SMS messages, call screening, call logs, virtual receptionist, mobile and desktop apps, and team messaging through VonageFlow. All plans require high-speed internet.
Vonage promotes three pricing plans for Business Cloud: Mobile ($14.99 – $19.99 a month per line), Premium ($24.99 – $29.99 a month per line), and Advanced ($34.99 – $39.99). All plans support up to 99 lines; businesses that require 100 or more lines will need to reach out to Vonage’s sales department before purchase. The higher two plans include additional features such as multi-level auto attendant, video conferencing, chat, file sharing, call recording, and visual voicemail.
You can try all three of Vonage’s plans free for 14 days. Any physical products purchased will need to be turned in within 30 days for a full refund.
Skype For Business
While not a full-on VoIP suite, Skype For Business could be an economical way for your business to set up online meetings. As Skype is run by Microsoft, access to Skype For Business is available when you sign up for either Office 365 Business Essentials ($5 a month per user) or Office 365 Business Premium ($12.50 a month per user).
Skype For Business comes with a couple of notable features. You’ll be able to create an encrypted audio or video meeting with up to 250 members that can be accessed via a personalized URL. On top of this, meetings can be recorded, screen sharing is available, and PowerPoints can be annotated in real-time. Skype also features built-in instant messaging.
Beyond Skype For Business, a business Office 365 account includes other perks, such as Outlook, Word, Excel, PowerPoint, and the cloud storage service OneDrive. The Business Premium plan can be tried free for one month.
Users like its easy setup, integration with Microsoft’s Office suite of applications, and ability to share files. Others mentioned that Skype can be difficult to use with a large group and that notifications glitch at times.
As another option that isn’t a total VoIP service, Google Hangouts comes bundled with Google’s G Suite. With Hangouts, you’ll be able to video chat with team members.
G Suite has three options: Basic ($6 a month per user), Business ($12 a month per user), and Enterprise ($25 a month per user). With Basic, you’ll be able to include up to 25 people in a meeting; with Business, the max is 50. Enterprise maxes out at 100. The Enterprise tier also includes the ability to record meetings and save them to Google Drive as well as the option to live-stream a meeting to up to 100,000 participants.
All three options also let users dial into a US phone number (Enterprise enables the option for international numbers). Hangouts features smart screen sharing, native apps for Android and iOS, and the ability to share presentations and spreadsheets.
G Suite includes other features beyond basic VoIP functionality: You’ll be able to use Gmail and Drive, plus Google’s branded Docs, Sheets, Slides, and Calendar programs.
Users positively note Google Hangouts’ simplicity of use, excellent integration into Google’s other apps, and ability to be used on both mobile and desktop. Negative remarks touch on problems when sharing images via Hangouts’ messaging feature.
Frequently Asked VoIP Questions:
Does My Business Need A VoIP?
If your business deals with a large number of calls, or frequently hosts conference calls, a VoIP system could be a welcomed addition. Besides streamlining your voice communication system, VoIP services will often enable you to cut costs compared to traditional phone carriers. VoIP can also offer improved audio quality and ease-of-use over traditional phone systems.
Some VoIP services also include webinar features. This could be a handy feature if your business frequently offers training to employees in different parts of the world, sells products to large audiences, or provides classes to clients.
How Do I Setup A VoIP Phone System For My Small Business?
If you’ve decided a VoIP service is right for your business, you’ll need to first nail down which service best fits your needs. This means comparing costs, hardware needs, calling features, and additional bonuses, like instant messaging, conference calling, and live chat software.
Because VoIP uses the internet, you’ll also need to make sure your business has a high-quality and reliable internet connection. This is especially important if you run a business that will have multiple users eating up bandwidth on calls. On top of this, you may be required to purchase additional hardware (such as phones or headsets) that best work with your chosen VoIP service.
Is There A Free VoIP Service?
Some services, like 8×8, RingCentral, and Zoho Meeting, offer a free trial that lasts between two weeks and one month. For completely free options, you will likely only manage to find VoIP systems centered around meetings. A prime example of this is the basic tier from Zoom. This option offers meeting capabilities for up to 100 participants, although you do have a 40-minute limit per meeting.
Another possibility for a collaboration-focused VoIP is to use either Skype for Business or Google Hangouts. While these systems aren’t exactly free, they are part of Office 365 and G Suite, respectively, which your business may already pay for because of their other office tools. Neither are full-on VoIP services; however, both will enable your business to set up conference (and 1-on-1) calls from pretty much anywhere.
If you are a solo-operated small business (such as a freelancer or professional consultant), you can also use the personal versions of Skype or Google Hangouts, which are both free to use. While you won’t be able to take advantage of enterprise-focused features, you will still be able to communicate with clients or project team members at no cost.
Finding the right VoIP service can save your small business time and money. With so many options and no one-size-fits all solution, there should be something that fits your business just right. Ultimately, the provider you choose will be one that matches your company’s needs while balancing cost and features.
The post Top 10 VoIP Providers For Small Business In 2019 appeared first on Merchant Maverick.
You’ve probably already heard of the terms “debit” and “credit.” After all, most of us no longer carry cash and use our debit or credit card to make purchases. When related to accounting, though, these terms take on completely different meanings.
Confused already? You’re definitely not alone. The concept of debits and credits can be difficult to grasp if you don’t have prior accounting experience. In this post, we’ll break down these accounting terms in their simplest forms, helping you understand debits and credits and why they’re so important to accounting. So, sit back, push aside everything you thought you knew about debits and credits, and get ready to learn more about this basic bookkeeping concept.
First, The Accounting Basics
Before we dive headfirst into debits and credits, it’s critical to understand a few other accounting terms. Don’t get overwhelmed with all of this terminology — we’ll tie it all together as you move further into this post.
Double-entry accounting is an accounting system where each transaction is posted in a minimum of two accounts. Though more time-consuming, double-entry accounting offers many benefits to small business owners; notably, it ensures more accurate reporting and makes it easier to spot errors.
Let’s step away from the numbers for a second and look at double-entry accounting on a more scientific level. Sir Isaac Newton’s Third Law states that “For every action, there is an equal and opposite reaction.” Though this typically applies to motion, we can also use this idea to understand double-entry accounting.
Let’s take a look at a basic example. Your business purchases supplies that are needed for operations. You spend $5,000 from your business checking account. You now own $5,000 in supplies, which you’ll record in your books. However, double-entry accounting requires each transaction to be posted to at least two accounts. So, while you now have supplies, the cash in your account decreased by $5,000 — equal but opposite.
How do debits and credits tie into all of this? We’ll get to that in a minute. For now, though, you should have at least a basic understanding of double-entry accounting. If you want to learn more, be sure to check out our post What Is Double Entry Accounting (And Do You Need It)? which dives into this concept in greater detail.
Double-entry accounting means that transactions are posted to two or more accounts. But what exactly is an account? A simple way to explain it is by thinking of accounts as categories that are used to organize your transactions. Sorting your transactions by account helps you easily track how money is coming into your business, as well as where it’s being spent.
There are five main types of accounts, although these can be further divided into sub-accounts. For now, though, we’ll focus on five core accounts that every business owner should know: assets, liabilities, equity, revenue, and expenses.
Assets:Â Assets are everything that is owned by your business. This includes but is not limited to your equipment, commercial vehicles, commercial real estate, computers, and cash. These are known as tangible assets — in other words, physical property. There are also non-physical assets — or intangible assets — that belong to your company. Examples of intangible assets include your logo and trademarks.
Liabilities:Â Liabilities are your debts, or money that you owe to other people. Some examples of liabilities include a business loan from a bank or other lender, money that you owe to your suppliers, or payroll taxes. Accounts payable (or money that is owed but is not paid upfront) is considered a liability.
Equity:Â Equity reflects the owner’s interest in the business. In addition to retained earnings, equity also includes stock.
Revenue:Â Revenue, or income, is money that is earned by your business. This is typically through the sales of products or services, but the business may also receive other types of revenue, such as earned interest.
Expenses:Â Expenses are costs that are needed to keep your business in operation. Expenses may include office supplies, insurance, and rent. While liabilities are paid in the future, expenses are paid immediately.
When posting transactions to your accounts, debits and credits are used to balance your books. In the next section, we’ll take a look at debits and credits, what they are, and how they’re used in accounting.
What Are Debits & Credits?
A debit is an accounting entry made in your books that reflects an increase in assets, revenue, or expenses. A debit is also used to record a decrease in liabilities or equity. Debits are recorded in the left column of a journal or general ledger.
A credit the exact opposite. It is an accounting entry that is recorded to show an increase in liabilities or equity. A credit also reflects a decrease in assets, revenue, or expenses. Credits are recorded in the right column of a journal or general ledger.
How Do Debits & Credits Work?
Now, let’s start tying debits and credits back into double-entry accounting. Remember, when using double-entry accounting, transactions are posted to a minimum of two accounts. When recording these transactions, at least one debit should be recorded in the left column, while at least one credit should be recorded in the right column. The left column and the right column — your debits and credits — should be equal.
If, for example, you obtain a loan to purchase a piece of equipment, you now have the equipment as an asset. Since your assets increased, a debit is recorded in the left column. Now, we need to balance this out with a debit. Because you obtained a loan from your bank, you now have a liability. Since your liabilities have increased, a credit is recorded in the right column. Your transactions should always balance out. If not, an error has been made somewhere in the process and will need to be corrected.
An Example Of Debits & Credits In Action
Now, let’s circle back to the example that was used when explaining double-entry accounting to see how debits and credits work. You purchased $5,000 worth of supplies using funds from your checking account. Remember that money is an asset, and an asset that decreases is recorded as a credit in the right column.
Because double-entry accounting requires you to post each transaction under two accounts, we need to balance this out. Since supplies are an expense, your expenses have now increased. Therefore, the $5,000 is posted as a debit in the left column.
Now, both columns are balanced.
Subcategories such as “Cash” and “Supplies” may be used to further sort your transactions. However, even when using subcategories, the credit and debit in this example remain the same.
Let’s change the example a bit. In this instance, you have purchased $5,000 in supplies. However, you don’t pay your supplier upfront and will receive an invoice at a later time. The supplies also still an asset, but the credit would be recorded under the “Accounts Payable” subcategory instead of “Business Checking.” Because “Accounts Payable” is still an asset account, your supplies are still entered as a debit.
Now, what if you paid some money down to receive your supplies? For example, let’s assume that you paid $1,000 from your checking account now, and $4,000 will be due to the supplier at a later time. The supplies are still an asset and would be recorded as a debit. The full $5,000 would be entered under your Supplies subcategory on the left side. However, the right column (your credits) would now have two entries. The $1,000 paid from your own account would be recorded under the subcategory “Business Checking,” while the $4,000 that will be invoiced would be entered under the subcategory “Accounts Payable.” Both debits and credits remain balanced.
The Importance Of Debits & Credits
We’ve established what debits and credits are, but why are they so important? One of the reasons that debits and credits are so important is because using them helps maintain balance. Let’s take it back to the basics by looking at the accounting equation. This equation states:
Assets = Liabilities + Equity
By using the system of debits and credits, we can maintain this balance.
What if the accounting equation — or our books — aren’t equally balanced? Then there is an error somewhere that will need to be corrected. With the double-entry accounting system, recording your credits and debits allows you to quickly spot errors and easily correct them. While using debits and credits doesn’t eliminate errors completely, it does reduce them and make errors easier to identify.
Using debits and credits also gives you a more accurate picture of your finances. By tracking your revenue and expenses in an organized way, you’ll have a clearer view of the profits and losses of your business.
Sound Complicated? Let Accounting Software Handle Debits & Credits For You
If you’re still feeling overwhelmed, you’re definitely not alone. Accounting concepts can be difficult to grasp, especially when trying to learn them while also running your own business. Fortunately, it’s rare that you’ll have to manually handle debits and credits if you have the right accounting software. Today’s accounting software does most of the heavy lifting for you, meaning the double-entry accounting and the balancing of debits and credits happens behind the scenes. All you have to worry about is setting up your chart of accounts, and entering your income and expenses into the appropriate account categories.
Ease of Use
Small – Large
$20 – $150/mo
$9 – $29/mo
Medium – Large
$9 – $60/mo
$15 – $50/mo
Sage Business Cloud
Small – Medium
$10 – $25/mo
It is, however, important to have a grasp of these accounting concepts. This allows you to be able to spot potential errors, understand the numbers on your financial statements, and be able to select the software that’s best suited for your business. Not sure of what software to check out first? Take a look at our accounting software reviews to see which options are out there. And if you want to get into the nitty-gritty of accounting and expand your knowledge, download our free Beginner’s Guide to Accounting.
The post What Are Debits And Credits? appeared first on Merchant Maverick.
We’ve all seen the reality TV shows for flipping houses. Someone buys a fixer-upper, completely transforms the house in no time at all, and then flips it for a hefty profit. The reality of fixing and flipping homes isn’t quite so simple. But don’t be fooled — house flipping can be a lucrative venture, although it can take more time, work, and money than what the home improvement shows disclose.
Whether you’re looking to make a little money on the side or you want to start a full-fledged business to replace your traditional 9-to-5, there’s one thing all house flippers have in common: the need for capital. Most people don’t have the funds to flip a home, but the good news is that you don’t have to have a loaded bank account to get started. There are multiple loan options available to you, whether you’re new to the game or a more experienced real estate investor.
In this post, we’re going to take a look at the best loans for flipping houses. These funds can be used to purchase investment properties and fund renovations so you can resell the home for a profit. You’ll learn how to qualify for these loans, why they’re a great idea for house flipping, and the potential drawbacks before you sign your loan paperwork.
Hard Money Loans
Contrary to what the name suggests, a hard money loan isn’t hard to get at all. In fact, it’s one of the easiest loans to secure for purchasing investment properties. However, that convenience comes at a price — something we’ll go into more detail about in a minute.
A hard money loan is private funding obtained from investors or individuals. Unlike financing with a traditional lender such as a bank, your credit score and income aren’t necessarily a requirement for qualifying. Instead, a hard money loan is secured with an asset. With a house flipping business, the property you’re fixing would serve as your collateral and could be seized if you don’t pay your loan as agreed. Funds from hard money loans can also be received quickly — in just days or weeks compared to months with other funders — which may be necessary if you have to move fast to snap up a great deal.
Hard money loans are a good option — and in some cases, the only option — for borrowers with poor credit scores, low income, or other barriers that would prevent them from qualifying for traditional loans. Because the property and its potential resale value are most important to the lender, hard money loans are best for experienced flippers that have fixed and flipped at least one property. However, if you’re a new business owner, you may still qualify, particularly if you are working with a contractor to improve the property.
While qualifying for a hard money loan is easy, there are, of course, a few drawbacks. The first is that hard money loans are short-term loans. Typical repayment terms are 1 to 5 years. As with other forms of short-term funding, hard money loans also have high interest rates when compared to more traditional types of financing, typically in the double digits. The goal, then, is to purchase the property, renovate, and sell it as quickly as possible.
Home Equity Loans & HELOCS
You can also use your own assets — your personal residence — to fund your fix-and-flip venture. How? With a home equity loan or home equity line of credit (HELOC). If you have equity in your home and meet other requirements, you may qualify. Here’s how it works.
As you pay down the mortgage on your home, you build up equity — in other words, this is the difference between the value of the home and what you owe on your mortgage. Rising property values may also contribute to equity. Let’s look at an example. If your home is appraised at $500,000 and you owe $200,000 on your mortgage, there is $300,000 in equity in your home. This equity can be used to secure a home equity loan or line of credit that can be used for any purpose, including the purchase of an investment property.
A home equity loan, which is also known as a second mortgage, provides you with a lump sum that is repaid over a long period of time. A HELOCÂ allows you to draw from a set line of credit multiple times until you enter the repayment period. A home equity loan is the better choice if you know how much money you need to purchase and fix up your property. A HELOC is the best option if you need more flexibility with your funding.
To qualify for a home equity loan or HELOC, a bank or other lender will look at the amount of equity in your home. The lender then uses a loan-to-value ratio to determine how much you can borrow. In addition to owning a home with equity, qualifying borrowers must have a low debt-to-income ratio and a solid personal credit score. You do not have to have prior house flipping experience to qualify.
Home equity loans and HELOCs have low interest rates and long repayment terms, making it more affordable for borrowers to get the funds they need. The downside, however, is that approval and funding of the loan may take a long time, so it’s not ideal for deals that will move quickly. You also put your personal home at risk if you default on payments.
Business Lines Of Credit
If you like the idea of a flexible line of credit but don’t want to put your home on the line, you could fund your business activities with a business line of credit. With a business line of credit, you’ll be approved for a set credit limit. You will be able to make multiple draws against this line of credit up to this limit. If you have a revolving line of credit, you’ll be able to continuously access funds as you pay down your balance.
If the line of credit is unsecured, you won’t have to put up specific collateral, although the lender may put a UCC blanket lien against your business assets or require you to sign a personal guarantee.
A business line of credit is great for fix and flips because of the flexibility offered. If, for example, a renovation goes over budget, you can access additional funds, provided you haven’t already hit your credit limit.
Lenders use information about your business to determine if you qualify for a line of credit, as well as your credit limit. At a minimum, lenders will evaluate your time in business and revenue for at least the last three months. Other lenders may have annual revenue, personal credit, and business credit requirements. Since you will need to show some business revenue and at least a few months of operations, this isn’t ideal for brand new businesses or businesses that haven’t yet made any money.
There are quite a few reasons why you should consider applying for a business line of credit for your fix and flip business. There are few restrictions on how most lines of credit are used, so you can put funds toward purchasing and renovating a property. Also, there are many lenders that don’t take personal or business credit history into account, so this could be a funding option for anyone with a low personal credit score or a lack of business credit.
Of course, like all other forms of funding, lines of credit have their drawbacks. In order to receive the best rates and terms, there are higher borrower qualifications that you might not meet. Lines of credit with minimal requirements may have high interest rates, shorter repayment terms, and additional fees. You might also find yourself limited by your assigned credit limit and be unable to fully fund your renovation.
Rollovers As Business Startups
If you want an alternative to traditional funding, you may be able to put your 401(k) or another retirement plan to work for you through a rollover as business startup (ROBS). Normally, early withdrawal of your retirement funds means that you’ll have to pay taxes and other penalties. However, a ROBS allows you to bypass these penalties and use your retirement funds for your business.
Here’s how it works. A new C-corporation is set up, along with a new retirement plan. Funds from your existing plan are rolled over into the new plan. Funds are now used to purchase stock in the new C-corp. Then, the proceeds from the sale of stock can be used for any business purpose, including funding your fix and flip business.
One of the biggest benefits of a ROBS plan is that you are not borrowing from a lender, so you don’t have to worry about interest rates, closing costs, and other fees. However, many people opt to have their ROBS plan set up and managed by a ROBS provider, which requires a setup fee and monthly maintenance costs. A ROBS provider can get everything set up legally, while also ensuring you maintain compliance.
With a ROB plan, you don’t have to worry about factors like income, time in business, personal credit history, and a business credit profile. You do, however, have to worry about one major drawback: potentially losing your retirement funds if your fix and flip business fails.
If you’re just starting your business, you’ll find that qualifying for business loans is challenging — if not impossible — for new businesses. This is because newly launched businesses are unable to meet requirements such as a business credit profile and annual revenues. If you don’t qualify for a business loan, why not use your personal information to qualify for a personal loan for business?
A personal loan is a loan that is taken out in your name, not the name of your business. With a personal loan, your business experience (or lack thereof) isn’t a factor for approval. You’ll use your income and your personal credit profile to qualify. Once approved, you’ll receive a lump sum that can be used for business expenses. There are multiple avenues you can take to receive a personal loan for business, from your bank or credit union to online lenders.
Personal loans can have very favorable rates and terms, resulting in a lower overall cost of borrowing. However, the best rates are reserved for borrowers with low debt-to-income ratios and a solid credit history. If you have personal credit challenges, you may qualify with some alternative lenders. However, you may have higher interest rates and shorter repayment terms, or be required to put up collateral to secure the loan.
If you’re more experienced in flipping houses, you may qualify for a traditional loan or mortgage from a bank, credit union, or other financial institution. These work just like the mortgage of your primary home: the lender gives you money, you make the purchase, and then you repay the loan over a longer amount of time — typically 15 to 30 years.
The good news with these loans is that interest rates are very low. However, qualifying can be difficult. To qualify for a mortgage, you’ll have to show previous experience in flipping houses, meet credit guidelines, and fulfill other requirements. Not all lenders will offer loans or mortgages for properties that aren’t occupied by the owner. Others won’t lend on homes that are in extreme disrepair. Because of its long repayment terms, going the traditional route is often a good idea if you plan to fix up a property and rent it out (or “buy and hold” as it is known in the industry) instead of immediately selling once renovations are complete.
How To Improve Your Chances Of Being Approved For A Fix & Flip Loan
While there’s never a guarantee that you’ll get approved for a loan for your fix and flip business, there are a few steps you can take to improve your odds. The lending process can also be lengthy, especially if you don’t understand the application process. Know what to expect and be prepared by taking the following steps.
Have A Business Plan
Lenders want to work with low-risk businesses that have a greater chance of success. After all, if a business fails, it is more likely to default on the loan. You want to show your lender that you are serious about your house flipping business and that each property is worth the investment. Your business plan should include information about your business such as your industry experience, your objectives, and a financial summary. Learn more about writing your business plan.
Each time you plan to rehab a property, an analysis of that property should be included in your business plan. We’ll discuss what you should include in this analysis in just a minute. Taking the time to analyze each property also is critical for getting the right amount of money from your lender.
Have A Property In Mind & A Plan Of Action
In order to be able to analyze a property and present this information to a lender in your business plan, you must first have a property in mind. Once you’ve found a property, you need to create a plan of action, from what contractors you’re going to use to how much the property will be worth once it’s rehabbed. This not only gives you a better understanding of the costs and timeline of your renovation, but this plan of action should also be included in your business plan.
What should your plan include? At a minimum, address the following points:
Sale prices of comparable homes
Financial projections for the renovation
Timeline from acquisition to flipping the property
Information about who will be involved in the rehab, such as business partners and contractors
Appraisal of the property in its current state
Estimated value of the property post-renovations
If you’re new to fixing and flipping homes, it’s wise to work with someone that is familiar with the industry. This could mean taking on an experienced business partner, working with contractors that specialize in renovations, or talking to real estate investors. These individuals can share their expertise, which can help you have a better understanding of the business and create an effective and realistic plan of action.
Understand The Costs Of Flipping The House
When it comes to flipping houses, one area that commonly trips up newbies is estimating the costs associated with acquiring and renovating a home. It is very easy to underestimate the costs of fixing and flipping a home. If this occurs, you risk not borrowing enough money from your lender, which could significantly delay your project.
Experienced flippers know that creating a detailed scope of work is imperative to fully understand the costs associated with flipping a property. You can work with a contractor and an appraiser to get a more accurate picture of costs. Some costs to consider include but are not limited to:
Purchase price of the property
Labor: Electricians, plumbers, landscapers, painters & general contractors
The cost of your renovation will vary widely based on the amount of work that needs to be done. For example, a home that only needs a few cosmetic fixes (upgraded countertops, paint, or new flooring) may have very few associated costs to get it ready for the next buyer. On the other hand, a home that needs structural work, a new roof or HVAC unit, or an additional room may have significantly higher costs.
In addition to the cost of buying and renovating the property, you have to consider other expenses such as property taxes, property insurance, real estate agent fees, and marketing costs to sell the property.
Even with careful planning, you should always expect the unexpected. Unforeseen issues can arise during the renovation process that can increase your costs and add to your timeline. But the more details you include in your scope of work, the more accurate your calculations will be.
Improve Your Credit
Most people don’t have the perfect credit score, so there’s always room for improvement. Cleaning up your credit and taking steps to boost your score not only increases your chance for approval, but also opens up more funding options and helps you qualify for the best rates and terms.
While there is no overnight fix for raising your credit score, there are some steps you can take that can raise your score by several points or more over a few weeks or months. This includes accessing your free credit score, disputing any errors on your report, paying down (or paying off) debts, and keep your balances low. Always make your minimum payments on time (and pay more, if you can) to lower debt and help increase your score. Learn more about how you can raise your credit score before applying for a loan.
Think outside the box
Sometimes, even the most carefully laid plans fall through. For example, maybe the funding you had in place suddenly fell through and now you’re back to square one. It happens to even the most experienced entrepreneurs. The key is to not let it slow you down and to think outside of the box. If you’re having trouble securing funding through traditional lenders or face high interest rates and less-than-stellar terms, consider other financing options. This could include using a real estate crowdfunding platform, taking on a business partner with capital to invest, or tapping a friend or family member for a loan.
Fix & Flip Business Loan FAQs
What type of expenses will fix and flip loans cover?Â
You can get a loan to cover nearly any expense for your fix and flip business. Funding methods like ROBS and home equity loans have few — if any — restrictions on how they are used. Funds from your loan can typically be used to cover a down payment, pay fees and insurance, purchase the property, and fund rehab costs. However, it’s always important to check with all potential lenders to find out about any restrictions on how funds are used.
What is the best fix and flip loan for a beginner?
If you’re a beginner, there are a few funding options to consider for your first fix-and-flip property. Using your own money through a ROBS is one option that has several benefits, such as no credit check or high interest rates. If you have a good credit score and equity in your property, you might also consider a home equity loan or line of credit. All of these options do not have time in business, business credit score, or annual revenue requirements.
Hard money loans may also be an option, but due to higher interest rate, you should explore other alternatives first. While many hard money lenders require you to have some experience fixing and flipping properties, you may still qualify provided you have a solid business plan and connections with experienced contractors or business partners.
Can I get a fix and flip loan without putting money down?
When you apply for a fix and flip loan, lenders typically look at two numbers: the loan-to-value ratio (LTV) and the after-repair value (ARV). The LTV is the size of the loan compared to the value of the property. Most lenders cap their maximum LTVS at 90%, while others may have higher or lower requirements. For example, if you’re purchasing a property that costs $200,000 and will borrow from a lender with a maximum LTV of 90%, the lender will fund $180,000. You will be required to pay $20,000 as the down payment of the home.
Other lenders calculate how much you can borrow based on the ARV of the property. This is the estimated value of the property after it has been renovated. Using the same example as above, let’s assume that the ARV of the property is $300,000. In this example, let’s say the lender will loan a maximum of 80% of the ARV. This means that you can borrow up to $240,000.
With many loans, you may be required to make a down payment. However, some hard money and private lenders may fully fund your real estate deal with no money down. You may also consider other more advanced methods of flipping properties, such as wholesaling — putting a property under contract and then selling that contract to another buyer. Before you dive into these different loans and methods, consider speaking with an experienced real estate investor and fully researching your options.
Can I get a fix and flip loan without a credit check?
It is possible to get a fix and flip loan without a credit check by working with a hard money lender — an individual or investment group that bases its loan approvals on the value of the property and not your credit score. The good news is that personal credit isn’t a factor for approval, so if you have bad credit or a lack of credit history, you may be approved based on the property you’re interested in renovating. On the flip side, though, hard money loans are notorious for high interest rates. These are short-term loans, which means that you’ll have to purchase, renovate, and sell the property quickly.
You may also qualify for a business line of credit if you have an established business. Some lenders will look at performance metrics such as your time in business and annual revenues to determine if you qualify. As with hard money loans, you may face higher interest rates, additional fees, and shorter repayment terms if you go this route.
If you have a retirement account, you can set up a ROBS to use your own funds for your real estate purchase. The only requirement is to have a qualifying retirement account with a minimum amount of funds — no credit check required.
Operating a fix and flip business certainly isn’t like what you see on “reality” TV. The reality is that it takes time, hard work, and capital to flip houses. However, when it’s done right — and you find the right funding for your situation — flipping houses can be a very lucrative and rewarding venture. As with any type of loan, make sure you do your research, understand the challenges ahead of you, and make the best decision based on your business goals. Good luck!
The post The 6 Best Ways To Get A Fix And Flip Loan For Your House Flipping Business appeared first on Merchant Maverick.
When it comes to paying your employees, setting up a payroll system is an important component of your business plan. But before you set up a payroll system, you’ll need to make a few choices, and one of the first is to decide on the pay schedule that works best for your business. Should you pay employees monthly? Bi-weekly? What do all those terms mean and what are the pros and cons of each? How do you know you’re making the best choice for your business?
Read on while we delve into the debatable topic of pay schedules.
Types of Pay Schedules
Pay schedule is defined by your pay period and your pay date. When and how often will you pay your employees? There are four major prevailing pay schedule types businesses may choose when setting up payroll:
Each type has its own pros and cons, and assessing the right fit will boil down to what works best for your business and your employees. However, it’s important to note if your state has a minimum payroll frequency requirement or other payday requirements based on industry.
What it means for your business and employees
Employees are paid more often for a total of 52 paydays per year.
Employees are paid every other week for a total of 26 paydays per year.
Employees are paid twice a month for a total of 24 paydays per year.
Employees are paid once a month for a total of 12 paydays per year.
The Weekly Pay Schedule
The weekly schedule means employees are paid every week for 40 hours of work, usually on a Friday, with 52 paychecks a year.
Paying weekly is a standard in some of the trades like construction, warehouse, plumbing, or back-of-house jobs. In general, employees like being paid more often, and a weekly pay schedule works best for employees living paycheck to paycheck. It is also the easiest for calculating overtime for employees who work irregular schedules.
The more pay periods, the more money your company might lose in fees, especially if your payroll system charges per payroll run. Fewer payroll runs, fewer costs. Not only does a weekly payroll cost the most for your company but it also takes up the most time for or your accountant.
The Bi-Weekly Pay Schedule
The bi-weekly schedule means employees are paid for 40 hours of work every two weeks, usually on a Friday, for 26 (or 27) total payments a year. With the bi-weekly method, two months out of the year, employees will be paid three times a month, and the way weeks fall year-to-year will impact whether you issue 26 or 27 paychecks annually (Leap Year, you sly little troublemaker).
This is less expensive than running a weekly payroll and less time-consuming. This method is often the most ideal for hourly workers and preferred among employees for its consistency (every other Thursday; every other Friday, etc.) and can be useful for financial planning and paying bills.
Bi-weekly pay can be the most cumbersome for an accountant or payroll supervisor in terms of time and difficulty. With the inconsistency of 26 or 27 paychecks, this method is the most headache-inducing to calculate benefit deductions and taxes.
The Semi-Monthly Pay Schedule
The semi-monthly schedule pays employees for 40 hours of work twice a month usually on the 1st and 15th (or 15th and 30th) of the month, for 24 payments a year. How is this different than bi-weekly? Under the semi-monthly plan, paychecks are consistent and there are only two paydays per month. Employees receive fewer and slightly bigger paychecks on the semi-monthly schedule.
Accountants like the consistency of running payroll. Payroll dates are set, and there is no confusion about paydays. Filing and taxes line up nicely at the end of the month with reporting cycles.
Bank holidays can put a wrinkle in a payment schedule, and the semi-monthly pay schedule doesn’t always line up with the work week.
The Monthly Pay Schedule
Employees are paid for their 40 hours of work once a month, toward the end of the month, for 12 payments a year.
This is the easiest for the employer with only 12 payroll runs per year; also, your payroll money has longer to sit and accrue during the month. It’s the easiest to run for salaried employees, and is the most cost-effective method. Accountants like it, too!
This is the least preferred method among employees.
How To Choose The Right Pay Schedule
In trades, where irregular scheduling makes week-to-week different, paying your employees consistently is an important factor. If it is industry standard to pay your employees weekly, it’s best to remain competitive and (if you can swing it) offer weekly pay.
However, choosing a pay schedule has more to do with the time you can commit to payroll and any state requirements you need to follow. If you pay employees a salary, calculating hourly wages may be less of a concern. So, as you try to marry your needs and wants, ask yourself these questions:
Do I have the hours/ability to commit to a weekly payroll?
Do I have a professional/service calculating payroll taxes/deductions?
How much is my time worth?
What method of payment would my employees prefer?
Does my payroll service charge per payroll run?
Do I want every Leap Year to make me irrationally angry at the universe?
Does my state have a minimum paycheck requirement?
What does my monthly cash flow look like?
Does my industry offer overtime? Which pay schedule is best for calculating overtime?
Payroll is important, necessary, and a foundational aspect of your business. The pay schedule you choose will impact your business, dictate your cash flow, and matter a lot to your employees. No pressure, right? If you have an accountant or bookkeeper, weighing their time and abilities is important: you do not want to create a burden on employees. However, once you’ve decided on a method, stick to it and, if you’re ready, outsource as much of payroll as you are able.
There are many cloud-based payroll software options for small businesses and some of those even allow for different pay schedules depending on employee type. We recommend Gusto as a place to start for full-tax services with competitive pricing. However, each payroll system is unique — like your business — and you might find one of the other systems a better fit. Check out our reviews of Square, QuickBooks, Paychex, and ADP to see if there is a program that works for you.
The post Choosing The Right Pay Schedule For Your Business appeared first on Merchant Maverick.
When it comes to cloud accounting, it’s almost impossible to ignore FreshBooks. The software serves as the accounting home to over 10 million customers, a number that speaks to FreshBooks’s reliability and popularity. However, there are a few other kids on the block worth considering.
If you’re a FreshBooks user who has tired of the service or miss FreshBooks Classic — or perhaps you’re just in the market for new accounting software and want to know all your options — we’ve compiled a list of various other accounting programs for small businesses. Below, you’ll find seven of the best FreshBooks alternatives that match up well in terms of business size, features, accounting ability, and more. Read on through to find out if FreshBooks is right for you — or if you should try something else.
Overview of FreshBooks
Founded in 2003 and based in Toronto, Canada, FreshBooks offers an array of accounting features, including invoicing, estimates and proposals, contact management, and expense tracking. However, it also lacks other features like traditional accounts payable and budgeting.
The company is especially praised for its top-tier customer support and easy-to-use software. Unfortunately, these boons come at a cost. FreshBooks is among the more expensive bookkeeping solutions, with plans ranging from $15 to 50 per month. On top of monthly rates, extra users will put you out even more; all plans start by allowing a single user, and additional users run $10 per month each. Plus, only the two most expensive plans actually have double-entry accounting, meaning the smallest plan isÂ not an accounting solution for small businesses — it’s just glorified invoicing software.
With user limitations in mind, freelancers, micro-businesses, and small businesses in need of simple accounting features probably fit FreshBooks best. Larger businesses with multiple users, or companies that require advanced accounting tools, should look elsewhere.
Excellent customer support
Good mobile apps
Plenty of integrations
Expensive monthly rates
Limited feature set
Best for small businesses looking for strong accounting, advanced features, and overall robust small business accounting software.
With over 2 million users and over 15-plus years of company history, it’s hard to overlook QuickBooks Online. This cloud-based, double-entry accounting program brings plenty of nifty features like invoicing, contact management, tax support, and lending. Plus, many like it for its ease-of-use, 500+ integrations, and invoicing automations.
QuickBooks Online does receive poor marks across the web for customer support and a sometimes unintuitive interface. However, there are still plenty of positives with QuickBooks’s online service.
QuickBooks Online is great for small to medium-sized businesses wanting strong accounting, integrations, and features. Plus, the QuickBooks Online Advanced plan is suitable for larger businesses (although those needing more than 25 users will want to steer towards larger waters).
QuickBooks Online Features
QuickBooks has bundled this program with numerous features, including many standard accounting tools. Here’s a quick rundown of a few notable features in QuickBooks Online:
Chart of accounts
Up to 80 reports
QuickBooks Online Pricing
You can snag a QuickBooks Online subscription $20 – $60 a month. The more expensive the plan, the greater the number of features. Additional features can be accessed via QuickBooks Online Advanced, which goes for $150 a month, and payroll costs an additional $35 â $80 a month plus $4 a month per user.
How QuickBooks Online Compares To FreshBooks
While QuickBooks Online runs $5 – $10 more than FreshBooks, it packs in plenty of punch for your dollar. With its complete array of features, QuickBooks Online is simply the stronger and more well-rounded program.
On the flip side, FreshBooks clocks in with better customer support and a more intuitive interface. If you’re a small business that just wants a simple and basic bookkeeping program, FreshBooks could still be the way to go.
Take a deeper dive by reading QuickBooks Online vs. FreshBooks.
With a healthy array of features, QuickBooks Online makes for a great alternative to FreshBooks. While the monthly fees aren’t cheap, this program includes all the bells and whistles needed for a small business to have a complete accounting experience. If you can spring for the extra cost, and will utilize the more advanced features, QuickBooks Online is worth the look.
Best for freelancers and small businesses needing free, full-featured accounting software.
The free-to-use Wave, which splashed onto the scene in 2010, makes a great fit for those who can’t spare extra cash for accounting software. Wave doesn’t skimp out on features despite its $0 price tag. By adding Wave to your arsenal, you’ll have access to a strong accounting service with decent invoicing and lending, and an overall robust feature set that’s easy to learn.
Some users have remarked online that Wave does lack when it comes to providing good customer service. However, reviews are generally positive for the product as a whole.
The free angle makes Wave ideal for freelancers and microbusinesses that just need a straightforward accounting program and can’t shell out $100+ per year. There’s also a nifty Etsy integration that could be especially attractive to sellers on that online marketplace.
Even though Wave is a free product, it includes a stunning array of features that won’t constrain most users. Here’s a glance of some worthwhile features included with Wave:
Separate personal and business expenses
As mentioned above, Wave’s basic accounting program is completely free to use. However, if you’re willing to dish out some extra dough, there are paid online payment and payroll services available.
How Wave Compares To FreshBooks
While FreshBooks offers more integrations and better mobile apps, Wave actually includes some features FreshBooks does not, like vendor management and accounts payable. On top of this, Wave provides double-entry accounting upfront — with FreshBooks, you’ll need to shell out for one of the more expensive tiers to get access to that feature.
Wave also has one big advantage over FreshBooks: it’s free. This means that Wave may not be quite as beefy as QuickBooks Online, but it’s still a solid service sold at a hard-to-beat price.
You can get a more in-depth breakdown with our FreshBooks vs. Wave comparison.
By providing a nice set of features at a $0 price point, Wave makes for a reasonable alternative to FreshBooks. Wave is especially great for freelancers or small businesses with only a couple of people. All told, budget-focused shoppers will want to give Wave a second look before moving on.
Best for small businesses wanting affordable accounting software that works well for international invoicing.
Rolled out in 2009, Zoho Books is an option with advanced features, strong accounting, and amazing invoicing, all for a reasonable price. I’ll also mention that Zoho Books has been adding features since launch without raising its price once. On top of its core tools, Zoho Books delivers stellar customer service, international invoicing, and a solid suite of mobile apps.
When scouring the web for user reviews, we’ve found that customers can be frustrated by the service’s lack of integrations and no payroll feature. However, praises are heaped for Zoho Books’ ease-of-use, affordability, and good customer support.
Zoho Books Features
As Zoho Books is a paid accounting service, it unsurprisingly offers a strong set of features. In fact, its current form is on par with the other heavy hitters in the accounting software world. Here’s what we at Merchant Maverick like about Zoho Books:
Chart of accounts
Fixed asset management
Invoice in multiple languages
Zoho Books Pricing
Three pricing plans ranging from $9 to $29 a month line the shop shelves for Zoho Books. You’ll be able to access more features, contacts, and users when spending on the more expensive plans. All plans include unlimited invoicing and estimates. Things cap out at nine users, although you can buy more spots for additional fees.
How Zoho Books Compares To FreshBooks
By far the biggest difference between Zoho Books and FreshBooks is price. You’ll need to open your pockets a bit more if you go with FreshBooks — Zoho Books can be between $5 and $20 cheaper. This, coupled with the fact that Zoho Books has the whole gamut of accounting tools, means that small businesses may prefer to pass on FreshBooks.
Of course, FreshBooks is still a great service. Its payment history tools are better rounded and its software preforms more smoothly. Like Zoho Books, FreshBooks also lacks native payroll tools (however, FreshBooks makes up by integrating with Gusto).
Otherwise, both services provide powerful accounting tools, solid mobile apps, easy-to-use software, and excellent customer service. FreshBooks and Zoho Books are also great options for international invoicing. As one last note, they are both better suited for smaller businesses that don’t require numerous users.
Zoho Books makes a great case for small businesses wanting an affordable accounting solution with international invoicing and good customer support. Those that need bundled payroll capabilities should pass. Overall, Zoho Books is worth considering if you operate on a tight accounting software budget.
Best for small businesses that lack accounting experience and are in need of affordably priced accounting software.
Having launched in 2015, ZipBooks is a relative babe in the wide world that is accounting software. However, this youngster still delivers plenty of features while mastering the art of simplicity — making it a worthy competitor to any potential combatant.
With ZipBooks’ powerful automation tools, you can expect to be able to hop in with its free plan and take full advantage — even if you lack much accounting know-how. This makes it attractive to small businesses that prefer a guiding hand over a service with intricate functionality.
On the downside, ZipBooks lacks invoice customization and generates limited reports. Some users also complain about having problems with its mobile apps.
Despite its free and low-priced plans, ZipBooks still comes with a solid number of features. Plus, its simple and intuitive design makes it a great fit for business owners that don’t have much accounting experience. Here’s a look at some key tools ZipBooks includes:
ZipBooks doles out three plans pricing $0 – $35 a month. There’s also a fourth plan that provides a personal bookkeeper; it starts at $125 a month. Every plan incorporates unlimited invoicing and every paid plan bundles in unlimited users, an especially impressive feat. By leveling up to a more expensive plan, you’ll gain access to more features.
How ZipBooks Compares To FreshBooks
Both ZipBooks and FreshBooks promise simple and easy-to-use accounting experiences. One major difference between both services is price. ZipBooks clocks in $15 – $25 cheaper than FreshBooks, so budget-minded small businesses may prefer the lower price point.
FreshBooks does at least include more functionality for its higher cost, though. From a great number of integrations to more customizable invoices, you’ll be able to do more with FreshBooks.
However, you may not be losing out if you go with ZipBooks. The service prides itself on delivering an excellent experience for those without in-depth accounting knowledge. If you or others in your business lack bookkeeping skills, you may not need FreshBooks’s functionality and will instead benefit from the simplicity ZipBooks delivers.
ZipBooks is a nifty program that will get accounting newbies in the game for cheap. It features a free option that manages to be a worthwhile offering for small business owners. Plus, giving the free plan a spin won’t hurt your bank account if you decide you don’t like ZipBooks.
Best for medium- to large-sized businesses looking for strong accounting, robust features, and unlimited users.
If you’re looking to step up the functionality of your accounting software, Xero could be your answer. This bit of software, which was introduced in 2006, offers unlimited users, an impressive slate of accounting features, and 700+ integrations.
Customers seem to agree that Xero is a solid service with a plethora of functionality, even if its customer service has been lacking as of late.
Xero is best suited for medium- to large-sized companies, and not freelancers or microbusinesses. Because of Xero’s hefty feature set, those with minimal accounting experience may want to shy away.
Xero is known for having a wide array of features that require a learning curve at first (but you may get plenty out this program once getting the hang of things). Here’s some of our favorite Xero features:
You can sign up for Xero with one of three plans — they range in price from $9 to $60 a month. The more expensive the plan, the greater number of features and invoices you can access.
How Xero Compares To FreshBooks
Straight up, Xero and FreshBooks have similar monthly rates. However, Xero offers unlimited users on all their plans while FreshBooks charges a monthly $10 per user beyond one. As such, the wallets of larger businesses will like that Xero isn’t constantly pulling cash out.
Besides keeping your wallet at a healthy weight, Xero comes bundled with inventory tools and accounts payable (two things FreshBooks lacks). You’ll also like Xero if you need integrations; the service includes over 700, which makes FreshBooks’ 200-plus paltry by comparison.
However, Xero’s expansive functionality comes at a cost that isn’t measured with dollar bills: You’ll need to take time learning how to use all its features. With this in mind, those that don’t want to deal with understanding the ins and outs of their accounting software — like freelancers or small businesses without dedicated bookkeepers — may prefer the simplicity of FreshBooks.
Xero is one of the more robust accounting solutions on the block. With a wide array of features, unlimited users, and reasonable pricing, Xero should provide a solid accounting experience to many medium and large businesses. However, smaller businesses that can’t waste time figuring out their accounting software might prefer something else.
Best for freelancers needing management software with some basic bookkeeping baked in.
AND CO, launched in 2015 and now owned by Fiverr, isn’t exactly a full-on accounting suite. While it includes some features like invoicing, expense tracking, and reports, this piece of software is more of a management program for freelancers. As such, it makes the most sense in the hands of those that don’t need the complete accounting experience and would rather have tools to help simplify their freelancing career.
With that lead-in, AND CO is unsurprisingly best suited for freelancers. Microbusinesses or independent contractors may also benefit from some of AND CO’s unique features like proposals and signed contracts.
Throughout the web, AND CO receives generally positive reviews from users, with many praising its ease-of-use and strong mobile apps. It also offers solid customer support and numerous tools outside of its core software to help freelancers.
AND CO Features
Because AND CO is geared towards freelance management, you’ll find that it lacks compared to more dedicated accounting services. This isn’t necessarily a bad thing; if you’re a freelancer who just needs basic bookkeeping tools, AND CO could be right for you. Here’s a quick rundown of AND CO’s core features:
Unlimited clients with the paid plan
Proposals and fully editable contracts
AND CO Pricing
AND CO keeps pricing simple: a free plan and a premium one that goes for $24 a month. The base plan is pretty limited while the premium option tacks on an array of unique freelance-specific features.
How AND CO Compares To FreshBooks
To really take advantage of AND CO, you’ll want to opt into the paid plan, which could make the decision between it and FreshBooks harder. However, AND CO ultimately incorporates tools targeted towards freelancers that aren’t in FreshBooks (such as contracts and subscriptions), meaning that if those features matter to you, price may be moot.
FreshBooks, on the other hand, is a more complete program that will give you a better rounded accounting experience. The program combines other tools in its accounting Swiss Army knife that simply don’t exist in AND CO’s, like invoice customization, estimates, bank reconciliation, and a chart of accounts.
If you’re looking for something that isn’t a dedicated accounting platform and instead acts as a robust freelance management suite with some bookkeeping features corralled together, then AND CO could be your answer. You also may want to shop elsewhere if you aren’t a freelancer of are looking for a full-on accounting experience.
Best for small to mid-sized businesses not needing a full accounting suite, but want an easy way to manage invoices.Â
The second Zoho product on our list, this offering focuses solely on invoices. You’ll get a few bookkeeping tools with Zoho Invoice, like expense tracking and mileage deductions, but it generally focuses on doing one thing well: invoicing.
Zoho Invoice was created in 2008 and boasts an array of features, from 16 invoice templates, invoice auto-scheduling, and 14 different languages to send invoices in. Small to mid-sized businesses will benefit most from Zoho Invoice.
Across the nodes of the internet, users report that Zoho Invoice has friendly customer service and great mobile apps, but can be hard to navigate sometimes.
Zoho Invoice Features
Because Zoho Invoice isn’t a full accounting experience, you won’t get the same set of features that a complete accounting suite might. Here’s a quick slate of Zoho Invoice’s features:
Unlimited invoices and estimates
Multiple invoice languages
Zoho Invoice Pricing
You have four plans to choose from with Zoho Invoice. Prices range from free to $29 a month. The more expensive plans include more features, the ability to make invoices for more customers, and slots for additional users.
How Zoho Invoice Compares to FreshBooks
Zoho Invoice focuses on the invoice part of business, which means that if you need the gamut of accounting tools, FreshBooks will look better on your business’s software shelf. However, if you’re just in the market for invoicing software with a sprinkle of bookkeeping features, then Zoho Invoice might be for you.
When it comes to pricing, Zoho Invoice is indeed cheaper than FreshBooks, which makes up for its smaller feature set. Of course, if you don’t want to partner with FreshBooks — but like what Zoho brings to the table — there’s always Zoho Books to placate your business’s accounting needs.
Zoho Invoice probably won’t solve all your accounting problems, but it’s a great invoicing alternative for FreshBooks users on the smallest plan or for those who miss the simplicity of FreshBooks Classic. Of course, if you’re in the market for a full-on accounting solution, your answer may be in another castle.
Finding the Right FreshBooks Alternative
It should be pretty clear by now that while FreshBooks is a popular cloud accounting choice, it isn’t the only player in the ballgame. Letâs run down a quick summary of the best FreshBooks alternatives:
QuickBooks Online: A complete accounting suite that offers a more well-rounded experience than FreshBooks.
Wave: With Wave, you’ll be able to take advantage of solid accounting software for free.
Zoho Books:Â This option will give you a total accounting experience without breaking the bank.
ZipBooks: Designed for new users, ZipBooks is great if you lack much accounting experience.
Xero: This software is very functional and works great with larger businesses, but has a steep learning curve.
AND CO: A freelance management program, AND CO offers some basic bookkeeping features.
Zoho Invoice: While not a full accounting suite, Zoho Invoice provides well-designed invoicing tools.
So how should you pick your software?
If you currently use FreshBooks, ask yourself: what isnât working with my accounting software? Once you figure out what’s wrong, you’ll be able to decide a replacement easily.
If you are still exploring options and haven’t picked one specific program, consider these questions:
Which features are most important to my business?
What’s my budget for accounting software?
How much experience do I have with accounting software?
By answering these questions, you’ll be able to delve into which software fits best with your business. And don’t fret — FreshBooks is a solid choice, as is any of the seven alternatives we’ve outlined above. This means you should be in safe hands no matter which service you choose.
Be sure to visit our full accounting reviews to get an in-depth look at every option out there or read our nifty guide to picking online accounting software for extra help on your journey.
The post Best FreshBooks Alternatives appeared first on Merchant Maverick.
There is popular little nugget of business wisdom these days that says: If you can outsource a non-essential task, you must outsource that non-essential task. But while it’s nice to assume that every small business owner has the option to outsource, it might not be a practical choice for all businesses.
Running payroll is an integral part of business management because both your employees and the IRS need to be paid on-time and accurately. But the process of payroll can feel burdensome and overwhelming to small business owners who find themselves wearing lots of business hats. For small businesses that want to ensure payroll simplicity, outsourcing the job to a third-party reduces stress and helps you stay compliant. However, outsourcing isn’t free, and depending on how you outsource, it doesn’t guarantee simplicity, either.
Don’t know if outsourcing is right for your business? Keep on reading to find out.
What Is Payroll Outsourcing?
Payroll outsourcing is the process of paying a third-party to manage and run your payroll for you. This can be done via the use of payroll software, hiring a bookkeeper, or employing a Professional Employer Organization (PEO). It used to be true that outsourcing payroll was only something only the big companies could afford, but that is no longer the case. In recent years, the options for payroll outsourcing for small businesses have increased and it is easy to find an affordable option that fits your business needs.
How do you outsource? Well, your small business could start by exploring one of the many payroll available software options, including Gusto, Square, Intuit Quickbooks. If your payroll needs are a bit more nuanced, hiring a bookkeeper with payroll knowledge is a great asset. Another option is a PEO, which not only assists with payroll but also helps address HR compliance and all other aspects of employee management.
All reputable payroll software or services should offer help in the following areas:
Paying your employees or contractors through direct deposit/check
Filing your Federal and State taxes (some will also file your local taxes for no additional charge)
Filing your quarterly payroll taxes and paperwork
Paying vendors on your behalf
Garnishing wages and processing other deductions
Assisting with pre-tax and post-tax deductions and benefits
Time tracking/PTO tracking
Assisting with W-2 preparation and distribution
Many payroll companies are combining their services with HR, too, and can offer training modules, employee handbooks, and access to the legally required labor law posters. These programs are designed to create easy onboarding, provide clients with tax support, and help employees access their own wage information.
With payroll software, while most of the work is outsourced, someone from your business is still responsible for managing funds and hitting that “Pay” button. Plus, you’ll still be responsible for making sure your employees track their hours correctly. Full outsourcing could include hiring a national payroll service, a bookkeeper, or a PEO.
The Pros & Cons Of Outsourcing Payroll
Less chance of errors
Can be expensive
Loss of control
Outsourcing has benefits and challenges. When making the decision to outsource, small business owners must think about the most cost-effective and easiest way to manage their businesses.
The Pros of Outsourcing Payroll
Tax Assistance & Reporting: Employers must send payroll taxes to the government regularly and file quarterly tax paperwork on their payroll data. With lots of room for error, some small business owners might not want the headache of manually running payroll and carrying the burden of responsibility to pay the right taxes to their respective locations.
Reduces Risk Of Error: Whether you are hiring an expert or using a sophisticated cloud-based program that guarantees accurate payroll reporting, this is a handy aspect of outsourcing. IRS penalties and fees are very real and can hurt your business if you miss filing your reports or make a payroll mistake. Also, making a mistake on an employee’s payroll can be a headache to fix. Give those worries to someone else.
Saves You Time: Manual payroll runs may be time-consuming. Anything you outsource saves you time to spend differently for your business.
Enhanced Security Of Sensitive Information: Many outsourced payroll options come with enhanced and increased security for sensitive employee information. If you don’t want the responsibility for protecting social security numbers, maintaining HIPPA laws, etc., then it’s best to outsource the protection of that data.
Offer Employees Direct Deposit:Â Direct deposit is the most preferred method of payment among employees, and current stats say that up to 82% of employees are paid via direct deposit. However, not all small businesses may be eligible to offer this on their own based on federal and state laws. Outsourcing provides the opportunity to transcend the restrictions and offer direct deposit (although, you should always ask the payroll representative about relevant bank or industry restrictions). This is a state by state, company by company decision, so it’s best to contact a payroll or tax expert.
Easy To Combine HR Compliance: As an employer, you have responsibilities to your employees required by law. It is becoming more common for top payroll outsources to include HR compliance in their list of services. Since this addition is a competitive feature on most payroll programs, it’s a great additional time-saver.
The Cons of Outsourcing Payroll
It’s Not Free:Â Outsourcing payroll can be expensive. Depending on your company’s needs and number of employees, a good payroll system or PEO isn’t a cheap investment. (However, if you currently use an accountant or bookkeeper for payroll, perhaps outsourcing to an online company would save you the cost of an entire employee. So, price is neutral depending on your needs.)
Loss Of Control: By relinquishing payroll, you are giving up control of a major aspect of your business and entrusting it to someone else. That might mean doing it their way instead of doing it your way, and that can always be a challenge. Another thing: Business owners are ultimately still on the hook for payroll errors even if you outsource the job.
Business Unreliability: And there is the sad, but possible situation, that you could invest in a business that doesn’t do the job for you in myriad ways. Whether the business turns out to file taxes incorrectly or fails to offer you stellar customer service when you need it, relying on someone else is always a risk.
The Pros & Cons Of DIY Payroll
Higher risk of error
Takes a lot of time
Many small businesses make the decision to run payroll in-house. The DIY route is a solid option for small businesses with uncomplicated payrolls and a thrilling spirit of accomplishment. Some people hate the minutia of payroll, but some people really love it! It’s definitely a great job for a detail-oriented human with a penchant for numbers and reports. DIY payroll can also be a great route depending on your specific business. For example, do you just pay contractors? There are no employer required taxes for contractors, so you may not need a sophisticated program for tax and benefit deductions.
The Pros of DIY Payroll
It’s Free: Money matters, cost matters, and if every dollar in your company is crucial and you need ways to save, you can run payroll yourself. For some small businesses, outsourcing just isn’t in the budget. There are several free online calculators available that assist with tax requirements. Simple accounting software helps with numbers and there are also free payroll templates online.
You Are In Control: Running payroll and reports on payroll is a huge part of the business and helps create a story about the business as a whole. There might not be a program or person out there that does it exactly the way you desire; or maybe it’s important to spend time managing the financial aspects of your business.
The Cons of DIY Payroll
Payroll Dependent On Human Being: In this scenario, you or an employee are entrusted to learn how to manage payroll. Now imagine that person on a long vacation, going on leave, or getting ill. If you only have a single human running payroll (which may be complicated depending on your business), you could run into some stress if you need someone to quickly take their place.
It Takes Time: It’s the business dilemma. Time and money are both limited, so you’ll spend whichever you have more of. If you have more money than time? Outsourcing is a solid option. If you have more time than money? DIY might be a better fit.
Increased Stress/Risks: Payroll takes time; it requires attention to detail; it requires punctuality and precision and patience. If that’s you, awesome. If it’s not? Don’t try to be the person who wants to do-all-the-things and ends up hating life. There is increased stress with running payroll on your own, and due to the tax requirements, there is a lot of room for error.
Payroll Outsourcing Options
If outsourcing seems like something your business might pursue, there are several roads to explore. You can hire a bookkeeper either full or part-time, find payroll software to use, or even hand payroll over fully to an accredited program. Each option comes with its own benefits and risks.
Payroll Outsourcing Options
Full-Service Payroll Software
Businesses looking for payroll software that handles most tasks for you including automatic filing.
Self-Service Payroll Software
Businesses looking for basic payroll software that calculates their payroll, but doesn’t file taxes for you.
$10 – $35/mo
Accountant or CPA
Businesses with complicated payrolls and tax situations.
$100 – $400/hr
Businesses looking to outsource bookkeeping and payroll tasks.
$20 – $45/hr
Professional Employee Organization
Business looking to outsource all payroll and HR management.
$150 – $2,000/mo
Full-Service Payroll Software
Best for businesses looking for payroll software that handles most tasks for you including automatic filing.
A full-service payroll provider will run payroll for you — start to finish. You help onboard employees and give the company information about pay and pay schedules, and then all you have to do is click “pay.” (It’s not entirely hands-off, but as close as you can get.) Some of these programs are similar to their self-service online counterparts. Here is where most of them differ: Some will take over the onboarding of employees, many file your quarterly and year-end payroll taxes for you, and many come with a tax guarantee. You are paying for the guarantee that their company, not your business, is on the hook for penalties related to tax mistakes.
What Does Full-Service Payroll Do?
A full-service payroll provider pays your employees, removes taxes and deductions and garnishments and sends them all to their respective places. They file your taxes for you and assist with distributing W-2s. It’s full-service, darlin’, so order up any reports you want and benefit from same-day direct deposit. And: most full-service payroll providers combine integrations to offer benefits, retirement plans, and HR platforms. Sounds nice, huh?
Don’t get too excited: you still need to keep employee records accurate, be able to answer employee questions about payroll and the laws in your state, and follow local tax laws. (If a mistake turns out to be yours, well, the fine print in the guarantee says that renders the no penalty guarantee null and void.)
What Does Full-Service Payroll Cost?
Each service provider is different, but the range of costs for full-service payroll run between $40 – $300 a month plus $3 – 6 a month per employee depending on the service. There are sometimes additional fees, too, for integrations, implementation, and benefits administration.
Which Businesses Should Use Full-Service Payroll?Â
Times are changing. Even a few years ago, it was not cost-effective to outsource full-service payroll for a business with fewer than 50 employees. However, with more and more services entering the market, the competition among providers is heating up. A small business with a few employees might find a few hundred dollars a month a reasonable price to pay for payroll. Depending on the business, the benefits outweigh the DIY route. Any company of any size can find a full-service payroll system that works. For the most affordable option for small businesses, check out Square Payroll. Merchant Maverick uses Gusto and we highly recommend the program for its features, integrations, and attentiveness to customer service for small businesses. For businesses already using QuickBooks, check out Intuit’s full-service payroll program.
Self-Service Payroll Software
Best for businesses looking for basic payroll software that calculates payroll but doesn’t file taxes for you.
There is crossover in payroll services between the full-service payroll options and other more bare-bones payroll services. If full-service isn’t economical, practical, or on your radar yet, there are other payroll service options in addition to those who do-it-all. Intuit QuickBooks has a desktop program that runs numbers for you and can assist with printing checks and paystubs, but you will still need to file your own payroll taxes with your quarterly payroll updates to the government.
What Does Self- Service Payroll Do?
Payroll services vary. Most of them will take on calculating payroll, managing deductions, and printing checks. Without a full-service option you are often sacrificing tax filing and support, or other HR features like managing benefits or tracking time and paid time off. Many major competitors like ADP and QuickBooks offer simplified payroll services at a more economical rate.
What Does Self-Service Payroll Cost?
Pricing will always depend on the size of your business and how many payrolls you run. For example, ADP charges per payroll, so you will pay more if you are on a weekly pay schedule. In general, some basic payroll services, like Patriot, have a base fee as little as $10 a month + $3-5 dollars per employee. Some are subscription-based, like QuickBooks, and start at $35/mo+. The more services you need, the higher your monthly cost will be.
Which Businesses Should Use Self-Service Payroll Software?
Small businesses that want to pick and choose the features they pay for and receive some basic guidance will benefit from picking a payroll service that suits their needs. Whether that is a local payroll service company or services from the same providers who offer full-service options.
Best for businesses looking to outsource their bookkeeping and payroll or for businesses with complicated payrolls and tax situations.
It is true that in our fast-changing automated world, the roles of bookkeeping and accounting are slowly shifting toward computers. If you miss real-person contact and you don’t want to ship payroll off to the cloud, you may also find hiring an accountant or bookkeeper is still a solid option in 2019.
What Does An Accountant/Bookkeeper Do?
An accountant manages and analyzes a company’s money, taxes, and compliance. A bookkeeper is the business record keeper of all financial transactions. There are many online bookkeeping and accounting services available that will include running payroll as part of their services. These companies and real humans do more than payroll, however, as they will help manage all credits, debits, and loans, as well. In this capacity, you are not adding HR services or other options. You are hiring someone to run and analyze the numbers for you.
What Does An Accountant/Bookkeeper Cost?
To hire accountants and bookkeepers, they will let you know their hourly rate, or you may offer a competitive salary. Accountants, who are schooled and trained in regulation and money, will cost more per hour ($100-400 per hour on average) than their bookkeeping counterparts ($20-45 per hour on average).
Which Businesses Should Use An Accountant/Bookkeeper?
If you have complicated payrolls and a complicated tax situation, an accountant is a worthwhile addition to your company. Having an accountant in-house is nice, but it’s also a luxury. You can hire accountants per hour to help you with specific tax issues or money needs. Bookkeepers manage the day-to-day money in your company. If you have a lot of money coming in and out, someone specifically focused on keeping your accounts current and paying your employees is a great asset.
Best for business looking to outsource all payroll and HR management.
A Professional Employee Organization is an entity that provides small businesses with help for human resources, payroll tax filing, worker’s compensation insurance, safety and training, and so much more. If a bookkeeper focuses solely on running payroll, a PEO focuses on running anything employee-related in your business.
What Does A PEO Do?
First, your business and the PEO enter into a co-employment. This is so the PEO controls and manages, on your behalf, everything tax-related, and you are freed from administrative duties such as deductions, benefits, retirement plans, etc. A PEO also takes over the burden of human resource management as well. In many of those areas, there are strict regulations and a lot of risk of getting it wrong. It might be prudent and more cost-effective in the long run to outsource the more delicate aspects of employee management. (Also, a PEO might be the only way a small business may offer competitive health benefits which makes your business a more attractive place to work!)
What Does A PEO Cost?
PEOs are either paid a flat rate per employee or take a percentage of payroll. Depending on the PEO, the small business, and the number of employees, those numbers fluctuate between $150-$2000 a month per employee or they take a 3-8% cut of payroll on average.
Which Businesses Should Use A PEO?
If your business is growing and you really do want/need to outsource everything that isn’t strictly related to your business, a PEO will fill that void. Also, if you are a small business owner and you don’t know how best to offer your employees competitive health/dental/retirement benefits, a PEO can pave the way to make those options available for any business, no matter the size. Use a PEO if you want to seamlessly integrate payroll, taxes, HR, employee management, and so much more.
How Much Does Payroll Outsourcing Cost?
The breakdowns listed in the section above show the range in payroll costs among each option. However, there are a few more things to consider.
A simple DIY route could cost nothing at first, but if you misfile taxes and incur penalties, the fines and fees will negate any savings. Or maybe you are a small business paying for services you don’t need or use. Payroll can range from $40-100 for small businesses with few employees up to thousands a month for full-service payroll. Hiring a bookkeeper or accountant part-time or full-time is a solid tens-of-thousands of dollars. Only you know what payroll option works best for your situation.
Which Payroll Option Is Best For Your Business
My magic ball says the right option for you is…
That was a trick: There is no magic option. You will need to assess your business needs with what you can afford and your own level of pioneering spirit. Here are some questions to ask yourself as you make your payroll decisions:
Do I have a complicated payroll?
Do I want help filing taxes and quarterly reports?
Do I have the time to commit to monthly payroll?
Am I afraid of making payroll mistakes?
Do I want to offer HR services to my employees?
Do I want to offer benefits to my employees?
Do I enjoy puzzles and numbers?
Am I inundated with employee paystub related requests?
Can I afford a payroll service?
Do I have the time to pick options or do I need something fast?
Am I dazzled by endless reports and features or am I just fine with barebones systems?
Whatever payroll system you chose, make sure your research includes quotes. Some payroll services charge extra for benefits and HR per employee and by the time it’s added up, you’re looking at a more expensive option than a PEO. Know how much you want to tackle, how much you want others to tackle, and what you can spend and go from there.
If you’re still not sure, here are some benefits to both. See which is the better fit.
The Benefits to Payroll Outsourcing
If you do not have someone employed by you who knows how to run payroll, outsourcing is a great option. Since some companies combine payroll and HR, since there are so many available options to also outsource both, it can save your company time and money. Also, when you are running a business and wearing lots of hats, sometimes it’s nice to take one off and not have to worry about where you set it down. (I really just wanted to see that example through.) Outsourcing isn’t stress-free but it is stress-reducing, and that’s important.
The Benefits of DIY Payroll
If your business doesn’t have a complicated payroll (maybe you hire mostly contractors) or there is something calming in running payroll yourself, there are a great number of benefits to keeping payroll in-house. Not only do you have control, but you also don’t have to be dependent on someone else to fix mistakes or make changes. Also, you won’t have to pay any outsourcing fees. With the free tools and resources on the internet, you can find a DIY system that works.
How To Choose The Right Method
Follow your heart! (So cliche, so hardly ever used about payroll, and also so true!) Only you know what’s best for your business and your past experiences with payroll. No matter what method you choose, there will be some required time involved in the payroll process — how much time is up to you. In order to make the decision, you need to know how much money you want to spend, how much time you want to spend, and if you want to offer benefits to employees. If you just need to pay people, DIY. If you want to offer benefits, training, and other employee integrations, outsource.
No matter what you choose regarding payroll, outsource vs. DIY, there are numerous options available for businesses of all sizes. We’re lucky to live in such a technological age where services that used to be only for a few are now available to many. Large, full-service companies like ADP and Paylocity have rebranded themselves with options for small businesses, and those heavy-hitters bring a lot to the table. Certainly if you are looking for ways to streamline your business, between the payroll and accounting services and software available, competition among plans and services is fierce. Merchant Maverick recommends Gusto as a full-service provider with solid features and integrations. Some other payroll service providers worth checking out are Square, Intuit Online, and Paychex.
The post Should You Outsource Payroll Or Do It Yourself? appeared first on Merchant Maverick.
Being a first-time business owner can be a daunting experience. In addition to having to comply with a dizzying array of legal requirements, youâll also have to have at least a working knowledge of credit card processing, inventory management, and other topics. At one point or another, youâre going to encounter the term merchant services, and youâll want to know what it’s all about.
To put it in the simplest terms, unless youâre only going to accept cash and paper check payments in your business, youâll need to understand merchant services: what they are and where to get them from. Merchant services â and the providers who offer them â are essential to providing your customers with the largest range of convenient and secure payment methods. Signing up through a merchant services provider will â provided you choose the right one for your business â result in increased sales that more than offset the cost of those services.
In this article, weâll explain what merchant services are, and provide explanations of each of the primary products that are available from merchant services providers. Weâll also tell you how to find the best merchant services for your business, and what features you should look for in choosing a provider. Finally, weâll give you a brief overview of the best merchant services providers in the industry for small businesses, and explain which providers are the best choice for certain types of companies.
What Are Merchant Services?
The term âmerchant servicesâ can be confusing, because there are a lot of different definitions floating around out there, and they donât all agree on every detail. For our purposes, weâll define merchant services as the products and services a business needs to accept and process any form of payment other than cash or paper checks. This includes processing services for credit cards, debit cards, eChecks, ACH payments, and the newer mobile wallet services such as Apple Pay and Google Pay. It also encompasses hardware and software, such as credit card terminals, point-of-sale (POS) systems, payment gateways, virtual terminals, and mobile processing systems.
Note that there are also a variety of ancillary services that are often bundled with merchant services, including inventory management software, gift card/loyalty programs, online reporting features, merchant cash advances, and many others. These are not considered to fall under the rubric of merchant services, as theyâre not strictly necessary to enable your business to process credit card transactions. They can still be pretty useful, however.
Where do you go to get merchant services? Why, to a merchant services provider (MSP), of course! Again, the term âmerchant services providerâ is an umbrella term that covers any type of business offering merchant services. However, there are really two main types of merchant services providers: (1) merchant account providers, who offer true full-service merchant accounts with a unique merchant identification number for your business, and (2) payment services providers (PSPs), who offer credit card processing services, but donât provide a true merchant account. PSPs aggregate your account with that of other businesses using their services â a low-cost solution that can be very affordable for a small business thatâs just starting out.
Hereâs a brief description of the primary merchant services that your business will need to accept credit cards, debit cards, and eCheck/ACH payments:
Credit/Debit Card Processing: Of all the merchant services you might want to add to your business, credit (and debit) card processing is obviously the most important one. If a customer pays for a purchase with a credit card, youâll undoubtedly want some cold, hard cash to make its way into your bank account â and that wonât happen unless you have a service to process the transaction. As weâve noted above, you can get credit card processing through either a merchant account provider or a payment services provider (PSP). In either case, your provider will usually rely on a larger, direct processor (also called a backend processor) to approve and process transactions. While large direct processors such as First Data and Elavon offer merchant services, they arenât good choices for a small business. Popular payment services providers (PSPs) include Square (see our review) and Stripe. Traditional merchant account providers are much more numerous, with Dharma Merchant Services (see our review), National Processing (see our review), and Payment Depot (see our review) among the best choices for small and medium-sized businesses.
eCheck/ACH Processing: In addition to accepting credit and debit cards, you might also want to allow your customers to pay by check. While old-fashioned paper checks are rapidly declining in popularity, they can be accepted without the need for a check processing service. However, youâll have to take the check to the bank yourself, wait for it to clear, and hope that it doesnât bounce. eCheck and ACH (Automated Clearing House) payments bring advanced security and convenience to paying by check, allowing you to scan physical checks for processing or accept an ACH payment from a customer on your website. While some providers include these features with every merchant account, itâs more common for them to be offered as optional add-ons. In this case, youâll usually pay an additional monthly fee (typically around $20 – $30) for the service. For more information about these alternative payment methods, see our articles Everything You Need To Know About Accepting ACH Payments and The Complete eCheck Payment Guide.
Credit Card Terminals: Obviously, youâre going to need some type of physical credit card terminal to accept card-present transactions in a traditional retail setting. Options range from simple mobile card readers that require a smartphone or tablet (and the appropriate app) to function all the way up to complex point-of-sale (POS) systems that also include a variety of software features to help you run your business. While magstripe technology was the only option for many years, today EMV (i.e., chip card) is the standard acceptance method in the United States, Canada, and Europe. We also recommend that you seriously consider investing in hardware that also accepts NFC-based payment methods such as Apple Pay and Google Pay, as theyâre rapidly gaining in popularity and offer a higher degree of security than either magstripe or EMV. We also recommend that you buy your equipment outright. Terminal leases are wildly over-priced and should be avoided at all costs. Buying your hardware directly from your processor is usually the best option, but in some cases, you can save money by buying from a third party and having your equipment reprogrammed by your provider. For an overview of some great equipment options, see our article The Best Credit Card Machines And Terminals.
Point-Of-Sale (POS) Systems: As weâve mentioned above, a POS system is basically a credit card terminal with additional integrated software services built-in. Inventory management is a popular option, but there are also software add-ons for employee management and scheduling, online reporting, customer information management, and many others. While a POS system is a worthwhile investment for some businesses (such as restaurants), theyâre overkill for others. Beware of sales representatives trying to sell you a POS system if your business doesnât really need one. For more information on how to select a POS system thatâs right for your business, see our article POS 101: Choosing A POS System.
Payment Gateways: If your business has an online presence and makes sales through your website, youâre going to need a payment gateway to process those transactions. Payment gateways essentially perform the same function as physical credit card terminals, connecting your customerâs payment information with your providerâs processing network to approve the transaction and send you the money from the sale. Because not all merchants need a payment gateway, theyâre often offered as a separate feature (with an additional monthly gateway fee). However, itâs becoming increasingly common for providers to offer a gateway thatâs part of an integrated payment processing system designed to support both retail and eCommerce sales channels. For more information on what to look for in a payment gateway, see our article The Complete Guide To Online Credit Card Processing With A Payment Gateway.
Virtual Terminals: Used primarily by mail-order or telephone-order businesses, a virtual terminal is a software application that allows a laptop or desktop computer to function as a credit card terminal. Transactions can be manually keyed in or swiped/dipped with a compatible card reader (these usually connect via USB or Bluetooth). Retail merchants should be aware that, in most cases, youâll pay significantly higher processing rates if you manually enter the card data rather than using a card reader.
Integrated Payment Platforms: One common complaint we hear from merchants is that they often have to sign up with one vendor for a merchant account, another vendor for a payment gateway that has the special features they need, and possibly other vendors for things like online shopping carts or POS systems. Merchant services providers are well aware of this problem, and in recent years theyâve started to offer integrated, cloud-based processing systems that combine all these separate features into a single product. Obviously, they have a vested interest in keeping you tied to their particular ecosystem. However, there are genuine benefits to this approach for merchants as well. You wonât have to worry about compatibility problems or dealing with multiple customer service departments to keep everything humming along. Integrated systems can also (usually) save you money over signing up with multiple service providers. Finally, having all your business data accessible through the cloud is a significant advantage, even for smaller retail-only merchants who donât have a website. At the same time, youâll want to ensure that a vendorâs integrated system has all the features you need for your business before signing up.
Security & Fraud Prevention Features: Ensuring the security of your customersâ credit card data is essential for any business â retail, online, or a combination of the two. Obviously, you also want to take every step possible to minimize the chances of a fraudulent transaction. Security features such as tokenization and encryption protect your customersâ payment data and reduce the chances of experiencing a data breach. For online companies, fraud prevention features such as Address Verification Service (AVS) and card verification features such as CVV, CVV2, or CVC should be available through your provider at a minimum.
For more in-depth information on merchant services and merchant services providers, please refer to the following articles:
What Is A Merchant Services Provider?
What Is A Payment Service Provider?
What Is A Merchant Account?
High-Risk Merchant Services
Finding a good merchant services provider is challenging enough, but itâs even harder if your business is considered high-risk by the processing industry. What does it mean to be high-risk? Basically, certain business types are considered to be a riskier underwriting proposition by processors, and theyâll either refuse to give you a merchant account or put you in a high-risk account that invariably will be more limited and more expensive than what a comparable low-risk business would receive.
Besides being in an inherently high-risk business type (i.e., vape shops, online gambling, etc.), you can also find yourself in the high-risk category if you have an unusually high chargeback rate or your personal credit isnât so great. Fortunately, high-risk merchant service providers are available to serve your business. These providers usually work with a variety of banks (some of them located offshore) and direct processors to get you approved for an account. Your processing rates will be higher, and the terms of your contract wonât be so generous, but youâll have access to a stable account and youâll be able to accept credit and debit cards without any problems.
If youâre having particular difficulties in finding a high-risk account, you might want to consider an eCheck/ACH-only option. We only recommend this option for merchants who have been truly unable to get a merchant account, as youâll potentially lose sales when your customers find out that they canât use their credit cards.
For more details about high-risk industries and high-risk processing, check out our article Are You A High-Risk Merchant?.
How Do You Find Great Merchant Services?
Over the years, the question weâre most frequently asked is some variation of âWhatâs the best provider for my business?â Unfortunately, the sheer number of variables involved usually makes this question difficult to answer. As a very general rule, the best merchant services provider for your business is the one that offers the best combination of features, low processing rates, reasonable account fees, and favorable contract terms. In many cases, this might be such a close call that several providers might be able to offer you a good deal, without any single one standing out above the others.
One point we continually try to impress on merchants is that the best provider for your business is not necessarily the one with the lowest processing rates â or even the lowest costs in general. The most important thing to look for is a provider that offers the best overall value. Things like high-quality customer service are often worth paying a little extra for in the long run.
As a general rule, weâd also point out that payment services providers (PSPs) are usually a better value for small or newly-established businesses, while merchant account providers are more suited to medium-sized or larger companies that have been around for a while and have an established processing history. Signing up with a PSP is usually a good idea when youâre just starting out, but at some point, youâre going to reach a level where youâll need the stability and security of a true merchant account. It will probably cost you less money as well, as lower processing rates become more important as your monthly processing volume increases.
If youâre looking for a good merchant services provider, the resources available here at Merchant Maverick are an excellent place to start. Weâve reviewed almost all of the major players in the industry, and can give you an in-depth look at the pluses and minuses of each provider. As a starting point, we recommend that you look over our Merchant Account Comparison Chart, which compares several of the top-rated providers side-by-side.
How Much Should You Pay For Merchant Services?
No one likes to overpay for anything, and the merchant services industry makes it all too easy to pay too much without even realizing it. With complicated processing rate plans, highly-variable account fees, and surprise incidental fees that can show up on your processing statement without warning, figuring out whether youâre getting the best deal can be very difficult. If youâre new to payment processing, youâll want to evaluate pricing information and rate quotes from several providers before picking one to use for your business. This is also true if you already have a processing service and are thinking about switching to a (hopefully) less expensive provider.
Below is a quick overview of the various processing rate plans that will be the single most significant factor in determining your overall costs. Be aware that different pricing models will be more cost-effective for some businesses than others. Youâll want to have a good idea of your total monthly processing volume and your average ticket size to make valid comparisons between different providers.
The simplest pricing structure is flat-rate pricing. Despite the name, none of the providers offering this type of pricing actually use just a single rate for all transactions. However, youâll usually have only two or three rates to be concerned with, making your costs stable and predictable. Merchant services providers offering flat-rate pricing typically have a single rate for all card-present transactions, and another rate (or two) for card-not-present transactions. Often, there will be a higher rate charged for card-not-present transactions that have been manually keyed-in, rather than processed over a payment gateway.
Flat-rate pricing works best for very small businesses, mostly because you usually wonât have to pay any additional account fees. Be aware, however, that the flat rates themselves are often significantly higher than what youâd pay under an interchange-plus or subscription-based pricing plan (see below). For this reason, flat-rate pricing is usually not a good deal once your monthly processing volume exceeds a certain amount (typically around $10,000 per month).
Payment services providers (PSPs) usually offer flat-rate pricing as their only processing rate option. Popular providers offering this type of pricing include Square (see our review), Stripe, and PayPal.
Arguably the most cost-effective pricing method for medium-sized businesses, interchange-plus pricing passes your transactionsâ interchange fees on at cost and also includes a fixed markup for your provider. For example, a typical interchange-plus rate quote might look like interchange + 0.30% + $0.15 per transaction. While the underlying interchange rates themselves can vary wildly, this pricing method is more transparent than others because youâll always know exactly how much of a cut your provider is taking.
Interchange-plus pricing is usually only available through a merchant account provider offering a full-service merchant account. Because these types of accounts also typically have a number of monthly and annual fees, they arenât the best choice for very small businesses. Depending on the provider and the particular details of your business, the threshold where youâll start to save money with interchange-plus pricing can be anywhere from $1,500 to $10,000 in monthly processing volume.
Popular providers offering interchange-plus pricing include Dharma Merchant Services and National Processing,Â among others. While these two companies offer interchange-plus rates exclusively, many run-of-the-mill providers offer a combination of tiered and interchange-plus pricing plans. Unless you specifically negotiate for an interchange-plus plan, youâll usually be given a tiered pricing plan. Although itâs still the most common type of pricing plan in the processing industry, we donât recommend tiered pricing under any circumstances because it makes it impossible to determine how much of a markup your provider is charging for each transaction. Itâs also the most expensive type of rate plan, in most cases.
Membership (Or Subscription) Pricing
A variation of interchange-plus pricing, membership pricing has only been available for a few years from a small number of providers. Pricing is similar to interchange-plus, except that you donât pay a percentage of each transaction as part of your processorâs markup. Thus, a typical membership pricing quote might be interchange + $0.15 per transaction. However, thatâs not all youâll pay. Membership pricing also includes a monthly membership fee that ranges from as little as $49 per month to as high as $199.00 or more per month. This fee combines all of your other account fees into a single charge, plus includes an extra amount to cover the per-transaction percentage markup that you otherwise wouldnât be paying.
Membership pricing isnât for everyone. The high monthly membership fee makes it particularly unsuitable for very small or seasonal businesses. However, high-volume businesses can save a substantial amount of money over what theyâd pay with a traditional interchange-plus pricing plan. In some cases, these savings can amount to several hundred dollars per month.
If youâre interested in seeing whether membership pricing is right for you, we highly recommend both Fattmerchant (see our review) and Payment Depot (see our review). Both of these companies provide excellent service and a full set of features to fulfill the needs of any business.
Monthly Billing VS Pay-As-You-Go
Most merchant services providers use one of two billing methods: (1) monthly billing, or (2) a pay-as-you-go billing model. With monthly billing, youâll pay a variety of separate fees for each service included with your account. These fees will be deducted once a month, at the end of your billing cycle. The processor will deduct any processing fees before sending the funds to your bank account, but if you have a statement fee, software subscription fees, etc. those will be billed at the end of the cycle.Â Pay-as-you-go billing, on the other hand, doesnât have monthly fees. Youâll only pay for the transactions that you actually process, and those fees are deducted before the processor deposits your funds in your bank account. If you don’t process anything in a month, you won’t pay anything — which is not true of a monthly billing plan.
If you sign up with a traditional merchant account provider, you can expect to be on a monthly billing plan, regardless of whether youâre on a long-term contract or a month-to-month arrangement. Payment services providers, on the other hand, usually use a pay-as-you-go model. This lowers costs for small businesses and also is the best option for seasonal businesses that arenât running year-round. Despite the additional fees, a monthly billing plan can actually save medium-sized or larger businesses money due to the cost savings of using an interchange-plus or membership pricing plan.
The Best Merchant Services For Small Businesses
As weâve noted above, some merchant services providers are a better fit for certain types of businesses than they are for others. Below, weâll briefly introduce our top picks for the most common types of businesses. Note that if your business falls into one of the categories described below, the provider we list wonât be the only good choice available to you. Rather, theyâre generally the best choice for most businesses that are similar to yours. If youâre interested in one of these providers, be sure to read the full review to learn more about them before deciding to sign up.
Mid-sized businesses ($10k-$25k/month)
0% + $0.15 markup*
0% + $0.15 markup
High-volume businesses ($25k+/month)
0% + $0.15 markup*
0% + $0.15 markup
Dharma Merchant Services
0.15% + $0.07 markup*
0.20% + $0.10 markup
Micro-merchants & low-volume
2.6% + $0.10 total
2.9% + $0.30 total
2.9% + $0.30 total
2.9% + $0.30 total
*Markup over standard interchange and assessment rate with interchange-plus pricing (our preferred pricing plan for transparency of fees).
Best For Micromerchants & Low-Volume Businesses: Square
Square (see our review) has been around since 2009, and has quickly become the leading choice for small businesses looking to accept credit cards with a minimum of fuss and paperwork. Square offers flat-rate pricing and uses a pay-as-you-go billing method that doesnât include any additional monthly account fees (unless you sign up for one of their optional services).
Read our Review
Squareâs most common processing rates are as follows:
2.75% for all retail and mobile (card-present) transactions
2.9% + $0.30 per transaction for all online (card-not-present) transactions
3.5% + $0.30 per transaction for all manually entered (also card-not-present) transactions
If youâre looking to minimize your up-front costs, Square offers a free mobile card reader that plugs into your smartphone or tablet. However, itâs magstripe-only. We highly recommend that you upgrade to either the $35 EMV-enabled reader or the $49 contactless + chip reader, which adds NFC compatibility and Bluetooth connectivity.
The company has expanded its services tremendously over the last ten years, and now offers far more features than we can discuss here. However, itâs still an excellent choice for merchants looking for a simple, low-cost solution. Squareâs flat-rate pricing is more expensive on a per-transaction basis than interchange-plus, but you’ll save money overall due to the lack of extra account fees. This pricing structure works best for businesses processing less than $3,000 per month, in most cases.
Best For Mid-Sized Businesses ($10K-$25K/Month): Payment Depot
For larger businesses with a stable processing history that need to upgrade to a full-service merchant account, Payment Depot (see our review) is an excellent choice. The company offers membership-based processing rates, true month-to-month billing, and a full range of products and services for retail or online businesses.
Read our Review
Membership fees at Payment Depot range from $49 per month up to $199 per month, depending on your monthly processing volume. This single fee covers all your merchant services, so thereâs nothing extra to have to pay. You can also receive a significant discount for paying your membership fees on an annual, rather than monthly, basis.
The companyâs processing rates start at a simple interchange + $0.15 per transaction, and go down with higher monthly processing volumes. There are four basic membership plans, which are tied to your monthly processing volume. For really large businesses, thereâs also a custom pricing option.
As long as your monthly processing volume is high enough that membership-based pricing makes sense for your business, Payment Depot is an excellent choice that will save you a significant amount of money over traditional merchant account providers. Just be aware that the company only serves US-based merchants, and they donât accept high-risk businesses.
Best For High-Volume Businesses (Over $25K/Month): Fattmerchant
Fattmerchant (see our review) also offers a membership-based pricing plan. However, their membership fees are high enough that their pricing structure only works well for an established business with a significant monthly processing volume.
Read our Review
The companyâs membership fees start at $99 per month for businesses processing under $500,000 per year. Above this amount, youâll pay $199 per month. Bear in mind, however, that this one fee covers everything the company provides â unlike traditional vendors who nickel and dime you for every âextraâ service they provide. Processing rates start at interchange + $0.15 per transaction, with lower rates available for higher processing volumes.
Because of the steep monthly subscription fee, Fattmerchant isnât cost-effective for small businesses with a low monthly processing volume. However, if your volume is high enough, you can potentially save hundreds of dollars a month under this pricing structure. All accounts are billed on a month-to-month basis with no early termination fee (ETF), so you can always switch processors if things arenât working out.
Fattmerchant is an excellent choice for businesses that are large enough to benefit from the companyâs pricing structure. They offer excellent customer service and a terrific cloud-based integrated payments platform that will have you up and running in no time. However, they donât accept high-risk merchants, and theyâre only available in the United States.
Best For Online Businesses: PayPal
For a newly-established eCommerce business, you canât go wrong with PayPal. Pay-as-you-go billing means that, in most cases, youâll only pay for your transactions â and nothing else. Note, however, that the companyâs virtual terminal comes with a hefty $30 per month fee, so theyâre not such a great choice for a mail-order or telephone-order business.
Read our Review
PayPalâs flat-rate pricing structure couldnât be any simpler. Online transactions are always 2.9% + $0.30 per transaction, while manually entered and virtual terminal payments are 3.5% + $0.15 per transaction. The companyâs PayFlow Gateway comes bundled with every account, allowing you to quickly and easily integrate it with your website. There are no additional gateway fees, either.
While PayPal is a great choice for a small online business, be aware that the companyâs high processing rates will no longer be cost-effective once your business grows beyond about a $3,000 per month processing volume. At that point, you should seriously consider upgrading to a true merchant account with one of our other recommended vendors. Also, PayPal has relatively limited customer service options and doesnât serve high-risk businesses.
Best For Tech-Driven Businesses: Stripe Payments
If your business is 100% online and you donât plan to ever expand into the retail sector, Stripe Payments is a great choice for your payment processing needs. The company offers simple flat-rate pricing, pay-as-you-go billing with no monthly fees, and a host of developer tools for integrating their platform into your website.
Read our Review
Pricing couldnât be more straightforward. All eCommerce credit and debit card transactions are charged 2.9% + $0.30 per transaction. International cards are also charged an additional 1.0% if currency conversion is needed. ACH payments are charged 0.8%, with a maximum charge of $5.00 per transaction.
As with any payment services provider, account approval is easy and can be accomplished online. However, the chance of later having your account shut down for any number of reasons is also higher. Stripe does a better job than most PSPs when it comes to customer service, offering live chat and telephone support on a 24/7 basis.
Overall, Stripe is a great choice for fledgling eCommerce businesses. Just be aware that your account wonât be as stable as a true merchant account, and the companyâs flat-rate pricing isnât cost-effective at higher processing volumes. Itâs also not available for high-risk merchants.
Best For Nonprofits: Dharma Merchant Services
Nonprofit businesses looking for a full-service merchant account will have a hard time finding a better choice than Dharma Merchant Services. One of our favorite processors, the company seems to be run like a nonprofit itself sometimes. Of course, itâs actually a public benefit corporation (B-corp), something thatâs almost unheard of in the processing industry.
Dharma Merchant Services
Read our Review
Whether youâre a nonprofit or not, Dharma offers full-service merchant accounts that are billed on a month-to-month basis to all its users. There are no long-term contracts and no early termination fees (although you will have to pay a one-time account closure fee of $25 if you close your account). For nonprofits, the company offers special interchange-plus processing rates of interchange + 0.15% + $0.07 per transaction for retail transactions and interchange + 0.20% + $0.10 per transaction for eCommerce transactions.
Dharma offers a full range of products and services, including the popular Clover lineup of terminals and point-of-sale (POS) systems. The company also provides some of the best customer support in the industry. However, be aware that their pricing structure works best for merchants processing over $10,000 per month, and they donât support international or high-risk businesses.
Best For High-Risk Businesses: PaymentCloud
If youâve read this far, youâve probably noticed by now that most of our top choices for merchant services donât support high-risk businesses. Fortunately, if youâre in the high-risk category, there are high-quality vendors out there that specialize in serving the high-risk community and provide excellent services at a reasonable cost. PaymentCloud is one of our favorites due to their reputation for top-notch customer service and because they offer many features that are typically reserved for low-risk merchants only.
Read our Review
Unlike many of our other top providers, PaymentCloud doesnât disclose their processing rates or account fees on their website. Because they work with a wide variety of banks and direct processors to get you an account, pricing is highly variable and subject to negotiation. While they have a reputation for fair pricing, you can expect to pay more than what a comparable low-risk business would pay. However, this is true with any high-risk merchant account provider.
The company offers a free credit card terminal with each account, which you can use for as long as you keep your account open. They also donât charge an account setup fee, which also helps to set them apart from most traditional high-risk providers. Finally, PaymentCloud is one of the few providers to offer support to the burgeoning CBD oil industry. However, they only allow CBD products that are applied externally â no food items or other ingestibles. If youâve had a hard time finding a merchant account for your high-risk business, be sure to check them out!
If youâre looking for additional options beyond the providers weâve profiled above, check out the following articles for more great choices:
The 5 Best Small Business Credit Card Processing Companies
The Cheapest Credit Card Processing Companies For 2019
How To Accept Credit Card Payments For Your Small Business
The Final Word On Merchant Services
Merchant services can be a complicated subject, and finding a merchant services provider thatâs a good fit for your business is often a real challenge. Youâll want to carefully evaluate the unique needs of your business, and factor in how much you can afford to pay to add the capability to accept credit and debit cards. In most cases, the added expense will more than pay for itself in additional sales.
All of the vendors weâve profiled above are excellent choices in their particular niche. However, they arenât the only good choices out there. So, we encourage you to look over the articles weâve linked to, and carefully read the full reviews of any vendor youâre considering. Most of the best merchant services providers for small businesses offer a very transparent disclosure of their processing rates and account fees on their websites, so check those out as well.
If youâre still having trouble deciding which company is best for you, youâll want to actually âcrunch the numbersâ and make a more informed analysis of what your potential costs will be. An excellent resource for doing this is our Cost Analysis Workbook, which will walk you through the steps necessary to estimate your overall costs with various providers. The workbook also includes spreadsheets to do the math for you â it couldnât be easier!
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