It’s no secret that owning and operating a restaurant can be one of the riskier small business ventures you can undertake. Trendy “It” spots in seemingly ideal locations open and shutter rapidly, and even a seemingly successful establishment with a consistent customer base can find itself struggling to stay above water. It goes without saying that operating with peak efficiency is of the utmost importance. According to a 2019 survey by point of sale company Toast, 52% of restaurant professionals cited operating and food costs as their No. 1 challenges. This shouldn’t come as much of a surprise; the costs of ingredients can be volatile, and if not properly tracked and monitored, may literally be the difference between success and failure.
Many restaurants operate with margins as low as 2-3%, meaning that if any area of your business is leaking cash, it could drop you into the red. And food costs are often a likely culprit. There are a number of reasons why you may be spending too much on ingredients while not getting back an appropriate return. You may be offering the wrong sized portions, certain menu items may be priced wrong, or you may be buying too much of an ingredient and letting a percentage of it go to waste. This is why it’s vitally important to be able to accurately calculate your food costs.
In this article, we’ll let you know what percentage of food cost you should be targeting and how to make sure you’re hitting that goal.
What’s Included In The Food Cost Formula?
Now let’s get to the good stuff. How exactly do we calculate food costs? It’s actually a fairly simple equation — with a catch. The first thing you’ll want to do is figure out your actual food cost.
Easy enough right? So, as an example, let’s say that you value your inventory at the beginning of the week at $10,000 (because we love the Base 10 system). You then make $3,000 in purchases. At the end of the week, your inventory is valued at $12,000. Using the calculation, we see that the first number would be $1,000. If you also had $3,000 in food sales, then you would divide $1,000 by $3,000 for an actual food cost of 33.3%. Make sense so far?
$10,000(starting inventory)+ $3000(purchases) – $12,000(ending inventory) / $3,000(sales)= 0.333(an actual food cost of 33.3%)
Industry standards vary slightly, but generally, an actual food cost percentage of roughly 30% should be your target. If you’re coming within a couple of percentage points on either side, you’re probably doing something right. Now, if you’re math-averse, unfortunately, that’s not the only calculation you should be making. There’s also the ideal food cost. In a perfect world, this percentage would match up directly with your actual food cost total, but nothing is ever that simple. The difference between these numbers is what helps you detect where you may be losing profits, either through waste or potential theft.
Ideal Food Cost Formula
Ideal Food Cost = Cost per menu item / Sales per menu item
To go off of the above example, if your total inventory cost each week for the ingredients in a dish is $900 and your sales on that menu item add up to $3000, you are left with an ideal food cost of 30%.
$900(cost per menu item)/ $3,000(sales per menu item)= 0.30(an ideal food cost of 30%)
Exactly where you want to be, right? However, let’s look back at the actual food cost we calculated earlier. There’s a 3.3% discrepancy in your actual and ideal numbers. Now you can start trying to figure out the reason behind that gap. Keep in mind that, although the goal is for those numbers to be as close as possible, you’re likely never going to cut down on waste entirely.
Download Our Food Cost Calculator For Restaurants
Restaurant owners (and managers) are busy people! We know. Sometimes you just want a tool that will do the work for you, with minimal time or effort required. I mean, honestly! Who wants to spend hours totaling up inventory purchase orders just to see how much you’ve spent?
(Spoiler alert, if you’re doing this manually it’s time to invest in a better system.)
To that end, we’ve put together a handy food cost calculator for you. This downloadable file will help you calculate both your ideal and actual food costs and highlight the difference between the two.
Get Our Food Cost Calculator Google Sheet
Or Download The Excel File
Strategies To Manage Your Food Costs & Increase Your Profit Margins
In the above scenario, a difference of 3.3% between ideal food costs and actual food costs probably isn’t going to make or break you. However, if you find the gap to be higher than that, you should probably try to lock down the culprit as quickly as possible. Left unchecked, a food cost discrepancy could bleed tens of thousands of dollars from your bottom line over the course of a year.
Here are a few reasons why you may not be getting an optimal return on your food costs.
Menu Items Mispriced: Menu pricing can be tricky, and restaurant owners often make choices based on gut instincts. But even micro-adjustments, particularly to popular items, could make a significant difference in bettering your food cost percentage. You can also try to redesign your menu to increase profitable items’ visibility. Keep your customers in mind and stay on top of current food trends; if you have seasonal items on your menu, make pricing adjustments accordingly.
Overspending On Ingredients: It’s important to shop around to make sure that you’re getting the best value for the items you include in your dishes. Buying in bulk can be a cost-saver, but you can offset those savings if you’re purchasing too much and letting ingredients go to waste. Carb-heavy items like breads and pastas are usually cheaper, so implementing more of those menu options could increase your profits. If your ideal and actual percentages are off by a large margin, you may want to hold back on giving away items at tables (like bread or chips).
Dishes Portioned Incorrectly:Â One easy thing to check that may end up making a big difference is simply whether the dishes you’re serving are too large. If you see the same dish coming back half-eaten again and again, that may be a sign that you need to adjust your recipe. Make sure that all of your cooks are on the same page. Even one lone cook with a penchant for adding more sauce or dishing up a larger portion can affect the bottom line.
Not Utilizing Your POS:Â If you’re running a full-service restaurant, chance are good you have a strong point of sale system. If any of the above measures seem too daunting, a strong inventory management and reporting system can do the bulk of the heavy lifting. A POS with strong inventory can help you keep precise counts of ingredients and can tell you what items sell best and if there are things like seasonal trends that you can utilize to your advantage.
Find A POS System That Helps You Control Your Food Costs
That last bullet-point above is of particular interest to us because helping you find the perfect POS system for your business is kind of what we do. Most POS systems will have some form of inventory management, but they are not all created equal. If inventory management is going to be crucial for your restaurant, there are some areas where you’ll want to make sure your system excels.
First, if you have a large number of SKUs, having a system that can import and edit items in bulk is going to virtually be a necessity. Most good systems, but not all, will allow you to import via a CSV file and some will even let you import existing barcodes. Features like this in the back end that cut down on how much you’ll need to input manually will save you countless hours. Along those same lines, having a system that allows you to create and print your own purchase orders is a huge benefit. While this is a common feature, it can occasionally be a time-consuming process depending on the POS, so be sure to utilize a free trial or demo when you’re shopping around.
Raw ingredient tracking could be the feature in inventory management that will help you cut down on food costs the most. And again, while most restaurant POS systems worth their salt will have this feature, some are more robust than others. Make sure your system provides real-time alerts to let you know if stock is running low. You can also usually set levels to automatically place a new purchase order when an ingredient is nearly out. Other systems automatically track waste, which can save you time when trying to calculate your ideal food cost. It’s also nice if your inventory syncs with your reporting, giving you detailed numbers on how much of a certain ingredient is selling and how much profit individual dishes are turning. In short, your POS can (and should) do a lot of the heavy lifting for you when it comes to calculating your inventory to make sure you’re running at peak efficiency.
The Bottom Line: Managing Food Costs Is Key To Improving Your Profit Margins
If you’re running a restaurant, you’re already aware of how volatile the industry can be. When you’re working with narrow margins, you need to find ways to cut costs anywhere you can. And while food costs are one of a restaurant’s biggest expenses, the good news is that it’s possible to shave down those costs if you’re vigilant. Calculating your actual food cost and your ideal food cost may seem like a tedious and perhaps arduous process. However, a POS system with a robust and easy to use inventory management system can make things much easier. In the process you might find some key areas of waste or some simple fixes that could save you thousands of dollars in the long run.
Get Our Food Cost Calculator Google Sheet
Or Download The Excel File
The post How To Calculate Food Cost For Your Restaurant appeared first on Merchant Maverick.
You need to buy inventory for your company, but you don’t have enough capital to do so. Conventional financing is not a viable option for your business, but you know you can quickly sell the inventory you want to purchase. Is there a way to leverage your inventory and use that as collateral? What other options are available to you? Read on to learn about inventory financing and whether it’s a good fit for your business.
What Inventory Financing Is & How It Works
Inventory financing is a type of asset-based loan in which the inventory you’re purchasing with the loan is used as collateral to secure the loan. Depending on the arrangement, the lender may also require you to put up your accounts receivable as collateral. The amount of financing you receive is directly related to the value of the inventory in question, usually 70 to 80% of the inventory’s value. As you sell the inventory you purchase with the loan proceeds, you’ll be able to repay the loan.
Inventory financing is typically used by large upstream producers and distributors of tangible goods, such as manufacturing companies and product wholesalers. You’ll need to both carry a lot of inventory and be purchasing a large quantity of inventory to qualify for this type of financing.
Inventory financing products are sometimes conflated with “inventory loans,” which is a more general term. An inventory loan is simply a loan to purchase inventory, whereas inventory financing refers to a specific type of loan wherein the inventory purchased with the loan is used to secure the loan. A standard business loan to purchase inventory may instead require another type of specific collateral, a personal guarantee, or a general blanket lien on all of your business assets.
Unlike inventory financing, which is appropriate for large B2B businesses, other types of inventory loans can be used by small B2C businesses.
Types Of Inventory Financing
All inventory financing uses inventory as collateral, but there are still different types of financing agreements. In this section, let’s look at the types of loans used for inventory financing.
Inventory Loans
Inventory loans are typically structured as short-term loans, with the expectation that the inventory will sell quickly and pay for itself quickly. With an inventory financing loan, you will receive the entire sum up front and then repay the principal, plus interest, in installments.
Usually, the minimum loan amounts for inventory financing are on the high side, meaning the smallest loan you can take out could be $500,000 (or higher, depending on the lender). The amount you receive will be a percentage of the appraised value of the inventory you are purchasing, to account for the fact that inventory depreciates in value over time. For example, if you need to purchase inventory with a liquidation value of $800,000, the lender may lend you 80% of that, so you’ll receive a sum of $640,000.
An inventory term loan can be a good choice for large, one-time inventory purchases — if you have the opportunity to purchase a bulk amount of quick-turnaround inventory at a discount, for example. However, some loans may be easy to renew for repeat borrowing needs.
Inventory Lines Of Credit
A line of credit is a common loan structure for inventory financing and is more suitable for ongoing access to capital for inventory purchases. With an inventory-secured line of credit, the business owner receives a line of credit based on the value of their inventory, repays it as the inventory is sold, and borrows more funds as needed and the limit is replenished. The borrower only has to pay interest on the money they withdraw, plus any other associated fees.
Rather than one-time inventory purchases, an inventory line of credit can be useful for regular inventory replenishment needs due to cyclical cash flow issues, e.g., for a business that has slower sales certain times of the year.
Note that before you turn to an inventory financing lender for a line of credit, you may want to try to negotiate a line of credit with your vendors directly.
Accounts Receivable & Inventory Financing
Accounts receivable and inventory financing (ARIF) is when accounts receivable financing and inventory financing are used in conjunction. Businesses that frequently have a lot of money tied up in both invoices and inventory may be able to leverage both of these assets as collateral to secure financing.
Accounts receivable financing—also known as invoice financing—is a loan based on the value of your business’s unpaid invoices. You’ll usually get a line of credit based on the value of your receivables (invoices). Because A/R financing and inventory financing are both asset-based loans, they function similarly and may be used together to secure a loan or line of credit. As with inventory financing, with AR financing you’ll only receive 70-80% of the value of your unsold invoices; this is to account for the fact that some of those invoices may never be settled.
Invoice factoring is something slightly different, as you actually sell your unpaid invoices to a factoring company, but can also be used to leverage outstanding invoices to pay for inventory.
Purchase Order Financing
Purchase order financing can be a useful way for B2B companies to finance certain types of inventory purchases. With this type of financing, you receive an advance to buy the inventory you need to deliver on large purchase orders. PO financing works well for companies that resell finished goods and need to fulfill orders for these goods. The way this works is you receive a purchase order from a reliable (creditworthy) customer. The PO financing company will then front you the capital to pay your suppliers for the inventory needed to fulfill that order.
PO financing is similar to invoice factoring, except with PO financing you’re taking out a loan to fulfill an order; invoice factoring is a loan based on completed orders.
Expected Rates & Terms For Inventory Financing
Rates and terms for inventory financing, of course, vary depending on the lender and the type of inventory financing you’re applying for. But some things are true of inventory financing and asset-based lenders in general :
Loan minimums are high (usually $500K+)
You can only be approved for 70% to 80% of the assessed value of the inventory you’re purchasing
The value of your current inventory must be at least twice the amount you’re asking to borrow
Interest rates are typically in the high teens
Repayment terms are short (up to 3 months)
Time to funding may be as long as 30 days
The lender may do an on-site inspection of your inventory and your inventory management system, and you will need to pay the associated inspection costs
If you fail to repay the inventory loan or line of credit on time, your inventory will be repossessed
If these terms don’t sound like they would make sense for your business, you may be better served by an online inventory loan, which is more appropriate for smaller businesses.
When Inventory Financing Is A Good Choice For Your Business Funding Needs
As mentioned, inventory financing can be suitable for manufacturing and distribution companies. In some cases, it could also suitable for large retailers. Consider whether the following applies to your business:
You own a large company that deals with tangible goods (usually B2B)
You need to borrow at least $500K and have at least $1 million in current inventory
Your sales are outpacing your revenues
You are unable to get higher credit lines from your suppliers
You have outstanding purchase orders you need to fulfill
You have an efficient inventory management system
You’ve exhausted other possibilities for financing (such as a credit line with your vendor or a conventional business loan)
Compared to a standard business loan, inventory financing is more expensive but is usually easier to obtain, as long as you have a larger, established business and your inventory is selling quickly. You do not necessarily need to have good credit, but you will need to demonstrate a strong sales record that indicates you will be able to easily sell the inventory you are purchasing. You will generally be able to borrow up to 50% of the value of your current inventory.
When To Avoid Inventory Financing
If you have a newer business without a demonstrable sales history, or your current inventory is losing value and not selling, it’s unlikely that an inventory financing company would be interested in lending to you. This type of financing also isn’t suited for startups or smaller business-to-consumer companies such as independent retailers that only need to purchase $50,000 worth of inventory. In those cases, you’d be better off with an online inventory loan, such as a short-term working capital loan or business line of credit.
Even if you do qualify for inventory financing from an asset-based lender, you may still want to avoid this type of financing if there’s a chance you could qualify for a better loan, such as an SBA loan. This is because inventory financing loans are more expensive than traditional business loans.
Is Inventory Financing Right For You? How To Find An Inventory Financing Company
So, you’ve decided that inventory financing is a good option for your business, and you need to find a reputable company to work with. Due to the large sums of money involved, the complex nature of asset-based loans, and all the due diligence involved in securing inventory financing, you will likely want to find a loan specialist who can guide you to navigate your inventory financing options and find a suitable lender for your company. There are also online loan matchmaking services such as Lendio that you may be able to use to secure inventory financing.
One inventory financing option you might want to consider is P2Binvestor, as this lender has earned a 5-star review due to its easy application process and competitive terms and fees.
Donât Think Inventory Financing Is Right? Learn About Other Types Of Small Business Financing
Perhaps you’ve realized inventory financing isnât right for you because you run a B2C business and/or you have more modest financing needs. I’d like to point you toward some other loan resources that might be a better fit:
6 Small Business Loan Options For Purchasing Inventory
Types Of Small Business Loans
14 Types Of Alternative Financing For Small Businesses
The Best Small Business Loans For 2020
SBA Loan Requirements
Business Line of Credit Comparison
Invoice Factoring Comparison
If you’re looking for specific lenders that could offer smaller amounts of capital to purchase inventory, BlueVine and OnDeck are a couple of our top picks in the small business space. I encourage you to read those reviews and see if their lending products could work for you. And as with invoice financing loans, you can also find other types of loans on online loan marketplaces including Lendio.
Need more help? Let me know in the comments and I’ll see if I can guide you in the right direction.
The post How Inventory Financing Works & When Itâs Right (Or Wrong) For Your Small Business Funding Needs appeared first on Merchant Maverick.
Cloud technology is at once powerful and versatile. When applied to point of sale, the cloud enables business owners to not only sell, but also to optimize their sales using the data these systems effortlessly collect. In just a day’s worth of transactions, your POS has the potential to collect a wealth of information about your sales, your employees, your customers, and the trends that can make or break your business.
There’s a good chance you’re not taking full advantage of even your POS system’s basic data reporting capabilities. Or if you’re shopping around for a new cloud POS, you may be having a hard time sussing out the reporting features of each different POS app.
In this article, I’ll discuss how you can use POS reports to make better decisions concerning your business. Read on to learn how to harness the power of the cloud so you can sell smarter.
Why Your POS Data Is One Of Your Most Valuable Assets
The POS system is a central hub for most brick-and-mortar businesses. Using web-based technology, your POS gathers data about your sales, customers, employees, inventory, and more, and assembles all this information into digestible reports. The business owner or store manager can then access these reports online. POS reporting data can (and should) be used to make important decisions about things like staffing, which products to sell, and when to restock.
The importance of POS reporting becomes abundantly clear when you start shopping for a POS and you see that most systems charge extra for advanced POS reporting capabilities.
With that said, you need to know how to interpret and apply your POS data in order for it to benefit your business.
Let’s dig a little deeper into how you can go about doing this.
How To Effectively Handle POS Data Analysis
POS systems organize raw data about your business into reports, which are typically pretty user-friendly. Still, you need to be organized and methodical about checking these reports in order to make them actionable.
Here are tips for checking your POS data:
Pull End-Of-Day Sales Report(s) Daily: In your daily sales reports, you can typically view things like your total sales, which items sold most, your busiest selling time that day, and other metrics for the day. The exact type of daily sales reports vary by POS, but your POS should have at least some kind of general daily sales or closeout report you can check to get a general overview of how the day went.
Pull “X” & “Z” ReportsDaily: The “Z” report shows a more detailed breakdown of your daily sales and is run at the end of each day; the “X” report shows that same data but can be run at any time of day to show a current snapshot of the day’s sales so far. These reports show detailed sales breakdowns by category, tender type, employee, as well as taxes, gratuities, gift card spends, voided items, and more. Importantly, the Z report will let you know how much cash should be in your register at the end of the day.
Pull Employee Reports Daily: See who worked that day and what they did. Checking daily will help you spot any discrepancies or suspicious patterns, and also make sure all employees have clocked out by EOD.
Check Payments Report Daily: You need to send your credit card transactions to your merchant services company daily in order to get paid. POS systems with integrated payment processing should automatically batch your transactions each day, and you should be able to view this information in some kind of daily payments report. It’s a good idea to check each day to ensure the batch was sent, and also check daily to make sure your bank deposits are matching your batch totals.
Check Other Reports Periodically & As Needed: POS software offers various other reports, including reports on order histories, stock counts, customer behavior, returns & exchanges, gift cards, discounts, comps, and more. While you don’t need to necessarily check all of your reports every day, it’s good to have this data at your disposal so you can dig deeper when you need to solve a problem—for example, if there is a discrepancy in your daily “Z” report, you might check your comps and discounts reports to see who might have issued a discount and why. Another example is checking your batch history for a certain day if a customer complains they were double-charged.
Pull Your ReportsWeekly, Monthly, & Annually To Identify Trends: In addition to pulling key reports daily, looking at sales and other metrics over longer time periods such as weeks, months, quarters, years, etc., will provide important insights about your business’s performance and help you identify trends over time.
With multi-location businesses, the manager at each location should have access to reports, and there should be a system in place for regularly sharing reports from each branch with other managers and/or the business owner.
POS Web Reporting VS Mobile Dashboards
In recent years, more POS systems have embraced mobile POS reporting, which lets you run reports on a dedicated mobile app. These apps may even show a live view of your sales in real-time. Mobile reporting apps make it convenient to quickly access key information about your business’s performance when you’re at home or anywhere else.
However, POS reporting apps often have a somewhat pared-down version of the reporting suite you’ll find on the web dashboard that you log into from your browser. When evaluating POS systems, find out if it offers mobile reporting, and if so, see how the mobile reporting suite differs from what you’ll see in the web portal.
A couple of examples of POS systems that offer strong mobile reporting apps are ShopKeep and Square, which offer the mobile reporting apps ShopKeep Pocket and Square Dashboard, respectively.
How To Optimize Your Point of Sale Data Collection
To generate accurate reports, business owners need to make sure their POS is accurately gathering data. While POS systems generally make it quite easy to collect data, you’ll still need to do some setup to optimize your data collection. This setup process can be tedious if you just want to get up and running, but it’s super important for data and analysis purposes. Trust me: you’ll thank yourself later.
Implement A Strong Inventory Management System
Inventory reports will only be accurate if you have a good inventory management system in place. For example, all of your inventory must be properly tagged by category. To gather information, you need to generate reports on your business’s profitability, and you’ll also need to enter the raw cost of each item.
Depending on your needs and the strength of the POS system’s inventory tracking feature, it may benefit you to also use an outside inventory management software program that integrates with your POS. Which brings us to the next item…
Make Sure Your POS “Talks To” Your Other Business Software
Whether you use software for inventory management, accounting, email marketing, or any other business function, it’s important that this software integrates seamlessly with your POS. Otherwise, you won’t be able to transfer data between systems. For example, many businesses use QuickBooks and thus need a POS that integrates with QuickBooks. Or, you may operate a Shopify online store and need a POS that integrates with Shopify to sync your in-store and online sales.
Sometimes, you may have to pay an extra fee for POS software integrations, especially if you need to hire a developer to create a custom integration. Depending on cost and other considerations, you might consider switching to a POS system’s in-house add-on for accounting, eCommerce, etc. (if they offer an add-on for that function).
Customize Your Reports To Track KPIs
Your business should have key performance indicators (KPIs) that relate to your goals for your company. Measuring and tracking these KPIs helps you focus on the data that matters most for your business. For example, if you have the goal of increasing the amount each customer spends, you’ll have a KPI for average spending.
Some POS systems let you create custom reports which can be helpful for tracking your unique KPIs—Square is one example of a POS with this capability. Even if your system doesn’t let you generate custom reports, you may be able to customize your reporting dashboard to show the reports that relate to your KPIs, or modify your reporting settings to send you those reports at your preferred frequency.
Train Employees On Best Practices
Not just cashiers, but everyone on your team needs to be trained on best practices to accurately collect data using the POS. This could mean making sure your sales team is trained on how to onboard customers to the loyalty program, training warehouse workers on how to properly tag inventory, etc.
The first step of training your staff is for the manager themselves to become well acquainted with all POS functions and how it collects data. Once you know what data the POS collects, you’ll be able to advise your staff accordingly.
6 Clever Ways To Use Your POS Data To Firm Up Your Bottom Line
What can you do with reports to actually increase sales or lower operating costs? Here are some ways to put that data to work:
Get Smart About Staffing: Check employee management reports to see if you’re adequately staffing for busy times or overstaffing during slow times. You can also gauge the performance of individual employees to see who earns the most commissions, who comps the most items, and other key metrics.
Optimize Your Outlets: Even if they’re only across town, two locations of your store or restaurant can have very different customer bases, so it makes sense to individualize your offerings at each location. With multi-location POS reporting, you can compare data between different locations to customize inventory and staff to meet each store’s needs.
Stock Only What Sells: Run reports to see what hasn’t sold and what’s selling like hotcakes. Then you can clear out the non-selling product for a more popular item. You can also use reports to see what items may sell best during certain times of the year and make stocking decisions based on that data.
Retain Your Customers: POS systems with CRM reporting help you maintain relationships with your customers. For example, you might check reports for lapsed customers and offer them a coupon to win them back. Or, identify your top customers and reward them with an exclusive offer. If your POS has a loyalty program, you can also track the success of any offers and coupons you send out.
Find & Fix What’s Gone Wrong: Theft, errors, and mismanagement are all problems that can be detected using POS reports. When you encounter a problem, there’s a good chance that the solution lies in the data. For example, if you see a lot of voids, this may indicate that your staff needs more training on how to use the POS system.
Motivate Your Team: Sharing information from your POS reports can be a useful motivational tool in a team setting. For example, you might have a meeting to show everyone how much sales increased last month — and then provide an incentive to sell even more this month! The employee insights from your POS reports can also prove useful for individual performance reviews, as they provide information on what the employee is doing well, and perhaps things they can improve upon.
Your Point of Sale Data Can Make Your Business More Successful, So Use It!
Point of sale data can tell you a lot about what’s going on at your business. From employees’ daily activity to inventory stock counts and long-term sales trends, POS reports put actionable information right at your fingertips. To better acquaint yourself with the different types of POS reports, I recommend reading the Top 5 Standard POS Reports and POS Reports: Getting Beyond The Basics.
If you’re ready to go get yourself a fancy new POS system that has better reporting tools, we have a plethora of information on the best POS systems for your buck. Here are some additional resources to help you find a POS system with excellent reporting:
Best Retail POS Systems
Best Restaurant POS Systems
Best Salon POS Systems
Best POS Systems For Bars & Nightclubs
Best POS Systems For Food Trucks
Best Coffee Shop POS Systems
Best Liquor Store POS Systems
Have a question about POS data or point of sale systems with strong reporting? Leave me a message in the comments and I’ll get back to you.
The post Why Point Of Sale Data Is The Secret To Understanding Your Business And Making More Sales appeared first on Merchant Maverick.
Clover is a big name in small business point of sale and if you’re currently in the market for a POS system, it’s likely that Clover is on your radar. But with so many different entities selling Clover, it can be difficult to gauge how much you should pay for a Clover system or what’s a good deal (and what’s not).
There are three aspects to Clover pricing: one-time hardware costs, monthly software costs, and ongoing credit card processing fees. In this article, I’ll break down how much you can expect to pay in each of these areas, and where you can find the best prices for Clover POS.
Who Sells The Clover POS System?
Many different entities sell Clover, ranging from national banks and merchant services companies to even retailers like Sam’s Club. The following are some popular Clover POS system vendors:
Bank of America Merchant Services*
Clover.com
Dharma Merchant Services
First Data/Fiserv*
Leaders Merchant Services*
Merchant One*
National Processing
Payment Depot
Sam’s Club Merchant Services*
Wells Fargo Merchant Services*
*Not a recommended Clover reseller
Generally, we recommend purchasing your Clover system directly from Clover.com or from a high-quality Clover reseller such as Payment Depot, Dharma Merchant Services, or National Processing.
How Much Does A Clover Credit Card Machine Cost?
As with the cost of POS systems in general, Clover hardware pricing depends in part on where you purchase it, as well as which pieces of hardware you want to include in your POS setup.
A Clover Station is the largest, most complete Clover POS setup, and includes 14″ swiveling POS screen, cash drawer, and receipt printer. The Clover Mini has a smaller swivel-screen and can be used by itself or with a Station. The Clover Flex is a handheld smart terminal with an even smaller screen that can also be used by itself or as part of a larger Station setup. Finally, the Clover Go is a mobile credit card reader that connects to an app on your iOS or Android device.
All Clover devices sync together so you can pretty much mix and match them however you like. For instance, you could have a Clover Mini with a cash drawer as your main terminal, while also using a Clover Go for occasional mobile sales. Or, you might just use a Clover Station and nothing else, or a Clover Flex with a Clover Mini, etc.
The following prices are what you can expect from Clover.com directly. Other Clover vendors vary in their pricing, and we recommend you do your research to compare prices to find the best options out there.
Clover Station for any business: $1,399. Includes Station, cash drawer, and receipt printer with customer-facing display and NFC. Including Clover Mini: $1,749.
Clover Station for full-service restaurants: $1,349. Includes Station, cash drawer, and standard receipt printer (kitchen printer sold separately). Including Clover Flex: $1,699.
Clover Mini: $749. Has built-in scanner and receipt printer but does not include cash drawer.
Clover Flex: $499. Has built-in scanner and receipt printer but does not include cash drawer.
Clover Go: $69. Includes Micro USB charger. Charging dock sold for an additional $29.
Additional hardware add-ons, such as scales, barcode scanners, kitchen printers, and debit PIN pads can drive the price up further.
Various vendors may offer lower prices on Clover hardware (Clover.com hardware prices are MSRP), but those lower prices may come with a catch, such as having to sign to a long-term merchant services contract for payment processing. Many Clover vendors also offer the option to lease your Clover POS, but we never recommend leasing your POS system. It’s always a much better deal to buy your system outright, or pay for it installments if the vendor offers 0%-interest financing.
To learn what each of the Clover hardware devices can do and which ones you need for your business type, I recommend reading our dedicated reviews of the Clover Station, Clover Mini, Clover Flex, and Clover Go. My post on The Best (And Worst) Companies To Get a Clover Credit Card Machine From also has more information on the different Clover hardware options and how much you can expect to pay from different vendors.
Understanding Clover Fees For POS Software
Clover charges monthly fees for its software, letting you choose from several different plans that offer different features. You can also purchase additional software features from Clover’s App Store.
Here are Clover’s monthly software plans:
Register Lite Plan: $14/month
Best for businesses with credit card sales of less than $50,000/year
Flat-rate processing at 2.7% + $0.10 (if plan is purchased directly from Clover)
Features include:
Accept all credit and debit cards, including chip (EMV) cards
Accept contactless (NFC) payments
Track cash payments
Process payments when offline
Send paperless receipts
Accept on-screen signatures & tips
Ring up items, discounts, & tax
Charge taxes at the item level
Process refunds
Theft protection (set employee permissions)
Employee management (payroll, shifts)
Export basic reports (sales, tax, payroll)
24/7 support
Liability protection up to $100,000 in the event of a data breach
Access to 200+ apps and integrations on Clover app market*
Monitor activity, sales, & refunds remotely
Track sales with item-level reporting*
*Available on Flex, Mini, & Station only
Register Plan: $29/month
Best for businesses with credit card sales of more than $50,000/year
Flat-rate processing at 2.3% + $0.10 (if plan is purchased directly from Clover)
Pre-authorize credit cards (for bar tabs, reservations)
Build your mailing list automatically*
Read customer feedback, and reply with coupons*
Create a simple, custom loyalty program*
Fire orders to a kitchen printer or other stations
Add gratuity to checks
Manage tables
*Available on Flex, Mini, & Station only
Dining Plan: $69/month
Best for full-service restaurants
Flat-rate processing at 2.3% + $0.10 (if plan is purchased directly from Clover)
Includes everything in Register plan, plus:
Floor Plans app: Build dynamic floor plans that match your layout
Orders app: Set up order types and categories; move or transfer orders; fire orders directly to kitchen or prep stations; add items to partially paid orders
Apply service charges to large parties
Split checks in any proportion
Run reports per revenue center (patio vs. bar)
Other bundled that come pre-installed: Bar Tab Auths, Tips, Shifts, Discounts, Happy Hour
As you can see, the Register Lite plan is best for very light, low-volume users who don’t need to do things like process exchanges, manage inventory, or accept tips. For most retail or quick-serve businesses, the Register plan is best, especially considering the lower rate for payment processing. Full-service restaurants may benefit from the Dining plan, but it depends on your needs; you might be fine with just the Register plan. Note that Clover used to offer Payments Plus, which was free and more limited in features. However, that plan has been discontinued.
Still, $14/month to $29/month is pretty affordable for a POS, especially since Clover doesn’t charge extra for additional registers or devices. Of course, Clover apps might add to the cost if you need specialized features. But again, most businesses will find everything they need in the $29/month plan.
Note that while most Clover providers sell Clover software services, those companies often charge their own markup on top of Clover’s monthly fees.
How To Navigate Clover Credit Card Fees
Clover is always offered in conjunction with a merchant account, whether you buy it from Clover.com or elsewhere. Clover.com offers a flat-rate pricing structure, whereby you pay 2.7% + $0.10 or 2.3% + $0.10 for all card-present transactions (and 3.5% + $0.10 for card-not-present transactions, regardless of plan).
Clover’s flat-rate pricing scheme is straightforward and doesn’t include any extra merchant services fees. Generally, flat-rate processing works great for small, low-volume businesses. The processing fee on the Register plan (2.3% + $0.10) is quite competitive, especially compared to Square’s rate (2.6% + $0.10). (Note that Clover merchant accounts are still subject to underwriting and approval—make sure you read the fine print as you sign up.)
Not all Clover sellers offer flat-rate processing; some providers like Payment Depot offer interchange-plus rates, which might work better for higher-volume merchants processing more than $10K/month. Other less-desirable Clover vendors offer tiered pricing or enhanced billback pricing, which are both confusing and expensive. And still other vendors offer flat-rate processing, but at rates higher than what Clover.com offers. For example, Bank of America sells the Register plan with 2.7% processing.
How Much Should You Pay For Cloverâs Point Of Sale System?
All in all, most businesses can expect to pay somewhere around $1,400 for a complete Clover Station setup, with a $29/month software fee, and credit card processing fees of 2.3% + $0.10. As mentioned, Clover.com is a good place to buy your Clover devices and your system’s associated software and payment processing account. However, choosing one of the top-rated Clover providers could also be a good bet.
Whatever you do, beware of sub-par resellers offering expensive leases and tiered pricing. If you don’t buy directly from Clover.com, make sure you shop around and understand what fees are being absorbed or passed onto you in other forms.
Finally, if you’re not 100% sure whether you want to use Clover as your POS, you might also want to evaluate some of the best Clover alternatives.
The post How Much Does Clover POS Cost? Everything You Need To Know About Clover Pricing appeared first on Merchant Maverick.
In the restaurant industry, business owners are constantly looking for areas where they can potentially cut overhead costs or increase their turnover rate even slightly to maximize their profits. But reaching that goal is often much easier said than done. Fortunately for these owners, technological advances in the industry might just have a practical solution. One of the more recent trends in the point of sale industry has been to offer self-ordering kiosks. What started as a novel or niche idea just a few years ago has now spread to a large number of the top restaurant POS companies, making it a feature that you may not even realize you can implement affordably.
There are different types of self-ordering kiosks as well. Some allow customers to walk through the entire purchasing experience on their own, punching in their order, walking through automated modifiers, and eventually paying. If you don’t want to lose the personal touch from your employees entirely, you can also add on-table kiosks that can simply ease the burden from a server by automating the payment process or allowing customers to browse a digital menu.
X Must-Have Features To Look For In A Good Kiosk POS
Even if your POS system does offer kiosk hardware and software, it doesn’t necessarily mean it will be a good fit for your business. You’ll want to make sure that it has all of the functionality you’re looking for to make it worth actually implementing. Here’s a few features that POS systems can offer in kiosk mode that you may want to check out.
Menu Building
Designing an eye-popping menu that highlights your unique or profitable items can be a difficult task. Having a kiosk can show customers appealing photos of each item and allow individuals to click on various menu options to either view a description or ingredients. This can lead to an increase in impulse sales and free up employees. It can also save you money on printing and laminating when physical menus get destroyed or when the menu simply changes. With most systems, menus can be updated quickly with a few button pushes.
Menu Prompts
Along that same vein, when a customer is filling out his or her order, the system can quickly and efficiently walk them through various options and areas for up-selling. These prompts and modifiers can be easily added in most POS software and can lead to a decrease in ordering errors and a potential uptick in sales.
Loyalty
How many times have you been making a purchase and, as you were ready to pay, a representative asks you if you want to enter your phone number or email address to receive promotions? By this point, most customers are usually ready to be done with their transaction and don’t feel like spelling out their information. An automated system can also make this process easier, letting customers enter their own information that is then automatically stored for future marketing. In some instances, you can also incentivize customers to sign up for loyalty by offering an immediate or future discount on a purchase.
Variety Of Payment Options
This is one of the most important aspects to consider. Today’s customers will look to pay in a variety of ways and a lack of options at your kiosk could turn them away. At a minimum, you will want a system that can process magstrip and EMV chip cards. However, many systems will also accept other methods like Google Wallet or Apple Pay. If your business also utilizes gift cards, you’ll want to make sure that your kiosks are set up to accept those as well.
Barcode Scanner
This is somewhat more of a niche item but, for convenience stores or quick-service cafes, it can be a life-saver. Having a scanner that hooks up to your kiosk directly can allow customers to purchase self-serve or ready-made items by ringing them up themselves and paying for them in a matter of seconds.
Kitchen Display System Support
If you’re operating a larger full-service restaurant with a busy kitchen, having your kiosk directly sync to your KDS is a necessity. This will allow your cooks to see exactly when the orders were placed and they can view any special instructions or modifications that customers put in themselves. It also eliminates a potentially time-consuming step for your employees who would otherwise have to take down the order and then go to a separate station to send it to the kitchen.
Customer Notifications
To increase the the efficiency of your restaurant, kiosks can alert customers that their orders are ready either on an individual screen or by sending a text or email directly to a mobile device if wait times are longer. This is also a useful way to gather customer information for future marketing campaigns.
Tip Prompts
It’s a simple feature but one that can make a huge impact to your business’s bottom line. Simply being given a prompt to add gratuity is proven to increase profits across the board and is a simple, non-intrusive way to, we’ll say gently nudge, customers to reward your employees for their exemplary service.
Surprising Ways Your Restaurant Can Benefit From A Self-Ordering Kiosk Set-Up
Reduce Labor Costs
Obviously kiosks, either at the table or standing alone, can do a lot of the work that would otherwise fall to employees. Not only can this reduce the sheer number of employees you might need, it can also improve the efficiency of your employees on hand by taking some of the busy work off their plate. Kiosks can also mitigate against issues like unexpected rushes or having an employee who calls in sick at the last minute.
Increase Check Sizes
It’s easy to program in modifiers and prompts within a kiosk that will walk customers through up-sells and add-ons. This can be done in an intuitive fashion and in a way that doesn’t come across as pushy and customers feel as if they have more onus in their decisions.
Increase Overall Efficiency
While the addition of kiosks may seem impersonal, it can dramatically streamline your operations. With customers given the ability to send their orders at their own time, it eliminates those common occurrences where a server has to come back because a table hasn’t made its decision yet or stalls at one particular group of customers who take a long time to complete an order. Servers also don’t need to then make a separate trip to another station to fire an order to the kitchen. Instead, your employees can focus on making sure customers have everything they need.
Increase Order Accuracy
Along these same lines, having customers inputting their orders directly obviously eliminates the potential for server errors and will increase the likelihood that food comes out exactly to a customer’s specifications. This makes for an overall happier experience for customers who are then more likely to leave a hefty tip.
Disadvantages & Concerns When Using Restaurant Kiosks
Impersonal
Many restaurants pride themselves on their customer service and hands-on approach to their customers. Cutting back on the amount of face-time your hand-picked employees get with these customers might be seen as damaging to a restaurant’s brand.
Potential Confusion
If you end up with a kiosk system that isn’t extremely intuitive or has an interface that customers struggle with even slightly, it could defeat the kiosk’s purpose entirely. Having a server or other employee that is having to routinely walk customers through the ordering process can instantly eliminate any cost-saving benefits the kiosk could provide.
Customer ReluctanceÂ
While the world in general seems to be trending toward automation more and more, there is still a large part of the populace that might be turned off by using kiosks to order as opposed to speaking to a human employee. A recent poll from Upserve found that 78% of customers said they would be less likely to frequent a restaurant that utilized self-serve kiosks. No doubt this current trend will take some getting used to for some customers.
Cost
While we’ve already discussed how kiosks may help your restaurant cut down on labor costs in the long term, you’ll likely need to do some math up front to determine if the investment is going to be worth it. In short, kiosks aren’t exactly cheap and, if not utilized correctly, they could end up being more trouble than they’re worth.
The 5 Best Kiosk POS Systems For Restaurants & How To Afford Them
Now let’s get to our bread and butter… telling you which point of sale systems might be the bet for you if you’re in the market for self-serving kiosks. The following systems are all among our favorites at Merchant Maverick and excel when it comes to providing kiosk functionality.
TouchBistro
TouchBistro is a hybrid system best-suited for small to mid-sized restaurants and other food-service businesses. In many ways, TouchBistro has always been on the cutting edge of POS technology with strong mobile ordering functionality and a sleek designed catered specifically to make the lives of servers easy. It also was early on the scene with an automated kiosk system.
TouchBistro’s system comes with customizable branding and an easy-to-use interface that can feature pictures and descriptions of your restaurant’s products. The kiosk supports all types of payments, including Apple Pay and Android Pay and syncs with TouchBistro’s Kitchen Display System as well for restaurants. As you would guess, the kiosk also walks customers through add-ons and combos and lays out prices and options in an easily digestible format.
Toast POS
Toast is an excellent POS company that is Android based and prides itself on usability and its outstanding customer service. The all-in-one system is ideal for pretty much any type of food-service establishment and has one of the better tableside ordering systems in the industry. The system is feature-rich but does charge extra for some of its services like loyalty and online ordering.
Toast’s kiosk system feature’s Toast’s trademark simple interface and offers convenient order notifications directly to phone or email, eliminating the need for buzzers. Like TouchBistro, you can also customize your screen, displaying your menu items. Toast comes with a convenient scanner integration as well for establishments with quick scan and go items and Toast kiosk also syncs directly to a KDS.
Upserve POS
Upserve is a cloud-based system that can handle any-sized food service establishment. Upserve features extensive menu building. It has a robust feature set, including strong inventory management and reporting and a simple, customizable interface. It also has strong tableside ordering functionality and a convenient Upserve Live function that allows managers to check on sales in real time from anywhere on an iPhone.
Upserve makes Bite Kiosk available and come with a unique algorithm that takes user data to help predict future customer behavior, allowing it to make suggestions and up-sell items automatically. It integrates seamlessly with Upserve, allowing for easy menu and pricing updates. It also syncs with Upserve’s loyalty program and, when purchasing, there are discounts for orders of 10 or more units.
Revel Systems
Revel is an extremely robust hybrid system that can fit with nearly any sized restaurant or retail establishment. The iOS based system has an extremely generous back end with inventory that can handle more than 500,000 SKUs and a wide variety of reports. It offers a wide variety of ordering options and has its own delivery management system plus a impressive array of integrations.
Revel also is available with an intuitive kiosk mode. You can easily sync your loyalty program to the kiosk, allowing customers to easily look up past orders or simply make a repeat order. It also comes with the ability to take gift cards as payment. Orders are directly sent to Revel’s KDS. The interface also make it easy to browse menu items or retail inventory.
Lightspeed Restaurant
Lightspeed Restaurant is a cloud-based system designed specifically for small to mid-sized establishments but with the capacity to handle larger businesses as well. Lightspeed has a slick interface and syncs with things like mobile ordering and ecommerce plus an excellent employee management system. It also offers a convenient pricing structure, making sure you aren’t charged for features you aren’t using.
Lightspeed makes it easy to switch on its kiosk mode and conveniently walks customers through the ordering process with potential ares for up-selling and modifiers. The menu automatically syncs up with kiosk mode, making changes simple. You can also create your own payment methods, allowing customers to either pay up front or wait until after their meal.
How Small Businesses Can Afford to Invest In Kiosk POS Systems
Whether you’re interested in large, standalone kiosks or individual table kiosks, the cost can add up quickly. There are a few payment options and most companies will allow you to lease their hardware which can bring down the initial price. However, the long-term cost of leasing these systems is almost never a good idea. Buying the hardware outright ultimately saves you money but that still doesn’t solve the problem of needing cash initially when things might be tight. Fortunately, you have some options.
As a small business owner, you have some flexibility when it comes to receiving a loan. You can apply for an alternative small business loan, which can provide you with cash quickly and can be a good option if you have less than stellar credit or aren’t bringing in much money. These loans can get you the cash you need but can also have somewhat high interest rates.
There are other small business loans that you can look into as well each with slightly different terms. Loans for fledgling restaurateurs are sometimes difficult to land as the industry is viewed as risky. However, if you have a well-designed business plan, the right documents in order, and a good sense of your finances, you can dramatically increase your chances at approval. And, if you’ve run the numbers correctly and can bring down your costs by implementing kiosks, you may be able to pay off the loan quickly.
Are You Ready To Make The Jump To A Restaurant Kiosk POS System?
So hopefully you have a good sense of what kiosk systems are and what potential benefits they could provide for your business. If used properly, self-ordering systems can dramatically bring down your labor costs, increase efficiency and keep your customers happy by speeding up orders and cutting down on errors. It’s also a trend that may become the norm in the restaurant industry sooner than later.
However, that doesn’t mean that there aren’t inherent risks in making that switch. Upfront costs need to be a heavy consideration along with your customer base and your restaurant’s brand. If you rely heavily on your servers for their unique brand of customer service or have a clientele that may be wary of a more automated ordering process, it may not be worth the risk.
As a final thought, keep in mind that, if don’t immediately have the cash on hand to purchase a handful of self-ordering kiosks, you have options there as well with numerous small business loans that may be at your disposal. As with anything, do your research, crunch your numbers, and don’t hesitate to ask questions when making this important decision.
The post Why You Should Consider A Self-Ordering Kiosk For Your Restaurant (Plus The 5 Best Kiosk POS Systems & How You Can Afford Them) appeared first on Merchant Maverick.
It’s that time of year again — time for holiday parties, sparking lights and decorations, and gifts under the tree. As a small business owner, the holidays can add even more to your already full plate (and no, we’re not talking about your big family dinner). One of the most wonderful times of the year can quickly become one of the most dreaded for small business owners and entrepreneurs because of one little phrase: year-end accounting.
Despite being a hassle, though, year-end accounting serves several important functions. The year-end accounting process helps you prepare for tax time. You’ll also run critical financial reports that give you a clear picture of the financial health of your business. This helps you determine any action you need to take in the future to stay on track, boost your profits, or hit other company-wide goals.
Every business owner needs to do their year-end accounting. The good news, however, is that there are steps you can take to simplify the process. Some of these steps can be done at the end of your company’s calendar or fiscal year, while other steps are performed on an ongoing basis. Integrate these tips into your accounting workflow to save time, avoid overlooking errors, and be prepared for your year-end accounting process.
Use Accounting Software
If your business isn’t already using accounting software, what are you waiting for? Today’s accounting software allows you to keep your transactions organized and automates processes such as reconciling bank accounts or sending payment reminders. Depending on the software you choose, you’ll have access to a variety of accounting features that can help you throughout the year … and at the end of the year. This includes invoicing, estimates, expense tracking, inventory management, and time tracking. Your accounting software also allows you to run important financial reports needed for year-end accounting. If you’re new to accounting, don’t worry — most software is easy enough for anyone to use, even if you didn’t major in accounting! (If you don’t believe us, check out our top easy accounting programs.)
The software you choose should fit the needs of your business. For example, if you operate a small business with a handful of clients and only need basic features like invoicing and reporting, free accounting software may work for you. If you have a larger business with more extensive accounting needs, there are plenty of paid options available that offer additional features at an affordable price.
As the end of the year approaches, selecting and learning how to use your new accounting software can be a burden to a busy business owner. If your end-of-year to-do list is too long to add a new task, take some time to at least explore your options so you can have a fresh start for the new year.
Regularly Invoice Customers
Regularly invoicing your customers is necessary for a number of reasons. Not only does this help improve the cash flow of your business, but it also saves time with year-end accounting. In other words, don’t wait until the last minute to invoice your customers — make life (and year-end accounting) easier by invoicing your customers throughout the year.
The same holds true for invoice reminders. Your customers and clients get busy, too, and can easily overlook an invoice. Sending out payment reminders helps you get paid faster, improving your cash flow and reducing the number of unpaid invoices you have to deal with at the end of the year.
Your invoicing software or accounting software makes it easy to send invoices and payment reminders, as well as receive payments from your customers. Of course, features vary based on the software your business uses, but many programs offer recurring invoices and automated payment reminders that help you get paid faster with less work on your end.
Keep Track Of Your Income & Expenses Throughout The Year
For a business owner, there are few things more stressful than shuffling through receipts, invoices, and bank statements to get your finances in order. Not only does waiting until the last minute create more work for you (or your bookkeeper), but rushing through makes it easier to miss errors that can affect everything from your financial statements to filing your taxes. Don’t wait to track your income and expenses. Simplify your year-end accounting by tracking income and expenses throughout the year.
You can track your income and expenses through your accounting software. At a minimum, you should include the date of the payment, the amount of the payment, and the payor or payee. For further organization, you may even break down your income streams and expenses into categories if this is an option in your accounting software.
Like many of the other steps in this article, the benefit of tracking your income and expenses is two-fold: it simplifies your year-end accounting and also allows you (or your accountant) to more easily find tax-deductible expenses.
Reconcile Your Bank Accounts Every Month
Accounting is all about balance, and reconciling your bank accounts can help ensure you maintain that balance. To put it simply, reconciling your accounts means that you compare documentation (such as invoices or bills) to ensure they match the transactions in your bank accounts. Sound difficult? Not to worry — your accounting software can come to your rescue again.
Sure, you could sit down and manually compare your bank statements with your bills, receipts, and invoices … or you could let the software do the work for you. Many programs offer a reconciliation feature that lets you securely connect to your business bank accounts. The information is compared to transactions that have been input into your software. If the numbers don’t match up, you know that there’s an error somewhere in your accounting — maybe you forgot to enter an expense, for example. Bank reconciliation goes beyond just user error; it is also a way to detect bank errors or even fraudulent activity.
Reconciling your bank accounts should be a regular bookkeeping task that your business performs at least once per month. Balancing the books and detecting errors on a regular basis is far easier and less time-consuming than waiting until it’s time to do your year-end accounting. Plus, if you notice an error at the end of the yar, it may be too late to set it right.
Separate All Personal & Business Expenses
In a perfect world, all small business owners would have their personal and business expenses separated by using different bank accounts. Unfortunately, this isn’t the case for all businesses. If you use one bank account for personal and business expenses, those will need to be separated as part of your year-end accounting process.
Why separate your expenses? Two words: IRS audits. If the IRS has reason to believe that you’re writing off personal expenses as part of your business, you could be audited. And if you don’t have your finances in order, you’ll find it more difficult to get through this audit, potentially paying more money due to poor record-keeping.
Fortunately, some accounting software provides easy, hassle-free options for separating your expenses. If you don’t have separate bank accounts, look for a program that offers this feature, such as Wave. You should also consider opening a business bank account for improved organization heading into the new year.
Count Your Inventory At The Beginning Of The Year
While your accounting software may have an inventory tracking feature, you should never skip over manually counting your inventory. By counting your inventory, you can verify that the data in your software is correct. Your inventory at the beginning of the year should match the closing inventory from the previous year. Counting your inventory is also a way to calculate the cost of goods sold, and is required for several tax forms.
There may be discrepancies in your accounting software and your manual count. This isn’t uncommon and could be due to a number of reasons, such as broken products or items that were stolen. Identifying these discrepancies keeps your books accurate and prevents interruptions to your business, such as unexpectedly running out of stock.
You may also find that you need to clear out some stock as you head into a new year. Products that are obsolete or aren’t selling, for example, can be sold at a reduced price or even donated, which may qualify as an additional tax deduction. Need more year-end sales advice? Check out our top holiday sales tips.
One thing to note is that your inventory should be counted on a day that your business is closed. Products should not be shipped or sold until the inventory is counted and reconciled in your accounting software to ensure accurate counts.
Run Year-End Reports
Running financial reports is a critical step in year-end accounting. These reports give you a clear picture of how your business is doing financially. These reports are also used when filing your tax return. In addition to showing how your business performed through the year, you can also use these reports to set budgets and goals for the year ahead.
There are a few reports that you should always run at the end of each year. These include:
Profit & Loss Statement: A summary of costs, expenses, and revenues that show whether the business operated at a profit or a loss.
Balance Sheet:Â Summarizes the company’s assets, liabilities, and equity.
Expense Report:Â A report that tracks expenses necessary for business operations, including reimbursable travel expenses of employees.
Mileage Log:Â A report that reflects the beginning and ending mileage on a vehicle used for business purposes.
Payroll Summary:Â Summarizes data for paid employees, including wages, taxes, and deductions.
Sales Tax Summary:Â A summary of the sales tax you have collected, as well as sales tax you have paid toward your expenses.
You may opt to run additional reports to have a more comprehensive view of the financial state of your business, such as a Statement of Cash Flows or Sales By Item. You should also consult with your accountant to find out about other reports that may be required for filing your tax return.
Most accounting software allows you to easily run at least basic reports, such as P&L Statements and Balance Sheets. For more advanced reporting, a software upgrade may be required. Always make sure to check each report for accuracy. Once you’ve confirmed that your reports are accurate, it’s time to analyze your business performance. Did you meet your financial goals? Are there areas for improvement? Use this data to set a budget and financial goals for your business for the year ahead.
Take Care Of Year-End Payroll
As the end of the year approaches, you can tackle year-end payroll tasks. While some tasks are better reserved for the month of December, you can actually get a jump on completing these tasks by starting in October or November.
To get started, first verify that your company information, such as tax ID numbers and mailing address, are accurate. Next, verify the information of your employees and contractors. This includes taxes, wages, Social Security number or Tax ID, filing status, and mailing address. If information is incorrect, an employee or contractor should review and submit an updated W-9 or W-4.
Also make sure that you prepare in advance for payroll periods that fall during the holidays so there isn’t a delay in payments. In December, you can also run payroll for employee bonuses and make any necessary adjustments.
The Payroll Summary that was mentioned in the previous section should be used to verify that all information is correct. Once you’ve confirmed that all employee information and payroll summary data is correct, you can gather the documents you need to send out 1099-MISC forms and/or W-2s in January. If your payroll processor or accountant will be sending out these tax forms, make sure that everything is in order and you have all required documentation in order to have the forms prepared and mailed out prior to the deadline.
Lock Your Closing Periods
Once you’ve completed your year-end accounting, it’s time to lock your closing periods — or close the books. Once you’ve locked your closing periods, you will be unable to add or make changes, so make sure that you’ve completed all of the necessary steps of year-end accounting before closing your books. Many accounting programs allow you to lock closing periods quite easily just by selecting a date.
If you did find that you made an error, all hope isn’t completely lost. Some software, such as QuickBooks Pro, allows you to set a password that can be used to add, remove, or update transactions.
Start Fresh In The New Year
This all may seem a bit overwhelming, but it’s worth it to have a fresh start for the new year. You’ll be ready for tax time, have new goals in mind for your business, and have a better understanding of your company’s current financial situation.
While some of these steps may be time-consuming (I’m looking at you, inventory counting), knowing what needs to be done and tackling tasks throughout the year will save time and help ease the stress that comes with year-end accounting. Good luck!
The post Simplify Your Small Businessâs Year-End Accounting With These 9 Easy Tips appeared first on Merchant Maverick.
WooCommerce is the most popular ecommerce plugin for WordPress, which is the Internet’s most popular content management software.
Explore WooCommerce’s Feature Set
Explore my WooCommerce Setup Guide
WooCommerce was originally developed by a small theme / web design firm in 2011. It grew rapidly among the WordPress community due to its feature set, but also due to its business model.
Same as now, you could download & use the full WooCommerce plugin for free from the start. WooThemes made money by selling compatible designs, support, and from specific extensions (e.g. to connect to a credit card processor).
In 2015, Automattic bought WooCommerce from WooThemes. Automattic is the software company run by Matt Mullenweg, the original author of WordPress software.
Ever since, the development of WooCommerce has been tightly coordinated with the development of both self-hosted WordPress and Automattic’s hosted WordPress.com software.
So that’s enough introduction. The point is that WooCommerce is legit, WooCommerce is growing, and WooCommerce can be a great fit for many storeowners…but not all.
Disclosure – I receive customer referral fees from companies mentioned on this website. All data & opinions are based on my experience as a paying customer or consultant to a paying customer.
What is WooCommerce?
To run an ecommerce website, you only need a few additional features. You need a product listing, a shopping cart, a payment processor, and order functionality that will merge & manage all the order information within a database. That’s it.
Because of that, ecommerce platforms are very similar to general website software…with just a bit of added functionality.
And like general website software, your choice of software depends on your personal desire for control / customization vs. convenience.
It’s a bit like real estate. A house provides maximum control. But you have to deal with maintenance, contractors, and random issues. A hotel offers zero control or customization, but they take care of *everything*.
WooCommerce lives on the more control / customization end of the spectrum. If Etsy & Amazon are hotels, then WooCommerce is a house.
WooCommerce is a software plugin that adds ecommerce functionality to WordPress, which is general website software (aka “CMS”).
And WordPress is part of a 3 part bundle that “makes a website” –
domain (your address on the Internet)
hosting (where your website files live)
software (what generates the files & pages that make up your website)
In other words, WooCommerce can help WordPress build a stand-alone store instead of a single-family home.
Now, this leads to the first overarching choice with WooCommerce.
Your choice is that WooCommerce is *part* of that 3 part bundle. It directly competes with other WordPress ecommerce plugins.
But…it also competes with other big bundled ecommerce solutions. And many big competitors deliberately bundle domain, hosting, software & ecommerce into a single, simple monthly price.
That’s great – and there are plenty of upsides & downsides to that bundling. But it’s important to be aware of since exploring the pros & cons of WooCommerce is a bit like comparing apples & oranges with other ecommerce solutions.
But – we’ll do it anyway. I love WooCommerce for what it is, but it’s not for everyone. Here’s a few pros & cons of WooCommerce both in comparison to direct & indirect competitors.
Pros of WooCommerce
Most ecommerce platforms have a series of strong advantages, and WooCommerce is no different. Here are a few reasons to use WooCommerce, not only instead of other WordPress plugins, but also instead of other ecommerce solutions.
Long-term Cost & Value
WooCommerce is free to download & free to use. If you have WordPress installed on your hosting account, you can navigate to Plugins –> Add New and add it to your website right now.
Explore my WordPress Ecommerce Setup Guide here.
WooCommerce is also fully functional with no add-ons or extensions.
That means that your annual website costs could be as low as ~$120/yr, depending on what hosting plan you have.
For contrast, the average low-tier ecommerce bundle with a hosted service like Shopify (review), BigCommerce (review) or Wix (review) will run around $360/yr for a single website.
But it gets even better for WooCommerce.
Since your main annual cost will be for a hosting plan, you can maximize the value of your hosting account with multiple websites.
If you had 4 small WooCommerce powered websites on your hosting account, then your annual per website costs would be $30/yr.
To run 4 small ecommerce websites with Shopify or Wix, your annual per website costs would be at least $1,440/yr.
For example, one of my earliest clients had a personal website, a home decor blog, a cat collar store, and an embroidery store – all on her same hosting account.
All 4 sites used WordPress, and the 2 store used WooCommerce. It helped her defray the costs and keep her 2 stores profitable – since they were side-hobbies anyway.
But it gets even better for WooCommerce.
WooCommerce comes fully-featured and fully supported with no transaction fees of any kind. There’s no “premium tier” to move to. Your long-term per-feature costs will always be lower with WooCommerce.
Also, almost all of WooCommerce extensions are flat-fee and under $100. You have access to a huge and rapidly expanding library of advanced, complex ecommerce features for flat-fee optional cost.
And, lastly, since WooCommerce works within WordPress, you get a double cost benefit for any free or premium plugins that you already want to use with your website.
For example, the most popular Redirection plugin for WordPress is free. And it’s free for WooCommerce too, since WooCommerce is integrated with your website.
If you are already paying for speed, security, and anti-spam for your existing WordPress website (with something like JetPack), then you can simply extend that subscription to cover your store as well.
And, you can piece together any 3rd party software based on cost, need, compatibility, etc.
If we stick with the housing analogy with WooCommerce, you can sub-lease rooms to help with the rent, your home office can benefit from your general security bill, and you can add-on *exactly* as your budget allows.
Now…all these massive cost benefits for WooCommerce comes with a few massive caveats, which I’ll cover in the cons. But on face value, WooCommerce is an incredible short-term and long-term value for any storeowner.
Integration with WordPress
WordPress software powers more than 1/3rd of the entire Internet. And it’s popular for a reason – it works well, it’s incredibly versatile as software, and it has a huge community (both for-profit and non-profit) supporting it.
And WooCommerce benefits from all three reasons as well, since it’s been a part of the broader WordPress community for years now.
This seamless integration with WordPress is important because WooCommerce can pull features in from an entire universe of plugins, themes, tutorials, and values that simply does not exist anywhere else.
For example, Yoast SEO has long been a hugely popular plugin with lots of international translations, advanced SEO feature support, and good usability.
There is no hosted platform with anything like it (or like any of Yoast’s excellent competitors). But since WooCommerce is integrated with WordPress…Yoast is integrated with WooCommerce as well.
The same goes with popular themes. Themes will support the same PHP structure as WooCommerce. In fact, developers will often go ahead and add bonus features to WordPress themes to make it extra appealing to WooCommerce users.
Plus, WordPress has long upheld the values of the Open Web with full RSS support, nice permalinks, W3 valid code, cross-browser compatibility, and full control over your code, content & data.
f you want to leave WooCommerce, it’s easy and well-supported. Your data is only accessible to you – and anyone you grant permission to (not the other way around).
Lastly, if you have an existing WordPress powered website and want to add ecommerce, WooCommerce makes it as seamless as any other plugin so that you don’t have to style & support a store on a completely different platform.
Support from Automattic
Automattic is a company founded by Matt Mullenweg, who is also the author of WordPress software.
WordPress software is free, open-source and community supported. But Automattic is the for-profit company that makes & sells tools for WordPress software.
They run WordPress.com, a bundled hosted service for WordPress software in addition to JetPack, a speed / security / utility kit for WordPress websites, and WooCommerce.
Now, there’s a whole universe of for-profit companies offering WordPress plugins, themes, support, etc. They all do great work, and I recommend many of them.
But for longevity, consistency, and building more 3rd party integrations, I think it’s in WooCommerce’s advantage to be owned by Automattic.
There are plenty of WordPress software companies, and plenty of good ecommerce plugins. In fact, some have features and setups that I like a bit better than WooCommerce (mainly for digital goods only).
But the bottom-line when comparing WooCommerce not only to other plugins, but also to Shopify, Squarespace, Wix, etc – is that you need a large company that will be around and have an financial interest in keeping the software cutting-edge.
Additionally, since Automattic is still private and venture-funded – they are still in “growth” mode, which only means more investment in features & customer service.
WooCommerce’s ownership is a huge advantage for choosing WooCommerce over other ecommerce plugins, and put it at parity with other ecommerce solutions offered by large, stable companies.
Versatility & Compatibility
A few fun facts about WooCommerce –
You can use it to sell memberships
You can use it to sell recurring licenses
You can use it to sell digital goods
You can use it to sell apppointments
You can use it to sell affiliate, drop-ship, or even Amazon products
You can “hack” it and combine to sell really anything you can imagine
The actual plugin is incredibly versatile and compatible with a huge range of uses. Like WordPress, your imagination is likely more limited than the tool is.
The plugin automatically creates & manages a range of page types including products, product categories, orders, confirmations, etc
It’s compatible not only with most single-use WordPress plugins but also with large site-type plugins like the BuddyPress social network plugin and bbPress forum plugin.
In other words, you can create a niche social network with forum and online store all with the same WordPress install.
3rd Party Integrations
WooCommerce has a large & growing Apps & Extensions store. It’s a library of premium extensions that allow you to harness powerful 3rd party software for things like payments, shipping, cross-product listings, inventory management, marketing, bookkeeping, and more.
If you are an offline merchant who loves a 3rd party processor (like Square), then you can use an extension to add it to WooCommerce.
If you love your 3rd party shipping or inventory software, it will probably integrate with WooCommerce.
Ease of Use & Onboarding
This pro has a caveat – I’m assuming that you have worked with WordPress before. If not, this will actually appear in the cons section.
But, if you have, WooCommerce’s onboarding is amazing. They’ve upgraded the process to the point where my WordPress Ecommerce Setup guide isn’t nearly as useful as it used to be.
When you add the WooCommerce plugin, you are instantly moved into a setup sequence that will help you list your first product, set up your page types, and get all your basic settings ready to roll.
You really can be set up to sell in minutes. And unlike some plugins that create a dedicated section for use, WooCommerce automatically folds pages, media and options within the existing WordPress install so that everything appears where you think it should be (e.g., media settings, categories, etc).
Control & Customizations
Since WooCommerce is a PHP-based plugins that integrates with your WordPress install, you have direct access to the code via browser and FTP.
You can add, remove, edit scripts and bits of code to your heart’s content. If you want to edit your checkout flow or your error codes or your analytics script or your CSS – then you just do it.
You are not limited by a platform’s plan or code access or script limitations. If you want to hire a designer or developer or marketer, you can hire from a huge pool rather than a narrow field.
There are even custom extension developers who will create whatever extension for WooCommerce that you want.
Do you run a store than needs to accept Dogecoin? Or a very specific shipping option? You’ll need to use WooCommerce – because no major ecommerce platform will be building that anytime soon.
Cons of WooCommerce
Every ecommerce platform has natural disadvantages since there is an inherent tradeoff between control & convenience. You’ll likely find a lot of WooCommerce complaints and issues around the Internet.
Here’s a few of the key disadvantages you’ll find with WooCommerce – and using WordPress as an online store in general.
Ease of Use & Onboarding
WooCommerce & WordPress both try to make ease of use & onboarding (i.e., moving a new user to an active user) simple, straightforward and intuitive.
There are plenty of guides around the Internet, along with prompts, Q&As, support, and more.
But the bottom line is that there is still a basic tradeoff between control and convenience.
For a beginner, WooCommerce has a learning curve that is even steeper than WordPress’ learning curve. When you install WooCommerce, you not only have to learn the basic jargon of an ecommerce store (listings, checkout flow, payment tokens), but you also have to learn the basic jargon of WordPress (permalinks, posts, pages, plugins, etc) and the basic jargon of any self-hosted website (difference between HTML & CSS, page load speed, etc).
For a beginner with zero experience with WordPress or running a website, WooCommerce will require a steep learning curve. Now, it might be worth it if you have the time & patience to learn everything.
But compared to drag & drop basic online store builders like Weebly or Wix or even comprehensive ecommerce platforms like Shopify, WooCommerce’s onboarding & setup is a huge downside.
Technical Maintenance
Sticking with the house / apartment analogy, you know how you can just call the landlord when something goes wrong?
Yeah, you can’t do that with WooCommerce. There is some semblance of support via your hosting company and Automattic (if you are a premium JetPack subscriber) and the WooCommerce community. But there’s no single place to just call and get something fixed.
In fact, like a landlord, there’s no one who will come by and just check on the HVAC filter, the roofing, and basic structure.
Running WooCommerce is really like owning a house. There are plenty of people who will help you maintain it. In fact, many are quite reasonable and even quicker than a landlord.
But…when it comes down to it, *you* and *you* alone are in charge of keeping your website maintained, available, and operating.
Plugins will notify you of security updates, but you will need to install them and manage any new conflicts. Your hosting company will give you support, but you need to know what questions to even ask. You’ll need to know how to troubleshoot.
This downside comes directly from the benefit of maximum control. With maximum control & freedom comes maximum responsibility.
Again, you can get customer support for WooCommerce. In fact, some hosting companies offer “WooCommerce Hosting” with management included.
But compared to online store builders like Wix & Weebly or ecommerce platforms like Shopify & BigCommerce, WooCommerce is lacking in simple technical maintenance.*
*The one caveat here is the WordPress.com option – they are a hosted version of WordPress run by Automattic. Since they bundle hosting, software, support & more – you can get many of the benefits of WooCommerce without this downside. They’ll take care of all the maintenance…at an extra price.
Speed & Security
With the continued growth of mobile and the profitability of hacking, website speed & security are more important than ever.
Like the situation with technical maintenance, WooCommerce leaves you basically in charge of speed & security – even though there are plenty of native & 3rd party options to help you.
WordPress & WooCommerce are inherently secure when installed with a good hosting company, maintained, and used with basic security best practices.
Additionally, WordPress & WooCommerce are inherently fast when installed with a good hosting company, maintained and used with basic speed best practices.
But your weakest link is the toughest part with both speed & security.
For hosted platforms like Weebly, Wix, Shopify or BigCommerce (and the WordPress.com option) – this is an area where they truly shine. Your website lives on their infrastructure with their team of professionals watching constantly for issues and keeping software cutting edge.
In fact, several have bounty programs where they pay hackers to deliberately seek vulnerabilities in their systems. They will also have direct partnerships with payment processors for real-time fraud alerts.
Overall, speed & security should not be an issue for WooCommerce storeowners – including beginners. But, like with owning a house, you are still the one responsible for any issues.
It remains a key downside of WooCommerce, especially if you store starts growing rapidly from hundreds of visitors to hundreds of thousands of users – which brings us to the next downside.
Growth & Scaling
Since WooCommerce is a plugin for WordPress, it has to work within WordPress’ basic functionality.
And WordPress’ basic functionality is not built specifically for ecommerce, it’s built for versatility.
This issue means that the way WooCommerce works starts to break down when you get above a certain threshold of “queries” – ie, requests of the database.
And unlike browsing content, or really any other type of functionality, ecommerce can generate *a lot* of queries, very quickly, and in a short space of time.
Imagine WooCommerce is a single dude standing between a group of customers and a library. Imagine they all need to request books and return books before paying you, getting change, and then leaving. Now, if they go one at a time, it’s fine. In fact, you can probably push the guy to handling several returns and new books at once.
But imagine they all show up at once, say, on Thanksgiving, and start shouting out lots of book orders. And they start giving books to put back…and they all want to pay all at once.
Well, the dude is going to get really confused, tired, and crash. Not because he’s not good but because it’s a not-ideal system.
That’s WooCommerce’s core problem – handing *lots* of add to cart and checkout events all at once.
Ecommerce platforms that are built from scratch for ecommerce like Shopify and BigCommerce do not have this issue. They use a completely different set of technologies to avoid WooCommerce’s inherent issues.
Now, before a bunch of WordPress folks’ start sending me emails, WooCommerce can absolutely scale to hundreds of thousands of orders. WooCommerce says that the issues is a myth and has examples to prove it.
All true. But it take a lot of work & expertise to make that type of scaling happen. Here’s an interview with a top WordPress expert on making WooCommerce scale…and even he discusses it like a huge project, not something built-into the product.
If you have a small, growing store, this is a non-issue. You can solve problems as they come.
But if you are starting what will be a large ecommerce site very quickly, it’s a critical disadvantage to be aware of – especially when looking at other Enterprise ecommerce options.
Potential Long-term Costs
WooCommerce’s price (free!) and potential long-term value are amazing for beginners and anyone on a budget.
However, you may have noted the potential need for 3rd party help, WooCommerce can become quite expensive.
One of my earliest clients back paid me $1200 to fix several emergency issues that she simply could not figure out before her sales deadline.
She had chosen WooCommerce specifically to control costs (rather than integrate with an existing content site). But it will take several years of no issues to recoup those costs compared to a Shopify plan.
Since WooCommerce is not bundled with hosting and other software, it’s also easy to let regular costs get out of control. Once you start paying for automated backups, security scanning, managed hosting, CDN, premium plugin extensions, and more – your monthly costs may be much higher than anticipated (again, just like homeownership vs. renting).
Now, all these costs are *potential* costs. And if you have the time and patience, many storeowners would rather than potential costs that they choose rather than an high guaranteed cost. But it’s a potential downside to be aware of.
Future of Ecommerce
Ecommerce is changing rapidly. And the speed of change is happening faster everyday.
Apps like Poshmark, Depop, Pinterest, and Instagram are moving more ecommerce to happen seamlessly within apps via “headless” ecommerce backends.
In other words, some ecommerce platforms are simply inventory & order tracking systems where the actual shopping, cart, and payments happens within a 3rd party app.
In some ways, WooCommerce’s open structure should be an advantage. And yet, cutting edge ecommerce relies increasingly on APIs and direct integrations, which are not WooCommerce’s specialty.
Shopify is able to leverage its size, infrastructure, and tech team to create cutting edge integrations. Same with MailChimp, Square, and a whole universe of similar marketing tools.
And all that does not even start to discuss Amazon.
All that to say, WooCommerce does have a current disadvantage with ecommerce as it is currently evolving.
However, it could have a huge advantage as content becomes more important. And it will forever have an advantage as somewhere that you truly own & control. It’s this bet that Automattic has their money on.
It’s a potential downside to consider. There’s no right answer, it all depends on your goals, expertise, and view of the future. There’s a reason why so many website builders like Wix, Weebly, Squarespace, WordPress.com, and GoDaddy GoCentral are adding basic ecommerce functionality.
All of which leads us to a few direct comparisons.
WooCommerce Alternatives
There is a whole universe of ecommerce solutions on the Internet. Compared to 2003, this is a really good problem to have. But as an online storeowner, navigating choices is still an issue. Here’s a quick rundown of the main alternatives to WooCommerce, along with links to further posts.
WooCommerce vs. Other WordPress Ecommerce Plugins
There are lots of ecommerce plugins, but most are pretty terrible. WooCommerce’s main direct competitors are –
Easy Digital Downloads – a focus on simple digital goods.
WP Easy Cart – a focus on simplicity but limited add-ons.
WP Ecommerce – a non-Automattic comprehensive option. Meant for developers due to limited support options & simple extensions.
NinjaShop – a focus on simplicity but limited add-ons.
WooCommerce can also run on WordPress.com as part of a hosted bundle. This option removes a lot of WooCommerce’s negatives, but also increases WooCommerce’s costs & removes some of the self-hosted freedoms.
WooCommerce vs. Shopify
I wrote a full comparison of WooCommerce and Shopify here. The short version is that unless you have a specific reason to use WooCommerce and plan on running a growing ecommerce store, then you’ll probably do better with Shopify.
WooCommerce vs. BigCommerce
I wrote a full comparison of WooCommerce and BigCommerce here. The short version is that unless you have a specific reason to use WooCommerce and plan on running a growing ecommerce store, then you’ll probably do better with BigCommerce.
WooCommerce vs. Wix
Wix is much more user-friendly compared to WooCommerce. However, Wix also constrains your options more than even WordPress.com and hosted ecommerce platforms like Shopify. If you have a small store and want drag & drop convenience, then use Wix.
WooCommerce vs. Magento
Magento used to be a much tougher competitor to WooCommerce until Magento’s sale. Now, self-hosted Magento is going away. If you run an enterprise site, then scalability will likely make your choice for you. You’ll want Magento (or other Enterprise options). If you have a small ecommerce shop, then WooCommerce will be a better option.
WooCommerce vs. OpenCart
OpenCart is well-respected open-source ecommerce software. If you are building a ecommerce store from scratch and you want to host it yourself, then OpenCart is a solid option. However, it is declining in use (and with that, apps & extensions & developers). Unless you have a reason to use OpenCart, WooCommerce will give you access to a larger open-source community.
WooCommerce vs. Ecwid
Ecwid is less an ecommerce solution and more of an “anywhere shopping cart”. You can quickly add it to an existing website (ie, a plain WordPress website) and provide an ecommerce experience of a sort. However, it does not integrate with your backend. You also will have trouble competing for inbound marketing. It’s a good option to quickly add ecommerce functionality to your website without going through the WooCommerce setup process.
WooCommerce vs. Prestashop
PrestaShop is well-respected open-source ecommerce software. If you are building a ecommerce store from scratch and you want to host it yourself, then PrestaShop is a solid option. However, it is declining in use (and with that, apps & extensions & developers). Unless you have a reason to use PrestaShop, WooCommerce will give you access to a larger open-source community.
WooCommerce Review Conclusion
WooCommerce is the best ecommerce solution for 3 types of storeowners –
Storeowners with technical resources who want to heavily customize their store or use unique functionality.
Website owners who have a content-driven website and want to add-on a complementary, but seamless store.
Storeowners who are highly cost-conscious and feel comfortable investing time rather than money into running their own website.
If you fit those buckets, I’d highly recommend checking out the main WooCommerce website and using my guide to setting up your WooCommerce-driven ecommerce store.
If you don’t fit in those buckets, I’d highly recommend checking out a hosted solution. Explore my ecommerce platform quiz here. Or if you are building a small store (a dozen products), explore my online store builder quiz here.
Lastly, be sure to explore my guide to marketing your ecommerce store. So many stores fail, *not* because of platform…but because of a bad marketing plan. Spend as much time planning your marketing as you spend researching your store software.
The post WooCommerce Review: Pros & Cons of Using WooCommerce for an Online Store appeared first on ShivarWeb.
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.
Flat-Rate Pricing
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.
Interchange-Plus Pricing
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, 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. 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.
Vendor
Best For
Monthly Fee
Retail Rate
Online Rate
Contracts
Payment Depot
Mid-sized businesses ($10k-$25k/month)
$49-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Fattmerchant
High-volume businesses ($25k+/month)
$99-$199
0% + $0.15 markup*
0% + $0.15 markup
Month-to-month
Dharma Merchant Services
Non-profits
$20
0.15% + $0.07 markup*
0.20% + $0.10 markup
Month-to-month
Square
Micro-merchants & low-volume
$0.00
2.6% + $0.10 total
2.9% + $0.30 total
Month-to-month
PaymentCloud
High-risk businesses
Varies
Varies
Varies
Varies
PayPal
Online businesses
2.70%
2.9% + $0.30 total
$0.00
Month-to-month
Stripe
Tech-driven businesses
N/A
2.9% + $0.30 total
$0.00
Month-to-month
*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).
Square
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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.
Payment Depot
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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.
Fattmerchant
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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.
PayPal
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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.
Stripe Payments
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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
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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.
PaymentCloud
Visit Site
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!
The post Everything You Need To Know About Merchant Services appeared first on Merchant Maverick.
If you’ve been reading this website for a while, then you know that we began as a place focused on demystifying the world of credit card processing for small businesses. You might wonder, then, what we’re doing writing an article about a cash-only business. The fact is, we see both advantages and disadvantages to such a business, and we want to share some of our thoughts with you.
While most businesses do take some cash payments, some businesses are particularly suited to be cash-only. These businesses tend to be small and provide the services or sell their merchandise in person; the items sold also tend to be of smaller value. Below we have compiled a non-exclusive list of such businesses as well as a general overview of advantages and disadvantages for taking only cash payments.
Credit Card Processing Doesn’t Have To Be Expensive
Each of the above companies provides excellent customer service and fair pricing.
Why Would You Want A Cash Business, Anyway?
It is no secret that we are moving towards a cashless society, where customers carry little to no cash and make purchases through credit, debit, or cash cards. However, if you look carefully, you’ll notice that cash-based businesses are still lurking everywhere. Any kid can set up a lemonade stand or mow a neighbor’s lawn. Typically, you would pay them in cash. Same with a street musician or a hotdog stand by the sidewalk. Most likely, you will pay cash to your babysitter and maybe your dog walker too.
Cash-only businesses are typically new or “temporary” or side hustles, and they take only cash because they want to minimize start-up costs, they do not accept returns, and they do not have the time or desire to listen to pushy salespeople to learn the ins and outs of payment processing or buy any related equipment. In other words, they take only cash because cash is easy.
The Best Cash Businesses
Some businesses are especially suited as cash-only business. Below is a non-exclusive list to give some examples of such businesses.
Coffee, food cart, or food truck operator
Bakery, deli, or lunch stand
Small restaurant
Lawn mowing service
Laundromat
Vending machine operator
Errand service
Farm stand/farmer’s market vendor
Arts and crafts show vendor
Street artist (face painter, caricature artist, street musician, or similar)
Babysitting services
Pet services (pet sitting, pet grooming, pet training, dog walking. etc.)
Personal trainer or fitness instructor
Handyman services
Music teacher/tutor
Hair/nail salon or barbershop
Note that these businesses tend to be single-person operations that can be set up easily and quickly. With some notable exceptions like a laundromat, they tend to be mobile, with no physical business address. The goods or services they sell are usually lower priced, and customers do not usually demand refunds after purchase.
Advantages of Going Cash Only for Payments
Most businesses take cash in addition to other forms of payments. For this article, though, we truly mean cash only. This means no credit or debit cards, cash cards, gift cards, cash transfers (Venmo, Zelle), or personal checks. The business takes paper bills or coins, and that’s it.
We start below by discussing some advantages of going cash only.
Lower Costs & Overhead (No Processing Fees)
Compared with taking credit cards, taking cash saves your business money. In order to process credit cards, you would need to buy or lease the equipment to read the cards. After you get the equipment, you would have to spend time (or money to hire someone) to maintain the equipment.
In addition to needing equipment, each swipe/dip/tap of a payment card costs you money to process. The cost is percentage-based, so it’s difficult to know ahead of time how much each use of a payment card would cost you. As well, some processors charge additional monthly or per incidence fees. These charges can add up and affect your profitability, especially if you operate a small business with narrow margins.
When you take only cash, all of the above issues go away. You won’t need any equipment except a cash register or maybe just an old fashioned calculator. You won’t have to deal with recurring monthly charges for services you may or may not need. Best of all, you won’t have to pay a processing fee every time a customer pays you, so your profit margin stays intact.
No Risk Of Funding Holds
When you take cash, you get your money right away. With payment cards, your account won’t be funded until 24 or maybe up to 72 hours later. Even after that, with card payments, you are at risk for chargebacks. A customer could reach back several months after a purchase to demand their money back so that your sales are not always final until many months after the purchase. Your processor could freeze your account if you have too many chargebacks or even terminate your account altogether. With frozen or terminated accounts, you might not get back the charges in those accounts at all.
With cash, you’ll never have to worry about any of these issues. You get your money right away, and, unless a customer complains and you decide to refund their purchase, you’re never obligated to pay back what you have already taken in.
Simplified Accounting
If you take cash, you can simplify your business’s accounting needs.
There are two ways to keep your books: the cash method and the accrual method. The cash method doesn’t have anything to do with taking incoming payments only in cash. It merely means that you book a sale or expense when you actually receive or pay for the goods or services.
For instance, if you receive an order for widgets on August 31, send the order out, and receive your payment on September 15, then you book the sale on September 15. If you purchase office supplies on August 31 and pay the invoice on September 15, you book the expenditure on September 15. The cash method is considered the simpler of the two accounting methods. It gives you a realistic understanding of how much you have in the bank but does not take into account future income or expenditures.
With the accrual method, you book the sale or expense when you make the sale or incur the expenditure, even if you don’t receive the payment or don’t pay out the money until later. For example, if you receive an order of widgets on August 31, you will book this sale for August 31, even though you give your customer 30 days to pay so that they won’t have to pay until September 30. Likewise, for a purchase you make on August 31, you will book the expenditure on August 31 instead of waiting for when you actually pay, possibly 30 days later. With the accrual method, you must track your business’s finances with accounts receivables and payables.
If you take cash payments only, no matter which accounting method you use, you can simplify your accounting. With the accrual method, your accounts receivables are always up to date because you have already received the money and won’t have to keep track of them after that. If you use the cash method, you won’t have to deal with money you expect to receive in the future because, even though the method doesn’t require you to book the sale until you actually receive the money, you do, in fact, receive the money right away because you are paid in cash at time of sale.
Disadvantages Of Going Cash-Only for Payments
Even though becoming a cash-only business can reduce certain overhead and administrative headaches, they create inconveniences as well.
Lost Customers
Most customers today no longer carry a large amount of cash and prefer instead to pay with a credit or debit card. Going cashless means that these customers won’t be able to make purchases at your business unless they either have the cash on them or can access a nearby ATM. Even assuming these customers heed the cash-only sign at the door and manage to get the cash to complete the purchase on their first visit to your store, they might not come back because they might not want to deal with the inconvenience of paying with cash again.
Few Growth Opportunities
Taking only cash can reduce your business’s growth opportunities. Cash might make sense when your customer must physically be present to get that cup of coffee or get their pet groomed, but if you have the type of business where you can sell online or even take phone orders, then taking only cash could limit your business’s growth opportunities. Many customers today prefer the convenience of shopping online. In addition, online sales can reach customers who live far from your store. Going cash-only means you might be missing these customers who can help your business grow.
Need For Stringent Cash Handling Policies
When it comes to money, some people cheat.
Handling cash means you will have to deal with counterfeits. Despite security features such as colored ink, raised printing, watermarks, and similar, counterfeit currency are still in circulation. In fact, the US Department of Treasury estimates that $70-200 million dollars in counterfeits could be in circulation today. If you take cash only, you and your employees who handle cash payments should be trained on how to spot counterfeits.
Like it or not, while we would like to think that our employees are honest and law-abiding, some do steal, and having a drawer full of cash can fatally tempt these unscrupulous employees. So, if you have a cash-only business, you would have to have strict cash handling policies that are enforced regularly and stringently. You might even have to invest in surveillance equipment to catch those employees who steal.
Limited Automation/More Potential For Errors
Sometimes, cash shortages are caused by inaccurate counting instead of theft. With a cash-only business, the person at the cash register must count carefully, both when taking in cash and counting back cash to give change. While this might not be difficult under normal circumstances, if you operate a business with rush times like lunch periods, having to count cash for every customer could make you more error-prone.
In contrast, if you take payment cards, only the exact amount would be processed, and you would eliminate a source of counting error.
Potential For IRS Audits
Like it or not, the IRS knows that it’s easier for cash-only businesses to underreport earnings and avoid paying taxes. Of course, not every cash-only business tries to avoid paying taxes, but enough have done so that the IRS typically audit cash businesses more often. Even if you report all your cash earnings honestly, you must carefully document all your transactions. Otherwise, it could be difficult to establish a pattern of honesty to convince the IRS that you haven’t underreported.
Other Considerations If You Want To Go Cash Only
So far, this article has focused on how going cash-only may affect the way you take in payments, but there are other considerations to take into account before you jump into a cash-only business.
Inventory & Employee Tim-Tracking Software: Even though you might only need an old fashioned cash register for a cash-only business, you might be missing out on the other conveniences of a modern point of sale system. For instance, some modern point of sale systems include inventory management software that automatically deducts items from your inventory as you make a sale. Other systems allow an employee to punch in and out to track their hours for payroll. If you use an old-fashioned cash register, these software systems would not be available to you.
Not Exempt From Paying Taxes: It is, of course, perfectly legal for you to pay your employees in cash. However, you must still deduct your employees’ income, social security, and Medicare taxes. Failure to do so will subject you to fines by the IRS.
Difficulty Obtaining Bank Loans: If you wish to borrow money to expand your cash-only business, you might have trouble borrowing from a bank. Unless you have excellent accounting records, it would be difficult for you to show a bank that you have adequate cash flow to repay the loan. Under those circumstances, they might decline to lend to your business.
Inability To Obtain A Merchant Cash Advance:Â In the same vein as getting a loan, some financial services companies offer something called a merchant cash advance. The advance is paid back by deducting a percentage from future credit card charges. For instance, PayPal has something called PayPal Working Capital and Square has Square Capital. If you do not process credit cards, then you cannot avail yourself of these programs. While getting a merchant cash advance is not the cheapest way to finance a business, it might be crucial to providing cash flow in a pinch.
Newer Tech Allows Coin-Operated Machines To Take Payment Cards: Finally, just because you run a traditionally coin-operated business like a laundromat or vending machines doesn’t mean that you are stuck in a cash-only world. Payment card readers designed for laundromats now exist. The newer vending machines can also take payment cards. In other words, while coin-operated businesses are traditionally cash only, you won’t have to settle for that if you wish to take payment cards as well.
Is A Cash Business Right For You?
Though we are transforming into a cashless society, for certain types of business, going cash-only might still make sense. While there will be inconveniences to you and your customers, an all-cash business is still the fastest and the easiest type of business to set up because it requires zero setup cost. For small businesses that sell items of lower cost to customers who visit in person, accepting only cash might make a lot of sense.
However, even if you prefer to take only cash, you might wish to consider adding payment cards as a convenient option to your customers. You can require that every use of the card be in excess of a certain amount, and, with mobile processors like Square, as long as you have a cell phone, you can quickly set up an account to take credit card sales even if you operate a seasonal, low volume business like a farm stand by the side of the road.
At the end of the day, with the different types of credit card payment processors available today, going cash-only is merely a choice, not a necessity. Is going cash-only a viable option for your business? If you are currently operating a cash-only business, how is your experience so far?
We at Merchant Maverick like Square. Itâs a great service that opens up the ability to process credit card payments to many small businesses, and weâve written a lot of articles about Square’s point of sale, payment processing, inventory, booking, and invoicing features. These articles can be prohibitively in-depth to the uninitiated, however, so you might want to read this quick overview of Square for a summary before digging into the details.
A Brief History Of Square
Square was founded in 2009 when Jack Dorsey (also of Twitter) tried to help his friend Jim McKelvey take a credit card payment of $2,000.00. Squareâs first product was a magnetic stripe credit card reader that could be inserted into a smartphoneâs headphone jack to take credit card sales.
Square became a public company in November of 2015, and its stock is traded on the New York Stock Exchange under the ticker symbol SQ. While Square does bring in a lot of money ($3.3 billion for the year 2018), it still has not made a profit. For the moment, the company seems to be more focused on growing by adding new services for its customers.
While Square’s main focus continues to be helping small businesses quickly and easily set up taking credit card payments, it has also expanded its services to point of sale, inventory, and employee management — giving small businesses the ability to run more like large ones (more on these services below). To this end, it has bought the food delivery business Caviar, the catering service Zesty, and the website building service Weebly. It also owns a consumer-centric digital wallet called the Cash App, where users can send money to each other and even buy from any store with the money in the app.
In the span of about ten years, Square has grown from a startup focusing on one aspect of helping small businesses grow to a large business providing a suite of services that help small businesses expand. With so many additional services, what exactly does Square do these days?
What Does Square Do?
At its heart, Square is still a credit card processing aggregator (also sometimes called a third party payment processor or a payment service provider (PSP)). We have a great article on the difference between a merchant account provider and an aggregator, but below is a quick explanation.
Square’s Credit Card Processing Services
Traditionally, if you want your business to take credit card sales, you would work with a provider to set up something called a merchant account. To get a merchant account, you typically undergo a long application process and provide a lot of financial information before you are approved. These providers want to make sure that, based on your businessâs existing history, you don’t present a huge financial risk.
Credit card processing aggregators take more of a see-as-we-go approach and assume financial risk for bad accounts. Aggregators merely need to verify the identity of the applicant before authorizing a new account, and generally don’t ask too much more information. They have more freedom on who they sign up and how they do business with those they sign up.
While this means aggregators can quickly set your business up to take credit card payments without needing an established history, they tend to be cautious afterwards. These types of payment processors have advanced systems in place to analyze each transaction for any red flags. Suspicious transactions can cause the processor to hold funds until it has more information. Worse, third-party processors often have a clause in the contract that says they can terminate your account if they see fit. Usually, this happens to businesses that have high numbers of chargebacks or fraudulent transactions.
Square is an aggregator, so essentially the above is its business model. You can sign up for Square within minutes and without providing detailed financial information. In addition, Square gives you a basic set of free hardware and software so you can start taking credit card payments almost right away. The free items include:
Square Point Of Sale Software: Square’s free POS software is incredibly advanced for being free, though it’s certainly not a full-fledged POS. Still, for most small businesses it is more than sufficient. Square also offers premium iPad POS systems for a monthly fee if you need more advanced features.
Credit Card Reader: You can get a basic magnetic strip reader for free, but if you want support for chip cards, you’ll have to upgrade to another reader, which will cost you.
Invoicing: For those businesses that bill a larger amount but less often (e.g. lawn care services), Square offers an electronic invoicing function. The invoices are free to send, but you will pay a transaction fee when your customer pays with their card.
Square’s Value-Added Services
As mentioned earlier, Square has been adding more services to its core credit card processing business. Some of these services are for free, but others are available for a small fee. These services include:
Employee Management: With this service, you can manage your employees from anywhere. You can add new employees to the system, track their hours, track their register/sales (at either single location or multiple locations), edit and close employee timecards, and give selected employees selected access to various parts of this software (e.g. so they can enter their own hours but not see your weekly sales numbers).
Payroll Services: This service imports data from the employee management software so that you can easily pay your employees and contractors. Square will handle tax filings and withholdings, and they can handle the payments to other employee benefits such as health insurance and 401(k). You can even offer direct deposit to your employees.
Inventory Management: Square offers basic inventory management in its Point of Sale app for free, but the premium iPad POS systems offer a more detailed system that can track and analyze your business’s inventory across multiple stores and multiple registers. You are notified when inventory is low, and items are automatically removed from inventory when they’re sold, whether at one of your physical locations or online.
Business Debit Card (Square Card): When you are paid by your customers through Square, the money goes to an account kept by Square. Rather than moving the money to your bank, you can use it immediately with the Square Card. The Square Card is a debit card sponsored by Mastercard, and you can request it from Square for free. Check out How Does Square’s Instant Deposit Work? for more information about how to access your funds.
Appointments: Square provides a booking calendar for professional service businesses (like hair salons). The calendar not only tracks and moves appointments, but it can also send appointment reminders to customers. The POS and booking system is free for a single user, but if you have multiple users you’ll need to pay a monthly fee.
Square Online Store: Pretty much every business needs an online presence, and Square can help you build a professional-looking website even if you’ve never done it before. Square provides tools that can help you track your inventory sold through your online store and helps you with shipping (printing labels, discounted rates). Best of all, when you sell out of state, it tracks all the different sales taxes that you might owe. There’s a basic free webstore, but if you need more advanced features, you’ll need to upgrade to one of the other plans.
Other Services: Square offers many more services designed to make a small business owner’s life easier. For instance, Square offers marketing software to help you build email and social media advertising campaigns. It has an installment payment service for certain businesses so that a customer can buy a big-ticket item and pay Square in installments while you get paid right away. Square can help you build a loyalty program where customers can redeem goods or services with points. You can get your own branded gift cards to sell to your customers. Square even provides online store owners with a product photography service so that the items sold through webstores are presented in their best light.
As can be seen above, Square is well on its way to offering an entire suite of software and services that not only help you take credit card sales, but also help you manage your entire business’s operations.
What Are The Advantages of Square?
Every successful business has a few things it does extremely well, and Square is no exception. Square basically provides you with a free, fast, and easy-to-get-out-of way to start taking credit card sales. To elaborate a bit, the following are some advantages for signing up with Square:
Fast Setup: You can sign up for Square within minutes and get a credit card reader shipped to you very quickly.
Easy Termination: If you sign up and find that you don’t like Square, you can stop working with Square any time you want. There are no penalties for leaving, so you can sign up without fear. (There may be loose ends to tie up, but you can still terminate the services at will.)
Easy To Use: Square is focused on small businesses that are just starting out. They provide a simple piece of hardware and intuitive software to help you run your business and help you grow.
Simple Fee Structure: Compared with other pricing models, Square has an easy-to-understand flat fee structure so you can better predict your profits.
Fast Payment: With Square, you can get paid almost right away after a customer makes a charge. You can instantly deposit these funds into your outside account or use the funds directly with the Square Card debit card. In contrast, traditional merchant account providers typically hold the funds for at least 24 hours before releasing it to you. For a small business with tight cash flow, Square’s fast payment can make a difference to the business’s survival.
No Minimums Or Monthly Fees: A small fee here and there might seem insignificant, but they can add up in the long run. Square’s credit card processing service (and a lot of their other services) have no minimum or monthly fees, so a small business doesn’t have to worry about paying for anything other than the transaction processing costs.
These are just some of the advantages for signing up with Square. Of course, no business is perfect, and neither is Square. Under some circumstances and for some types of businesses, Square is not the best option.
What Are The Disadvantages Of Square?
No business can be everything to everyone, so Square is not suitable for every type of business. One of the biggest complaints we see about Square is that Square sometimes withhold funds in a merchant’s account, with or without warning. Sometimes, you never get paid. If you fit into one of the categories below, you might want to think twice before signing up with Square:
Not Suitable For High-Risk Businesses: A “high risk” business is usually defined as a business that deals with guns and ammo, tobacco and vaporizers, pharmaceuticals, gambling and financial services, and similar — anything highly regulated or prone to chargebacks and disputes. If you deal in any of these, Square is likely not the right business partner for you. Specifically, in its Terms of Service, Square reserves the right to terminate service if you violate any export control regulations (for example, sell military-grade items to specific countries) and money laundering laws, sell weapons or devices designed to cause physical harm, or “use the Services except as otherwise allowed” under their agreements.
Not Suitable For Business With Many Chargebacks: If you have a business that causes a high rate of dispute or chargebacks (even if it’s not otherwise a high-risk business), then Square is probably not the right company for you. Going back to Square’s business model, it fronts you the money that you take from your customers so you can collect right away while it waits for the banks to settle the charges. So, if Square can’t eventually get the money from the banks, it might stop fronting you the money (put a hold on your account) or stop working with you altogether.
Not The Best Pricing For High-Volume businesses: Despite its transparent pricing, Square might not be the cheapest service provider for your particular business. If your business is mature, you have an established financial history and are doing a consistently high volume of card payments, and you know how your customers tend to pay for your goods or services, then you might want to shop around a little more to find the merchant account provider that can offer you interchange-plus pricing and volume discounts. (That said, Square does negotiate custom rates for high-volume businesses, but you should absolutely shop around all the same.)
We have an article that gives more details on why Square is not suitable for high risk and high chargeback businesses. If you have an established business and wish to shop around, here’s some information on where you might be able to get a better deal.
What Are Square’s Fees?
Business owners like having predictable operating expenditures every month. Because credit card fees usually have a percentage component and a flat fee component, the cost of allowing credit card sales tend to be less predictable. Compared to traditional credit card processors, however, Squareâs fees are easier to predict.
With Square, you usually only have to worry about just one fee, expressed in a percentage form. Right now, if you use Squareâs free credit card reader and free Point of Sale software, you pay 2.75% of the sale. Thatâs it. If your customers choose to pay online, your rate is 2.9% + $0.30 per transaction. Having only to keep two numbers in mind makes it easier for you to figure out your markups so you can make a profit for your entire business.
Note, though, that if you use Squareâs premium hardware or software, the charges can get a little complex. Here’s an article giving a more detailed breakdown of Square’s fees.
How Do You Use Square?
When it comes down to it, it’s fairly easy to start using Square’s services. You can do it in four steps:
Sign Up For A Free Account. This only takes a few minutes, and we even have an article walking you through the process. You wonât have to provide a lot of financial information, and they wonât do a credit check on you at this stage (they will later, after youâre all set up).
Get Your Free Square Reader. Youâll have quite a few hardware choices–some of which you will need to pay for–but thereâs always one thatâs free for either iOS or Android.
Download The Free Square App. The app is called Square Point of Sale, and you will need this app to process payments through a mobile device.
Log In To The Free Square Dashboard And Explore. This is a fairly robust piece of software that manages all your credit card charges. You can customize reporting in a centralized hub, and do much, much more (some of which cost extra). Here’s a Merchant Maverick article on the details of the dashboard.
As mentioned above, Square wants to help you run your business. There are a lot of value-added services they offer, so once you’re all set taking credit card sales, you might wish set aside a little time to explore these additional services to see how they can help you run your business.
What Kinds of Businesses Is Square Best For?
Square isnât right for every business, but if your business is small or new, Square is very likely the best bet for you. With Square, youâll get lots of free software, hardware, and add-ons to get you up and running very quickly. You can use Square on the web, at a brick-and-mortar store, and even at mobile locations such as food festivals.
We’ve compared Square with PayPal and Clover Go and believe Square really does offer the best value for the price for a start-up business. As long as youâre not one of the âhigh riskâ businesses, you should have no problems getting payments from Square or with your account being abruptly suspended or terminated. Best of all, if you use Square and then after a while decide you donât like them, you can stop using them at any time.
Is Square right for you? This more in-depth article can help you decide.
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