This post originally appeared at Mailchimp Website Builder: Pros, Cons, and Alternatives via ShivarWeb
MailChimp has been one of the fastest growing email marketing providers for years now. They’ve built an huge base of customers ranging from tiny personal accounts to some of the most prestigious enterprise brands in the world.
In 2019, they added a ton of functionality, including postcards & remarketing as they grow their positioning into a marketing platform. And as part of their growth, they’ve introduced a free website builder.
See MailChimp’s Current Plans & Pricing
I’ve been using Mailchimp for years, and was super curious when they announced the beta version of their website builder (FYI, beta just means it’s their first, trial run version. They’re looking for feedback from users to improve the product).
So I gave Mailchimp’s beta builder a try for a full Mailchimp Website Builder review. But before I get into the pros and cons of my review, let’s dive into an overview about tools to build a website.
There are so many considerations to take into account when choosing a website builder — and really, there are a thousand ways to get what you want in the end in terms of functionality, convenience, pricing, etc. The thing to remember is: whether you’re building a simple personal website or running a business, the way you build your site has a lot of consequences.
In the long-term, it affects your versatility, functionality, and, of course, your brand. In the short-term, it can certainly add/take away a lot of headaches. That said, just like choosing a physical house or office, there is no such thing as an absolute “best” or “top” choice. There’s only the right choice relative to your goals, experience, and circumstances.
What Is Mailchimp Website Builder?
On the wide spectrum of website building solutions, Mailchimp’s website builder lives on the end that is all-inclusive and provides everything you need to get started and grow your website. It contrasts with solutions where you buy, install, and manage all the “pieces” of your website separately.
Using Mailchimp is sort of like leasing and customizing an apartment in a really classy development instead of buying and owning your own house. You’re still in control of decor, cleaning, and everything living-wise – but you leave the construction, plumbing, security, and infrastructure to the property owner. That point is key because there’s usually a direct tradeoff between convenience and control.
Everything may fit together just right with a website builder like Mailchimp, but that may or may not be what you’re looking for.
As far as competition, Mailchimp competes with all-inclusive website builders like GoDaddy, Wix, Squarespace, Jimdo, Yahoo!, and WordPress.com (and Shopify for online stores).
Compared to their direct competition, they focus on ease of use and their platform providing everything you need to market online — from their opt-in pages to their email software to their website builder.
Pros of Using Mailchimp Website Builder
Here’s what I found to be the pros of using Mailchimp’s website builder — not just in comparison to direct competitors like GoDaddy and Wix, but as an overall website solution.
Straightforward Sign Up Process
If you already have a Mailchimp account, using their free website builder is just a matter of navigating to it in the main menu and getting started. If you don’t have a Mailchimp account, it’s still incredibly easy to sign up. All you have to do is create an account with your business information + pick your payment plan to get started.
This is great for DIYers who want to get up and running as quickly as possible without an extensive sign up process.
Ease of Use
Another pro of Mailchimp’s website builder is that it’s incredible easy to use. When you first get started with the platform, Mailchimp actually creates a homepage for you to use as a starting point.
Once you get into the platform, you can “drag” and “drop” additional elements onto the page, remove elements from the premade page, add new pages to your site with the click of a button.
The whole setup is like painting by numbers. You just add in your content, add additional elements if you want them / need them, add your branding colors and fonts, and click publish.
There are obvious drawbacks to this setup, which I will cover in the disadvantages, but it is a real advantage to having an easy and quick way to get your site up and making sure it still looks decent.
It makes Mailchimp a great option for entrepreneurs / DIY-ers who want a website that gets the job done, looks clean, and doesn’t require hiring a professional to put it all together (and don’t want to worry about “messing it up”).
Another benefit Mailchimp’s website builder is that it’s completely free.
There’s no upsells, no limited access based on your payment plan, no restrictions. You can use the website builder with your free Mailchimp plan if you have under 2000 subscribers and don’t need additional email functionality, or you can use it with your paid plan for no additional charge.
While there are some limitations with the platform (more on that in a minute), it’s a great option for test projects or those who need a simple, functional website and don’t want to spend money on a platform.
Of course, no review would be complete without looking at the downsides. Every piece of software will have complaints. And for Mailchimp, there’s two big cons that stand out: limited design and functionality features.
Limited Feature Set – Design
With any technology product, there is almost always a trade-off between convenience and control (think Android vs. iOS).
And you can really see this trade-off with the Mailchimp website builder. The convenience of their design setup is great. It’s straightforward and fast, and puts your focus on getting your content into a premade template. You can add pages and a few elements based on your specific needs, but for the most part, it’s got everything you need.
However, if you want to go anywhere beyond the basics of design, you are limited with the builder.
You can’t add anything aside from the few drag and drop elements available to you, and the elements you can change on the overall template are fairly limited (AKA essentially just font and color).
If your website is growing, or becoming a bigger part of your business, the design limitations can be crippling. And unlike other website builders that attempt to solve this issue through apps, extensions, or access to the website code or HTML, there is no outlet for a Mailchimp website builder website.
Limited Feature Set – Technical
The limitations on design also bleed over into technical limitations.
Technical limitations are features that you don’t know that you want until you want them, and then you find out you can’t have them.
These are things like integrations with Facebook, Pinterest, Twitter, Google Ads, social sharing options, blogging, and a whole host of every intermediate to advanced marketing tools on the internet.
In their beta from, Mailchimp has extremely limited integrations (social sharing, social following, file downloads, etc.), but there are a ton of technical features that Mailchimp currently doesn’t provide or that are extremely limited.
There also aren’t add-ons or additional integrations to use with the platform, which makes it even more difficult to do anything besides the very basics on your site.
Ultimately, Mailchimp leaves much to be desired when it comes to product integrations and additional technical features that can help you better use and market your website.
Mailchimp Review Conclusion
Mailchimp makes getting your website up and running simple and fast, which makes it a great choice for DIYers who want a quick and easy way to build a website without the hassle of getting into the code or having something custom made.
Get started with Mailchimp here.
However, like most all-inclusive website builders, there does come a point where there’s a tradeoff between convenience and control. Mailchimp leaves a lot to be desired when it comes to design customization and functionality. If you’re looking for something that offers more control and scalability, you’re better off elsewhere.
Not sure Mailchimp fits your needs? Check out my quiz to find what the best website builder is for you based on your preferences.
If you own a small business and have a dedicated checking or savings account, now there’s a different way to send or receive money directly from your account. Unlike traditional transfers that can take up to three days, this transfer can be completed within minutes and is often free. The service is called Zelle, and you might already be familiar with it as a money transfer service for one of your personal bank accounts.
Zelle used to be a consumer-only banking service, but recently it’s been opened to small businesses. It’s available at most banks. If you want to learn how to pay or get paid without having to write a check or run to the bank for a deposit — and still be able to use the funds immediately —, read on to learn more.
How Does Zelle Work?
Before we get to the details of Zelle for business accounts, let’s first get a little backstory on how Zelle got its start and how the Zelle technology works.
Origins of Zelle
Zelle is a US-based money transfer service available to those who have a US bank account. It’s operated by a company called Early Warning Services, LLC, which, in turn, is owned by a handful of large banks, including Bank of America, BB&T, Capital One, JPMorgan Chase, PNC Bank, US Bank, Citibank, and Wells Fargo. In addition, 400+ “member” banks and credit unions participate in the Zelle service. The complete list of member banks can be found on the Zelle website, and if your small business has a checking or savings account at one of these banks, then you can probably use Zelle for your business.
The Zelle service was launched in 2017. There was an earlier version of the service called clearXchange going as far back as 2011, but accounts for personal money transfers were deactivated by December 2017 and users were encouraged to move to the Zelle service.
Zelle is basically a service started by banks, for banks. So, unlike its competitors such as Venmo or PayPal, each member bank has a lot of control over how to offer the service and whether (or how much) to charge for the service. While there is an independent Zelle app, for most users, the service is typically accessed through a bank’s website or mobile app. To sign up for the service or initiate or manage transfers, you log on to your banks’ website or app and access the Zelle service through tabs on the website or in the app. As a result, security features for the service depend on your bank’s security features.
The Zelle Network
Unlike many other money transfer services where you might have to wait up to three days to finalize a transfer, a Zelle transfer can be completed within minutes, and the money can be available for you to use immediately thereafter. This is possible because the banks that offer Zelle are “member” banks and presumably such banks have been vetted and given a greater degree of trust, so they release the money faster. Behind the scenes, Zelle transfers money via the ACH service, which–while it is possible to settle transfers in less than a day–still does not happen within minutes.
In reality, the service works like this:
Amy initiates a transfer of $100 to Beth through Amy’s banking app or web portal.
Amy’s bank debits $100 from Amy’s account, sends a message through the Zelle Network to Beth’s bank that $100 is being transferred, and moves $100 to a settlement account.
Beth’s bank notifies Beth of the transfer, credits Beth’s bank account for $100, and messages Amy’s bank through the Zelle Network that the money has been credited.
The banks then settle the account through an ACH transfer, which happens at specific times of the day during bank work days.
Can I Use Zelle For Business?
Zelle originally started as a consumer-only service, but, in 2018, it moved to allow small businesses to use the service. If you have a small business checking or savings account, then more than likely you can use Zelle for your business. However, it is possible for some banks to offer Zelle for personal use but not for business use.
If your bank does allow Zelle for small business use, be sure to check restrictions as well as fees for business accounts. They might be different from personal accounts.
Zelle For Business Accounts: What You Need To Know
If you already have a small business bank account, then you can probably already use Zelle. Here’s how.
How To Set Up a Zelle Account
Setting a Zelle account for your business is easy. Typically, a Zelle account can be used in connection with a business checking or savings account. Check your banks’ website to make sure, but if you can use Zelle, you should see tabs and buttons with the Zelle name or logo on the website or in the app.
In order to set up a Zelle account, you must have a cell phone number or email that you can associate with the account. If you already have a personal Zelle account, then you can’t use the same email or phone number for your business account even if your personal account is at another bank. Each Zelle account is uniquely identified with an email or cell number, so you can’t use something that’s already registered with the service. If your cell number is a VoIP number like Google Voice, you can’t use that number with Zelle either.
A unique cell number or email is all you really need. Because Zelle is a service through your bank, they already have your bank transit routing number and account number, so you won’t need to know that. Just follow the simple directions on your banking app or through your bank’s web portal, and you should be able to quickly set up a Zelle transfer account.
You must set up the email or cell number of each and every account you intend to send money to before you can send the money. You can’t just type the email or cell number on the fly and expect the money to be sent right away. The banks want to verify the recipient’s account before actually sending anything.
Here’s a screenshot of the Bank of America Zelle signup page (modified for privacy/security concerns):
What Types Of Transfers Are Allowed On Zelle?
Once you have your Zelle account, you can do two, possibly three things (depending on your bank):
Split a bill
In theory, you could use Zelle to request payment from customers, or receive payment from customers, or to pay vendors or partners — among other uses.
The web or app interface typically looks very simple and all you have to do is to follow directions to complete the action. Again, because your bank ultimately controls which activities it will allow, it’s difficult to show the interface here. Below is a screenshot of the Bank of America mobile app for Zelle transfers. It gives you an idea of what you’ll typically see.
Are There Any Transfer Limits Through Zelle?
There are indeed transfer limits through Zelle. Each bank decides how much that limit is, but typically there’s a limit on the amount and the number of transfers per day/week/month. For instance, Bank of America’s transfer limit is as follows:
So, in one 24 hour period, you can make one $3,000 transfer or 10 $300 transfers. The same goes for the 7 days and 30 days limits. On the Bank of America website, they specifically mention that a small business might receive a higher limit.
Again, because many details of Zelle are controlled by each member bank, be sure to check your bank’s specific number on daily, weekly, and/or monthly transfer limits.
Lastly, note that a transfer limit typically applies to outbound transfers. Usually, banks do not put a limit on how much you can receive through Zelle.
How Much Does It Cost To Transfer Money Through Zelle?
How much it costs for a business to transfer money through Zelle depends entirely on your bank. For instance, Bank of America charges no fees for your business to send or receive money through Zelle.
However, at US Bank, while there is no fee for a business account to send or request money through Zelle, there is a fee to receive money through Zelle. Each inbound transaction costs 2.5% of the transaction amount, with a $15 maximum or a $0.25 minimum per transaction. Given the different fee structure, before you start using Zelle for your business, be sure to do a little research through your bank’s website to find out for sure.
Are There Any Transfer Restrictions Through Zelle?
There is one transfer restriction for business accounts that does not apply to personal accounts. Some consumer users of Zelle bank at non-member banks. They can still use Zelle through the Zelle app by linking their debit card to the app. While this method of using Zelle is fine for personal accounts, businesses can’t send or receive money to this type of Zelle account. In order to use Zelle for business, you must bank at a Zelle member bank and receive and send money to only those who also bank at a Zelle member bank.
Protection For Fraudulent Transfers
Zelle transfers are more like debit card transactions than credit card transactions, so the legal protections available for credit card transactions do not apply to Zelle.
Zelle essentially is an ACH transfer between banks. As such, once that money is transferred, you can’t pull the money back except under very specific circumstances. You can stop the transfer if the other party doesn’t have a Zelle account and before they set one up. Otherwise, if you accidentally send money to the wrong account because of a typo, you would have to call your bank to see if they can pull the money back.
Like all ACH transfers, there is otherwise no protection for fraud, so most banks warn Zelle users to only send money through Zelle to parties they trust and carefully guard access to the Zelle account in the first place.
Zelle VS Other Mobile And Digital Wallets
Zelle was set up by the big banks to compete with mobile and digital wallets like Venmo and Cash App. There are differences between the services, and one of the main ones is that, with Venmo and Cash App, there’s an extra step to get the money into your bank account.
Zelle is a straight bank-to-bank transfer, so the money lands directly into your bank account and you can use it right away. With Venmo, Cash App, and others like PayPal, the money rests with each of these businesses. If you wish to take that money out for other general use, you must first transfer it to your bank. Typically, this is done through an ACH transfer that could take up to three business days.
Other than this main difference, as already discussed earlier, Zelle allows each member bank a great deal of control over how to operate the service and how much, if any, to charge for the service. In other words, if you have several Zelle accounts at different banks, you’ll have to pay attention to the differences between the services in order to not encounter any surprise charges or daily/weekly/monthly transfer limits.
Is It Time For Your Business To Start Using Zelle?
There are definitely advantages to using Zelle for your business. Fast transfer and immediate availability of funds are extremely convenient if you’re receiving payment. However, because ultimately your bank controls how many services they wish to provide through Zelle and how much they wish to charge, always double-check with your bank before you start any large-scale uses of Zelle.
As to how to use Zelle, you can, of course, pay or ask to be paid through Zelle. Simply provide the email or cell number you’ve associated with Zelle on your invoice and let your customers know you can take Zelle as well. You can also see whether the service providers and vendors you work with prefer to be paid through Zelle.
As a business owner, sometimes you can also transfer money to and from your personal and business accounts through Zelle (owner’s draw or increase in owner’s equity). The transfer is fast and you won’t have to write yourself a check or pay for a wire transfer.
All in all, while Zelle is not a complete solution for taking or making payments, it can do a lot. So why not try Zelle for your business? It’s fast, it’s often free, and it’s probably already available through your bank, just waiting for you to set it up.
How do you use Zelle? Leave us a comment and share any innovative ways to use the service!
The post Zelle For Business: What Small Businesses Need To Know About The New Money Transfer App appeared first on Merchant Maverick.
If you’re reading this, I’m going to take a wild shot in the dark and say that you probably have a PayPal account. As of the third quarter of 2019, PayPal has reported a total of 295 million active accounts worldwide. PayPal has become so embedded in people’s lives that many use their personal PayPal account to conduct business. However, by doing this, you give up the advantages that come with a free PayPal Business account.
We’re here today to explain why, if you’re a PayPal user doing business under your personal account, you should really sign up for a PayPal Business account and do business under that account instead.
Why Use PayPal For Business?
When you use PayPal for Business, you gain access to a plethora of services, both free and paid, that can be immensely helpful to any merchant making money from online sales. You’ll get three options for taking payments, two of which carry no monthly fees. You’ll get access to a plethora of eCommerce integrations, including Shopify, Magento, and BigCommerce. Offline merchants will get access to a number of POS integrations, as well as PayPal’s in-house mobile card reader and mPOS app, both of which are bundled together under the PayPal Here brand.
Other features available through PayPal include online invoicing, a Marketing Solutions package, a Virtual Terminal, a recurring billing service, and a lengthy list of developer tools. Of course, other payment processors sport similar tools, so is there truly any advantage to using PayPal for Business? PayPal itself would argue “yes,” and in favor of that argument,Â a recent study found that when a customer chooses PayPal as their payment method, they go on to complete the transaction 88.7% of the time — an average conversion rate 60% higher than that of other digital wallets and 82% higher than the average conversion rate of all other payment methods.
All things considered, a PayPal business account makes it simple and easy to send money back and forth. Whether you’re in the business of offering online subscription services, selling your wares at “meetspace” events like crafting shows and conventions, or even collecting donations for a nonprofit organization, PayPal for Business has plenty to offer.
Differences Between PayPal Personal & Business Accounts
Both personal and business PayPal accounts allow you to send and request money, make purchases, and even receive payments for sales you make — so long as you mark these sales as being for “Goods and services,” thus incurring transaction fees (and PayPal will check to make sure you’re not dodging transaction fees by mislabeling transactions). However, without a business account, you won’t have access to a host of commerce-facilitating features such as creating shipping methods, inventory tracking, allowing employees partial access to your account, and signing up for services like PayPal Here.
PayPal Business Account Requirements
The requirements to set up a PayPal business account are pretty minimal. You’ll need the following:
An email address
A business phone number
Your legal business name — your own name is fine if your business is a sole proprietorship
The last four digits of your SSN
Your Employer Identification Number (EIN) — if you choose individual/sole proprietorship as your business type, you don’t need to provide an EIN
Your date of birth
Your home address
Your bank name, account number, and routing number
This will be sufficient to start selling, but note that after you start actually accepting payments and making money, PayPal may request further documentation, such as bank statements. Third-party processors like PayPal and Square are notorious for their stringent scrutiny of merchants and their tendency to subject merchants to holds or terminations at the slightest hint of trouble. Just be ready to provide whatever information PayPal might ask for in the event that they detect something slightly suspect.
Check out our piece on avoiding account holds, freezes, and terminations to learn more.
How To Set Up Your PayPal Business Account
Start off by clicking on the “Sign Up” box in the top right corner of PayPal’s page. Note that if you are signed in to your personal PayPal account, PayPal will prompt you to either sign out of your current account and set up a separate business account under a different email address OR delete your current PayPal account and set up a business account using the email address previously associated with your old PayPal account. I assume most of you will want to choose the former option.
Next, you’ll be prompted to enter some information about your business. Enter the legal name of your business contact, the name and phone number of your business, and your business address.
Next, you’ll be asked to describe your business type. The options you’ll have to choose from are as follows: Individual/Sole Proprietorship, Partnership, Corporation, Nonprofit organization, or Government entity.
Next, you’ll be asked to further describe your business. You’ll be asked to choose the product or keyword that best describes your business, your estimated monthly sales, and your website (this one is optional), and you may also be offered the chance to receive a PayPal Business Debit Mastercard after you receive at least $250 in payments.
Now, if your business type is anything other than Individual/Sole Proprietorship, you’ll also be prompted to enter your Employer Identification Number (EIN). If you chose Individual/Sole Proprietorship as your business type, you won’t receive this prompt as you won’t have an EIN.
Next, you’ll be asked to supply some more personal information: the last four digits of your SSN, your date of birth, and your home address.
Once this step is complete, your PayPal business account will have been created. You’ll now be asked whether you want to request or send money and whether you want to send out an invoice (which will start the process of setting you up with PayPal Invoicing, a free service that allows you to create and send customized invoices)
After that, you’ll be prompted to select other PayPal services you may want to use. You can choose which online payment package you’d like to set up for online sales. If you’re in the business of offline sales, you’ll be offered the chance to set up a PayPal Here account. And if you want to sell goods through online marketplaces that PayPal integrates with, you’ll be offered the chance to connect to such a marketplace.
Keep in mind that you can always return to the set of signup options listed above by hovering over the “More” option on your PayPal toolbar at the top of the page and then selecting “Business setup.”
Let’s go back to setting up online payments for a moment. Click on “Set Up Online Payments” and you’ll be presented with the choice of processing all your payments through PayPal or adding PayPal as a supplementary way to get paid.
Depending on which option you select, you’ll then choose how you want to sell online. Choose “Process all payments through PayPal” and you’ll be offered two further options. With Option A, you work with an eCommerce solution that’s already integrated into PayPal. Option B lets you add HTML buttons to your website yourself. Below both options, you’ll see a “Compare options” link. Click it to see the following comparison:
Now, if you chose “Add PayPal Checkout as another way to get paid”, the two subsequent options will be different. Option A will be “I want a pre-built payment solution” while Option B will be “Use our APIs to add PayPal Checkout to your website.” Clicking “Compare options” will then display the following:
After you establish your payment setup, you’ll find an “Account setup” tab next to the “Payment setup” tab. Click on that to finish setting up your account.
From there, follow the links to confirm your email, link your debit card for Instant Transfers to your bank if you wish, link your bank account, make your business name clear for customers, and, should you so desire, get the PayPal Business Debit Mastercard.
Depending on the payment options you selected earlier, you’re going to need to choose between the three available payment packages for accepting payments online:
PayPal Checkout (formerly Express Checkout)
PayPal Payments Standard
PayPal Payments Pro
If you want to add PayPal as a supplementary payment option to your existing website or if you already integrate with an eCommerce provider, PayPal Checkout is a solid choice. You’ll get PCI compliance (PayPal redirects customers to its secure site to complete the transaction), contextual checkout buttons, and localized payment methods for European customers.
PayPal Payments Standard is a more fully-featured payment solution than PayPal Checkout. Payments Standard offers the same eCommerce integrations and PCI compliance offered by PayPal Checkout along with a healthy dollop of additional features. Here’s the full list of what you’ll get with Payments Standard:
Accept credit and debit cards (your buyers don’t need a PayPal account)
Accept PayPal payments
Send invoices online for fast payment
Accept payments in 25 currencies from 202 countries
Simplified PCI compliance
No long-term contracts, setup, withdrawal or cancellation fees
Nonprofit discount available for PayPal transactions
Toll-free phone support
Offer special financing on purchases $99 and up
Both PayPal Checkout and PayPal Payments Standard have the benefit of being free to sign up for with no monthly fees. PayPal Payments Pro, by contrast, costs $30/month to use. Let’s take a look at what you’ll get for the money:
Hosted Checkout page: With Payments Pro, you can keep your customers on your website throughout the entire checkout process and customize the design of your checkout page. If you want to provide your customers with the most seamless checkout experience possible, Payments Pro is the way to go. However, this means that you’ll have to take care of PCI compliance yourself.
Virtual Terminal: PayPal’s virtual terminal allows you to accept payments via phone, fax, or mail. Once you have your customer’s card number, you can key in those numbers from a browser window. It’s definitely a handy feature, and it always helps to be able to take payments by as many means as possible. However, competitors like Square and Shopify offer access to a virtual terminal without having to pay any monthly fee whatsoever.
Recurring Billing: If you’re in the business of selling subscriptions, Payments Pro offers recurring billing tools to power your sales. Unfortunately, recurring billing will cost you an additional $10/month. Oddly enough, PayPal Checkout offers recurring billing tools for no cost whatsoever.
Bear in mind that to implement many of the features on offer with a PayPal business account, you’ll need a developer to help you do the heavy lifting.
Another feature you can sign up for on PayPal’s website is PayPal Here, a suite of services that allows you to accept offline payments via a mobile POS app and a PayPal card reader of your choosing. You’ll find the PayPal Here page under the Tools drop-down menu in the toolbar on your PayPal dashboard.
The first thing you’ll need to do is sign up for PayPal Here. Once you’ve done that, download the PayPal Here mPOS app onto your mobile device. Next, sign in to the app and order your card reader. Of the three card readers currently available, the Mobile Card Reader and the Chip and Swipe reader are both free until June 30, 2020, for new PayPal Here account holders. Also available is the Chip and Tap Reader + Charging Stand combo which you can purchase from PayPal for $79.99.
For a full rundown of the features included in PayPal Here, read our PayPal Here review.
Are There Any Paypal Business Account Fees?
There are no fees incurred when you set up a PayPal business account. It’s completely free to have a PayPal business account (unless you sign up for the PayPal Payments Pro plan). Of course, free payment processing doesn’t exist, and PayPal is no exception. This means that payment processing fees will apply when you make a sale through PayPal. If you’re a US-based merchant, Here’s what you’ll be paying per transaction in the based on the nature of the transaction:
2.9% + $0.30 per online transaction
2.7% per swiped, dipped or tapped offline transaction (when you use PayPal Here or integrate with one of PayPalâs POS partners)
3.5 + $0.15 per keyed transaction
2.2% + $0.30 per online transaction for nonprofits (check out PayPal For Nonprofits to learn more)
5% + $0.05 per transaction under the MicroPayments plan
3.1% + $0.30 per Virtual Terminal transaction
Keep in mind that the Virtual Terminal is only available if you have a PayPal Payments Pro plan, which costs $30/month. Overall, PayPal’s fees are comparable to those of other third-party processors, though as I mentioned earlier, both Square and Shopify offer a virtual terminal without a monthly fee.
One recent policy change that has sellers chagrined is that when a transaction is refunded, PayPal will not return the processing fee to you. That means that if you refund a $100 online purchase to a customer, the processing fee won’t be returned to you and you’ll lose $3.20. This may not sound like that much, but if you’re issuing a significant number of refunds, these costs add up quickly. For more on refund policies in the payment processing industry, check out our article on credit card refund fees.
This article doesn’t cover every single fee associated with using PayPal. For more on the costs of such things as card readers for offline sales, conversion fees, chargeback fees, and more, our article on PayPal pricingÂ has the full story. And if you’re a seller outside the US, have a look at PayPal’s complete list of merchant fees, as the fixed portion of your transaction fees (when considering a 2.9% + $0.30 transaction fee, the 30 cents is the fixed part) will vary based on the currency you use.
The Bottom Line On PayPal For Business Accounts
We’ve established that if you’re going to use your PayPal account for business purposes, you really should get a PayPal business account. But how does PayPal stack up against competing payment processing solutions?
Overall, despite its shortcomings, PayPal is a solid option for merchants. With its relatively simple, transparent pricing and extensive eCommerce integrations, PayPal works particularly well as a starter option for new businesses and will scale with your business as it grows. What’s more, online sellers can always choose to use PayPal as a supplemental means of accepting payments. This isn’t the case with most of PayPal’s competitors.
PayPal has plenty to offer offline sellers as well — with PayPal’s in-house mPOS app along with its robust POS and accounting integrations, you’ll be able to take payments anywhere with ease. Read our full PayPal review for an even deeper look into what the payments giant has to offer your business.
That being said, PayPal obviously isn’t an ideal solution for everybody. If you’re not happy with PayPal’s business practices or if you’re in the process of comparison shopping, check out our article on PayPal alternatives. You may want to have a look at our merchant account comparison chart as well.
As always, if you’ve used — or are using — a PayPal business account to accept payments, we’d love to hear about it! Please drop us a comment!
The post Why You Need A PayPal Business Account If You Want To Take Payments Via PayPal appeared first on Merchant Maverick.
If you are looking to expand fundraising possibilities for your charity and are considering Square to process payments for your nonprofit, you may have a lot of questions. Fortunately, you’ve come to the right place; this post covers all the information you’ll need to make an educated decision. We’ll look at the costs, fees, and all of the features that wait for you behind the curtain of Square’s processing. Square constantly updates what they offer, so there’s a good chance that within the next year, Square will offer even more features for nonprofits. That’s not to say that Square isn’t already a viable option for charities to take paymentsâyou’ll find that from setting up a free online shop to engaging your donors throughout the year, Square provides all the tools you need to get going, with options to integrate or add features as you need them. Let’s get started!
How Do Nonprofits Benefit From Using Square?
One of the biggest reasons I have a sweet spot for Square is that they have competitively-priced processing rates, and your nonprofit organization won’t face any surprise fees or markups on the backend. In addition to a straightforward fee structure, Square offers a considerable amount of free software.
Not only that, Square is so easy to set up that you can get your account up and running to start taking donations, sell merchandise, and even set up your website all on the same day.
While Square for nonprofits offers a plethora of benefits, it’s not without some potential hiccups, however. In the world of payment processing, one merchant’s dream is another’s frustration, so let’s take a look at what Square has to offer and discover if this solution is right for you.
The Limitations Of Using Square for Nonprofits
It’s important to understand that Square isn’t a traditional merchant account provider. As a third-party processor, Square offers greater accessibility to a wider amount of businesses, but there’s inherently a bit more risk involved as far as account stability with this model. When a business or charity raises a red flag, sometimes it’s hard to make things right again.
One of the most important ways to avoid issues is to accurately disclose your type of business and ensure that you don’t sell anything on Square’s prohibited goods and services list that would throw you into the high-risk merchant category.
While representing a very small fraction of all Square’s accounts, the largest complaints against Square involve account freezes and terminations. No matter what processor you go with, you’re going to have this risk, however. That’s why we encourage all of our readers to learn how to reduce their risk of termination or funding freezes.Â
Beyond this, Square offers a lot of useful tools for a very low price, but it’s certainly not all-inclusive. When it comes to SaaS (Software as a Service) for a charity, you can find other options that cover the basics for next to nothing — and there are also more complex solutions that go as high as $15K for mid-sized charitable organizations and above. It really depends on what your organization needs in ancillary tools.
With that in mind, let’s take a look at what to expect with Square, and then look at how your charity can make the most of this low-cost option.
What Are Square’s Fees For Nonprofits?
As I mentioned before, what you see is what you get as far as payment processing costs. You won’t have any other additional monthly fees: no authorization fees, statement fees, refund fees or PCI compliance fees. You’ll also pay the same fee no matter what type of card your customer uses.
Be aware that accepting in-person payments versus web or invoice payments varies slightly, however.
Here are the Square fees for nonprofits:
2.6% + $0.10 for any tapped, dipped or swiped cards you take in person
Â 3.5% + $0.15 when you enter in a credit card number manually from the SquarePOS app, take payment in your Square Virtual Terminal, and process card-on-file transactions, including recurring invoices.
2.9% + $0.30Â for Square Invoices and eCommerce donations as these are both web-based transactions
You can also learn a bit more about Square’s Pricing in our article, How Much Does Square Charge?
Note that Square’s fees for nonprofit organizations are exactly the same fees that small businesses pay, and they’re designed for organizations that process less than $250,000 per year. Does your charity have higher projected donations coming in? Square may design a custom pricing package for charities and small businesses that process more than $250,000 per year in sales, but they consider that on a case-by-case basis rather than offering any sort of standard pricing for nonprofits.
Now that we’ve got the fees out of the way, let’s see what free goodies and other options await with Square for charities.
8 Ways Your Nonprofit Organization Can Make The Most Out Of Square
Square offers more than just payment processing for the nonprofit organization. Let’s take a look at the free tools Square offers that could support your charity in several ways.
1. Accept Donations Online
You have quite a few options to accept donations online with Square. The easiest option is to create a free Square site with ready-made templates that make it easy to build a simple web storefront. You can create a space that explains your mission and lets your donors contribute to the cause, or make a fully functional eCommerce store that allows you to sell things like t-shirts and other merchandise to support your organization and mission.
To start accepting donations, simply click Donations from your online dashboard and add the details. You can also allow custom donation amounts to let your donors give the amount of their choice, up to $1,000.
If you have multiple focuses for your nonprofit, you can create more than one campaign on your site. Just repeat the process in your dashboard from the donations area. That way if you want a focused fundraiser, you can do so while still maintaining the ability to accept general donations.
Below is an example of a storefront using Square’s free site template. You have a range of colors, but customization is limited. Also, take note that you do not have a custom domain with Square’s free site.
You can also upgrade the free site to a premium option through Weebly â it’s all easy to navigate and choose through your Square dashboard. This way you’ll get a custom domain and other bells and whistles that help you create a site you want for your cause.
If you already have a site, you can choose from one of the plugin integrations for Square at your Dashboard for a pretty easy setup.
If you’ve got some expertise when it comes to code (or have a developer on staff) you can build a branded checkout flow with Square Transactions API that allows you to accept digital wallets, too. Check out How To Accept Online Payments With Square for a full, in-depth explanation of each of these possibilities, and a few more (like in-app purchases).
2. Accept Donations In Person
Hoping people have cash on hand or the even more archaic option â a check â can really limit you. When you set up your Square account, you’ll get the free magstripe reader, but we strongly suggest that you opt for the Square Reader for contactless and chip. Square’s chip reader is the best way to protect yourself from chargebacks and give people more options (and convenience) to donate. That’s because chip readers better meet current security standards. The chip reader is competitively priced under $50.00. This little reader is an important tool to keep your costs down in the long run.
You have even more options in hardware, however. Whether you need something mobile or you need something a little sturdier for a kiosk or desk setup or both, you can find what you need to accept payments in person.
Want even more information on Square’s hardware options? Check out The Complete Beginner’s Guide to Choosing Square POS Credit Card Readers And Cash Register Bundles.
3. Take Donations And Orders Over The Phone
Like most point-of-sale software, Square comes with a virtual terminal right on your dashboard that allows you to take a payment over the phone or manually key in credit card data. What’s important to understand here is that a virtual terminal is really the only way to safely process credit card data. That’s because when you receive credit card information, security has to be considered during transmission and storage.
Jotting credit card information down a piece of paper or worse â keeping this information on a spreadsheet â is a big no-no. You’d be surprised to find out how many organizations store credit card data this way, but in the event of a breach, your business will face expensive fines (not to mention a huge PR issue).
Taking donations for your charity over the phone is really easy with Square. You simply enter in the credit card data on the form. Since the full credit card number isn’t visible once you key it in, you never have to worry about this information being vulnerable.
4. Recurring Donations
As a charity, there is probably nothing that feels better than an ongoing commitment from your supporters. These folks help you keep up your daily operations and allow you to plan for future growth.
Square makes setting up recurring donations super easy for your charity. Whether you’re on your mobile device or at your full Square dashboard on your PC, you can create what you need.
I’ve included the screenshot below so that you can how easy it is to set up and schedule your invoice for delivery on whatever recurring plan you want.
If you desire more consistent branding for your charity, you have some options. Check out the full post How To Use Square For Recurring Payments and Invoices for information on integrations or a pre-built workflow.
If you’re wondering about any additional cost regarding invoice scheduling for charitable donations, I have some good news: Setting up recurring donations for your charity doesn’t cost anything extra beyond the processing charge (3.5% + $0.15).
5. Sell Merchandise
Ready to sell merch at your event or want to offer online sales? As mentioned earlier, you have some options when it comes to setting up an online store via Square’s free store or upgrading for more space or design freedom.
Selling in person couldn’t be easier, either. Square’s free Point of Sale app works as a cash register or mobile app, so you can run a gift shop or merch table at a fundraiser. You can even accept payments for charity auction items right then and there (or send an invoice for payment after the event).
Whether you sell merch at an event, through your online store, or you take a phone order through your virtual terminal, Square syncs the sale at your dashboard so everything stays up to date. All your inventory is tracked across all your sales channels. When it’s time for a sale, you simply select the item from your inventory and you’re all set to make a sale. You’re also free to just enter in any amount and charge a card that way as well. After entering their email, your customer receives a digital receipt, and you now have their info.
You can also set up alerts at your dashboard to stay on top of dwindling t-shirts or other fundraising merchandise you offer. That way you can re-order supplies before stock drops to zero!
6. Manage Events And Registration
Planning an event for your charity can help you connect with both your supporters and those who become one. That’s why I’m glad to see that through Square, you can also find what you need to sell tickets for any event you have in the works. You’ll do this through your online store. You can set up your tickets for electronic delivery or you can print for shipping or in-person pickup options. Square gives step-by-step information on how to sell event tickets through their help center.
Square also has a partnership with Eventbrite so it’s that much easier to organize, manage your event, and sell your tickets.
The great thing about selling with Square is that your sales for tickets, merch, and donations all seamlessly sync to improve your record keeping. Whether you take a ticket at the door with your POS or sell a ticket online, everything stays up to date.
And that brings me to my next point: Square’s donation and sales tracking can improve your bookkeeping.
7. Track Your Income And Improve Your Bookkeeping
Square offers simple income tracking. You can download sales history, view deposits, and view everything that’s happening over a set period of time.
View income by categories like merchandise sales, donations, or ticket sales. You can also compare new givers with long-time supporters, as well as average donation size. While you’re not going to see more advanced reporting features with Square Analytics, we feel it delivers more than expected considering these features are completely free.
Need something more? One thing to note is that Square integrates with Quickbooks so you can sync sales data here and get the sales or expense reports you need all in one place. QuickBooks has some specialized accounting features for nonprofits, which can make it a must-have piece of software.
8. Collect Donor Information And Engage
You can export a list of your donations or the details about your donors from your online store at any time. All of this is accessed under Order Management right from your online dashboard.
As you collect donations, you can also manually enter any notes about your supporters. Because electronic receipts are delivered when your customer shares their email, you can also build a robust email list for future marketing.
Square has a few customer engagement features that are completely free. The emails that you collect during transactions are yours to add to a separate email campaign service, of course. You can also create, import, and manage all of your customer profiles within your Customer Directory, which you can then use to get more insights into your donors and plan future giving campaigns based on that information.
You don’t need to find a solution outside of Square for email marketing tools, however. Square Marketing gives you some pre-designed email templates with campaign suggestions and scheduling tools that help you create and manage your email list and marketing campaign. Square Marketing Starts at $15 / month. In the screenshot below, this particular campaign provides those on your list with a special offer. To the right, you can see that you have a selection of templates and themes to create something in line with your branding. Though it’s not fully customizable, you can add your logo, business name, and other images where desired.
Email remains one of the most cost-effective marketing tactics, so it’s nice to see that Square makes it easy to collect emails or opt for this relatively low-cost email marketing tool.
Is Square Right For Your Nonprofit?
Square remains a strong option for most nonprofits. You can start taking donations — and even have access to a few ways to grow — without having to spend any extra money right off the bat. However, for advanced reporting features, marketing, and other integrations you may need, you’re going to pay more each month. And in my mind, that’s okay. Square provides basic reporting features so you can gain insight into patterns of giving as well as set up multiple ways to give on your site and more ways to connect, and that’s all free.
While Square does not offer any special discounts for charities, the processing fees are competitive. And with all of the freebies, it’s a bit remarkable for a processor overall. Be aware that account stability issues exist, however, but they aren’t unique to other processors by any means. Be sure to review each section or check out our full Square Review so that you understand how to make the most of this option.
Not sure if Square is right for you (or already sure it isn’t)? Read Become A Hero & Save Your Charity Money With Discounted Credit Card Processing For Nonprofits or check out the Top 7 Square Alternatives.
Want to get started with Square and open an account? This step-by-step tutorial shows you how to set up an account, navigate your dashboard, start accepting donations or selling merchandise. Have any questions? We’d love to hear from you.
The post Square For Nonprofits: Everything You Need To Know About Seamlessly Accepting Donations, Running Events, & Selling Merch With Squareâs Platform appeared first on Merchant Maverick.
The year-end payroll gauntlet is fast approaching. With the holiday season in full-swing, taxes around the corner, and fourth quarter payroll requirements looming, there is a lot of pressure on business owners to complete these tasks smoothly and accurately (especially since even simple mistakes may accrue fines and fees). If you’re looking for a simple guide to walk you through your year-end payroll responsibilities, we’ve got you covered.
We’ve broken down the year-end payroll process into 10 easy steps. This way you can close out your payroll and ensure that you file all of the proper tax forms on-time. To make things even easier for you, we’ve also created a printable Year-End Payroll Checklist so you can mark your progress.
Small Business Year-End Payroll Checklist (PDF)
You can print the Year-End Checklist now and use it to follow along, or you can jump right in.
How To Complete Year-End Payroll
Year-end payroll is all about balancing your books, ensuring you’ve paid people the right amount of money, and double-checking that you’ve sent the right amount of taxes to the government. By the end of January, employees should have access to a W-2 or 1099, which is a record of payment received and taxes paid. You will also need to submit wage and tax information to the Social Security Administration (SSA) and the Internal Revenue Service (IRS).
Payroll is a year-long process: keeping your records updated as you go throughout the year will help with any end of the year accounting and paperwork management. Even if you outsource payroll, there is information you should verify and deadlines you shouldn’t miss. (Also, now is the perfect time to review your company’s payroll choices. Anything you/employees want to change before the new year?)
As always, the exact process for your payroll processing is dependent on your state and industry, so use these steps as a guide and verify with an accounting or bookkeeping professional.
Step 1: Verify All Employee & Company Information
As the year winds down, you will need to ensure that all of the information for your company and employees are correct. First, verify that your company name, tax IDs, and company tax information is updated and accurate. Next, make sure that your employee information is up-to-date. For employees, check the following:
Employee’s name is spelled correctly
Correct Social Security Number
Updated/accurate employee addresses
If you find any discrepancies between recorded information and accurate information, update your files and/or let your payroll service provider know of any changes.
Step 2: Verify Wages, Taxes, & Benefits
After you’ve checked and made sure all your employee and company information is accurate, the next step is to run through and verify that your wage, tax, and benefit numbers match up with your payroll numbers. Here’s what you’ll need to verify:
Yearly PTO accrual
Worker status (active, terminated, on leave)
Filing status (exempt or non-exempt)
Number of exemptions
Year-to-date wages and taxes
Most of the information above is on an employee’s W-4 form. Employees can change their tax information with the government at any time, so this is where you may find and remedy discrepancies. Bonus: Many payroll software programs have reporting features that will do this work for you.
Step 3: Order Your W-2s
If you run payroll yourself or if you do not have a payroll provider that manages your W-2s, you will need to order paper forms from the Internal Revenue Service. A W-2 is a tax and wage statement for your employees. Contractors will receive a 1099 form. You can also file these forms online on the IRS website. Paper forms take 10 business days to mail, so plan ahead and order these in December.
Step 4: Manage Paid Time-Off
What is your company’s paid-time-off (PTO) policy? Do you offer PTO as a lump sum at the start of the year or does your PTO accrue as the year progresses? Will your employee’s PTO reset in January? What happens to the unused time?
Some states have mandates on whether or not a company can clear PTO, so check with your accountant or bookkeeper about the laws in your state. If you pay-out accrued PTO, you will need to manage that payment with the last paycheck of the year and keep a record of that payment for tax purposes.
Step 5: Decide On Bonuses
If you are awarding bonuses, those payments must go out with the last paycheck of the year. You will need to keep a record of bonuses given for tax purposes.
Step 6: Update Your Compliance Posters
In November or December, it’s important to order your new labor law posters for the upcoming year. These posters are federally mandated and expected to be displayed in a conspicuous place where all employees can read them. Failure to post updated labor law posters could result in fines, fees, or even labor lawsuits.
Step 7: Update Payroll Information
Before you run your first payroll of the new year, you will need to update your payroll information. That includes checking for new tax rates, making adjustments to employee information, balancing PTO, and tweaking yearly deductions.
Step 8: Deliver W-2s/1099s To Employees
Your employees need their W-2/1099 forms documenting their pay and taxes for their own tax filings. You have a legal responsibility to deliver pay and tax information to employees by January 31st.
Step 9: File Your W-2s/1099s
File all W-2s and 1099s with the Social Security Administration by January 31st. (You may also need to file W-2s with your state or county, depending on location and local tax laws.) In addition to each W-2, you will send a W-3 form; this form is needed for each employee and is a summary of the information on the W-2.
Step 10: File Tax Forms 941, Form 940, and Form 944
Forms, glorious forms! You will need to pay your federal unemployment tax (FUTA) from the fourth quarter with Form 940. You must also file federal income taxes and FICA (social security and medicare taxes) through Form 941. The last form (Form 944) is an annual return of all paid payroll taxes. All are due by January 31st.
Payroll Year End FAQS
Still have questions about closing the books? Here are the most popular year-end payroll questions. Don’t see your question? Leave a comment below.
What does year-end payroll mean?
Year-end payroll is about checking that the numbers to ensure your payroll reports add up to the money you’ve given and withheld during the calendar year. This is the last opportunity before you file your taxes and year-end forms to reconcile any discrepancies, change or update information, or adjust payroll choices for the new year.
What year-end payroll forms do businesses need to file?
So many forms. The good news is that many of the payroll software options available offer tax and year-end payroll support, and many of these forms can be filed online. (Always check with your accountant or bookkeeper about your specific state and industry requirements.) Here are the most important year-end payroll forms you will need to file:
W-2 Form: This form reports wages and withholdings to the IRS
W-3 Form: This is a summary of the information in the W-2s. This goes with employee W-2s to the Social Security Administration.
1099 MISC: This is a statement of income for contractors.
Form 1096: If you’ve paid any contractors and given them a 1099 MISC, you will need to summarize that payment information and submit it to the IRS with this form.
Form 940:Â This is the form needed to pay your Federal Unemployment Tax (FUTA) liability to the government.
Form 941:Â This form is due quarterly and reports employee payroll taxes collected for each quarter. Payroll taxes include federal income taxes, social security and Medicare taxes.
Form 944:Â If your payroll taxes are less than $1000 annually, you may qualify to pay these taxes yearly instead of quarterly. Small businesses that qualify will fill out a Form 944 instead.
Form 1095-B: If you offer health insurance, you will need to send this form to the IRS and to your employee to document that health coverage.
When does year-end payroll have to be submitted?
All the forms related to year-end payroll reports are due by January 31st to their respective locations.
What year-end tax forms do employers have to provide their employees and contractors?
Employers need to send their employees a copy of their W-2 and contractors a copy of their 1099-MISC. This accounts for wages paid and taxes withheld.
When do employers need to complete their employee W-2s?
All W-2s need to be filed with the social security administration with copies sent to employees by January 31st.
When do employers need to complete their contactor 1099-MISCs?
All 1099-MISC forms must be sent to the IRS with copies sent to those who received nonemployee compensation by January 31st.
Get Started With Our Year-End Payroll Checklist
Small Business Year-End Payroll Checklist (PDF)
It’s understandable if all the steps above feel overwhelming. It’s best to think about year-end payroll like this: This is when you account for the wages and taxes you’ve paid and withheld throughout the year.
As you look to settle books and wrap up your fourth quarter taxes, you might find that you’re interested in outsourcing the task next year, if you don’t already. Some payroll software companies like Gusto and Intuit offer tax services as part of their payroll programs. Whether you’re running payroll yourself or outsourcing, use our Merchant Maverick Year-End Payroll Checklist to get started, and check out our other great payroll and tax resources for more help running your small business.
What Can I Write Off As A Small Business Tax Deduction?
Everything You Need To Know About Small Business Payroll
What Are Payroll Taxes? And How Do You Calculate Them?
Small Business Accounting: How To Close The Books At The End Of The Year
The post Small Business Payroll: Your Complete Year-End Payroll Guide 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.
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.
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.
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.
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.
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.
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
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.
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.
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.
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 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 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 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 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 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.Â 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.
You’ve done it. You’ve come up with a business idea, you’ve drafted your business plan, and you’ve started estimating costs and seeking funding to get your small business off the ground.
Or maybe you’re further along in the process. You’ve launched your business, and you’re working hard to ensure it’s a success. Good for you!
But wait … are you sure you’ve thought about all the key components of running a profitable business? For example, have you thought about how you’re going to do the accounting for your new business? If your doors are already open, do you have an accounting system in place?
If your answer is no, this article is for you. While it’s important to create a business plan, shop around for vendors and suppliers, and deliver exceptional products or services to customers, few things are more important than accounting for your business. Without good accounting, you’re putting your business at risk of failure by not keeping a close watch on your financials.
As a new business owner, you already have a lot of expenses that can pile up quickly. Adding an accountant to the mix just isn’t feasible for most businesses in their beginning stages. Fortunately, there are options available that make accounting simple … and are easy on the wallet. In this post, we’re going to talk about small business accounting. We’ll start off with the basics, then take a step-by-step look at how to use accounting in your business. We’ll explore accounting software options, the financial statements your business needs, and the tax deductions that can save you money come tax time.
Whether you’re a new business owner or haven’t gotten off the ground yet, whether you know a little about accounting or you’re completely in the dark, you’re in the right place. Welcome to Accounting 101.
What Is Accounting?
Merriam-Webster defines accounting as:
The system of recording and summarizing business and financial transactions and analyzing, verifying, and reporting the results.
In other words, accounting is a process used by business owners and entrepreneurs to keep track of the financial transactions of a business, from purchasing supplies and inventory to the revenue that the business makes. Accounting allows you to analyze the financial health of your business to determine where money is being spent, how money is being made, and how these numbers affect the business.
The Basics Of Accounting
Whether you’ve dabbled in accounting in the past or you’re brand new to it, every business owner should have an understanding of the basics of accounting. These concepts may be very new to you or seem confusing at first. However, take the time to learn them so that you can tackle your company’s finances head-on and reap the benefits of good accounting.
The Accounting Equation
We can’t discuss the fundamentals of accounting without first discussing the accounting equation. Knowing and understanding this principle is essential for double-entry accounting, which we’ll discuss a little later. For now, though, let’s familiarize ourselves with this basic equation.
The accounting equation states that:
Now, let’s break down each of these terms to ensure that you have a full understanding of the accounting equation.
Assets: Assets are everything that your business owns. This includes the cash in your business bank accounts, commercial real estate, equipment, inventory, and accounts receivable.
Liabilities: Liabilities include everything that your business owes. This includes accounts payable, loans, and other debts.
Owner’s Equity: Owner’s Equity (also known as shareholder’s capital) includes all investments of capital by the owners of the business.
The accounting equation keeps everything in balance. Each side must be balanced. If each side isn’t balanced, there is an error that must be found and corrected.
The Importance Of Double-Entry Accounting
Many businesses use what is known as double-entry accounting. Double-entry accounting simply means that transactions are recorded to two or more accounts. This system of accounting provides more accuracy and helps keep your books balanced. The accounting equation we discussed earlier is the foundation of double-entry accounting.
Double-entry accounting gives you a better view of your business finances. Single-entry accounting only uses income and expenses, whereas liabilities and assets are recorded using double-entry accounting. Not only does double-entry accounting give you a better understanding of the net worth of your business, but it offers additional benefits. Double-entry accounting makes it easier to spot errors and also comes in handy when it’s time to run financial reports.
This is a very basic overview of double-entry accounting. To learn more about how it works and why your business should use double-entry accounting, check out our post, What Is Double-Entry Accounting (And Do You Need It)?
Debits & Credits
In double-entry accounting, transactions are recorded as debits or credits.
You’re probably already familiar with debits and credits if you use a debit card from your bank or a credit card. That said, you’ll need to forget everything you think you know when learning accounting, because these concepts are completely different.
If this sounds like a foreign language to you, don’t worry. Let’s break it down so it’s easier to understand.
Debits: A debit increases assets and expenses and decreases liabilities.
Credits: A credit decreases assets and expenses and increases liabilities.
Total debits must equal total credits or there is an error that needs to be found and corrected.Â Remember, it’s all about balance.
Let’s take a look at an example. Say your business has purchased a piece of equipment at a cost of $15,000. You borrowed the money to purchase the equipment. Because you gained an asset, this is recorded as a debit of $15,000. However, you have to pay back the money you borrowed, which creates a liability. Therefore, you will record a credit of $15,000 under accounts payable (liabilities).
Totals Debits = $15,000 Total Credits = $15,000 â
Both sides are equal and balanced.
Debits and credits are not used in single-entry accounting. While it may seem easier to simply skip this and forego double-entry accounting, remember the benefits that we discussed earlier. Using double-entry accounting gives your business a clearer, more complete view of your finances. And before you get too worried, most accounting software handles the double-entry accounting for you behind the scenes, so you won’t have to do everything manually.
Ultimately, understanding these concepts may be difficult, but you’ll find that the benefits of balanced books are well worth the effort.
An important piece of the accounting pie is the general journal. This is where all business transactions are recorded in order by date. Each journal entry should include four things. Those are:
The date of the transaction
The account(s) and amount(s) credited
The account(s) and amount(s) debited
A memo describing the transaction
When recording a journal entry, debits are recorded in the left column, while credits are recorded in the right column. Each side will be balanced, meaning that the total amount of debits on the left should equal the total credits on the right. Let’s look at a quick example.
You purchase $500 worth of inventory for your business. This inventory was purchased with cash. You have inventory (an asset) in your possession, so $500 is recorded in the left column of the journal since this is a debit. Because you paid with cash, your cash account is decreased by $500. Therefore, a credit in the amount of $500 is posted in the right column.
The Chart Of Accounts
Another key accounting concept to remember is the chart of accounts. A chart of accounts lets you see exactly where your company’s money is going. While it may seem confusing initially, understanding how a chart of accounts is organized helps the numbers make sense.
While we won’t dive too deeply into this concept, you should walk away from this article with a basic understanding of what a chart of accounts is. Typically, a chart of accounts is divided into five sections: assets, liabilities, equity, income, and expenses. These categories are further divided into accounts, such as utilities, advertising, accounts payable, cash, and materials and supplies.
Here’s an example of what a chart of accounts looks like:
Your chart of accounts is important for a number of reasons. In addition to breaking down your expenses, your chart of accounts helps you have a clear picture of where your money is going to and coming from. Your chart of accounts also helps you track inventory and can be extremely beneficial come tax time. If you remember our journal entry example from earlier we spent $500 cash on inventory, you’ll see this reflected in the chart of accounts above where the “cash on hands” account reads -$500.
To learn more about this accounting concept, check out our post, How To Set Up A Chart Of Accounts.
Now, let’s pause, take a breath, and let all of this information sink in. Understanding these concepts and key accounting terms certainly helps you dive into your company’s accounting with more confidence. Rest assured, however, that you don’t have to know everything about accounting to balance your own books. Gone are the old days of paper journals and ledgers and manually writing down every transaction. Today, there are lots of accounting software options available. While you do have to learn how to use your chosen software and may still have to do some tasks manually, accounting software does a lot of the heavy lifting for you, from automatically posting transactions from your business bank accounts to calculating depreciation on assets to sending out recurring invoices.
How To Do Small Business Accounting
With an understanding of basic accounting concepts under your belt, it’s time to put that knowledge into practice. From the first steps you need to take before launching your business to picking the right software for your business to hiring an accountant, we’ll cover it all in this section.
Set Up Your Business Entity
Before you start your business, you must set up your business entity. This determines your legal structure and influences how you file and pay taxes, your personal liability for the debts and liabilities of the business, how you can raise money for your business, and various requirements that your business must meet. Consider the needs of your business and future goals when selecting your legal structure. The main business entities include:
Sole Proprietorships:Â A sole proprietorship is an unincorporated business that is owned and operated by one person. This is the easiest entity to set up and does not require formal registration. Business profits or losses are reported on the owner’s personal income tax return. A sole proprietor is held liable for the debts and obligations of the business.
Partnerships:Â Partnerships are legal structures for businesses with two or more owners. Formal registration is not required to form a partnership, although there should be an agreement between partners. Business profits and losses are passed through to the owners and filed on their personal income tax returns. The owners in a partnership may be responsible for the debts and obligations of the business based upon the type of partnership that has been formed.
Corporations:Â Corporations are the most expensive and complicated of all legal entities. Corporations have regulations that other legal structures don’t have, such as establishing bylaws and holding meetings. Corporations may also be subject to corporate tax rates and may face double taxation. However, there is limited liability on the owners, and corporations also have more opportunities for raising large amounts of capital through the sale of stock.
Limited Liability Company:Â A limited liability company (or LLC) combines the benefits of multiple entities. Owners of LLCs have limited liability, so personal assets aren’t at risk if the business goes under. The owners of the LLC can also determine how business revenue is taxed.
Check out our post, Types of Business Structures: The Complete Guide, to learn more about the different business entities, and consider speaking to an attorney to determine which choice is best for your business.
In addition to setting up your business entity, there are a few other steps you need to take in these early stages. The first is selecting a name for your business. As a sole proprietor, you aren’t required to register your business if you’re using your own name. However, some small business owners opt to file a Doing Business As, or DBA. A DBA is a fictitious name that is registered with the county or state where the business will operate. If you select another legal structure, such as an LLC or corporation, you’ll register your business name when you file other paperwork with state and local authorities.
The next step is obtaining any licenses and permits required to legally operate your business. Your local chamber of commerce or Small Business Administration office can help you find out what your business needs and how to obtain these licenses and permits.
If you plan to hire employees for your business, you will need to obtain an Employer Identification Number (EIN). This is available at no cost by registering with the Internal Revenue Service.
Other steps that you may need to take before opening your business may include purchasing business insurance, hiring employees, buying or leasing commercial space, and advertising your business to bring in customers.
Open A Business Bank Account
When you start your own business, you need a business bank account. This should always be one of the first steps you take before launching your business. However, if you’ve already gotten your business off the ground and don’t have a separate account, it isn’t too late to head to your local branch to open a business account.
There are a few reasons why opening a separate bank account is so important for your business. First of all, it simplifies bookkeeping and filing taxes. You won’t have to pick apart every transaction to determine which ones were personal and which were for business purposes.
Speaking of taxes, keeping a separate business bank account could prove to be extremely helpful in the event that you’re audited by the IRS. Sloppy bookkeeping and jumbled expenses could very easily turn a simple audit into a drawn-out nightmare.
Finally, if you plan to apply for any type of business funding, such as loans or lines of credit, a lender typically only deposits funds into a business bank account. By opening a business bank account, you also establish a relationship with a bank, which could provide you with low-interest funding further down the road.
Choose Your Accounting Method
Now, if accounting didn’t seem confusing enough, we’re about to throw another curveball your way. There are actually two different methods of accounting. Before you get frustrated, though, just know that the two types are very easy to understand and differentiate from each other.
The first (and most common) method is accrual accounting. Accrual accounting recognizes revenue and expenses or sales or bills are incurred, not when the cash switches hands. With this type of accounting, accounts payable and accounts receivable are recorded.
Accounts Payable: Expenses that you owe but haven’t yet paid (think bills).
Accounts Receivable: Revenue that your customers owe but haven’t yet paid (think invoices).
Let’s take a look at an easy example. Let’s say that you’ve received $5,000 in payments from your customers and $1,000 in outstanding invoices. You also have paid bills totaling $500 and $100 in unpaid bills.
Using the accrual method, your total profit for this time period would be $5,400. You would add the revenue you have received ($5,000) plus your accounts receivable ($1,000). Then, you would subtract your expenses ($500) and your accounts payable ($100) because your accounts receivable (unpaid invoices) and accounts payable (unpaid bills) are already recognized as part of your profit/loss.
The benefit of using the accrual accounting method is that it gives you a clear view of your income and expenses.Â On the flip side, though, it doesn’t give you a clear picture of the cash flow of your business. While your books may show that you have earned a bigger profit, you might not have as much available cash because of unpaid invoices.
The other method that you may use for your business is cash basis accounting (or simply cash accounting). Cash basis accounting recognizes revenue and expenses when cash changes hands. This method does not use accounts receivable or accounts payable. Instead, only revenue that has been received and expenses that have been paid are calculated.
Let’s go back to the previous example. Remember, we have $5,000 in revenue, $1,000 that we haven’t yet received, $500 in expenses, and $100 that we owe. Using the cash method, your total profit would be $4,500. You would simply subtract your expenses that have been paid ($500) from the revenue that your business has received ($5,000) because cash basis accounting does not include your accounts receivable (unpaid invoices) or accounts payable (unpaid bills).
The benefit of using the cash basis accounting method is that you can more easily track your cash flow at any time. However, you won’t get the longer-term overview of your revenue and expenses through the accrual method and most accountants do not recommend this form of accounting.
There are some other differences between the two methods of accounting, such as how income is reported for tax purposes, but this is just a basic overview. If you want to learn more to help you decide which method is right for your business, check out our post, Cash VS Accrual Method: Which Is Better For Your Business?
Find The Right Accounting Software
Our modern, tech-filled world makes it easier than ever to operate a business. This includes accounting software that eliminates the tedious tack of paper accounting. While this software doesn’t do all the work for you, it does keep your financial information organized in one spot, automates some tasks, and simplifies the accounting process. In other words, you don’t have to have a degree in accounting to do your own books if you have the right accounting software. If you don’t have the funds to hire a bookkeeper or accountant for your business (and most new businesses don’t), accounting software is a cost-effective way to keep your finances on track.
So, how do you know which software is best for your business? There are a few considerations to keep in mind:
Price:Â Before searching for accounting software, have a budget in mind. What can your business comfortably afford? In some cases, you may not be able to afford anything — and that’s okay! There is free accounting software available. However, free software may come with lots of ads, fewer features, or allow for no more than one user. If you have complex accounting needs, multiple users, or have other specific needs, there are options available at all price points.
Features:Â Consider the needs of your business when choosing accounting software. If you’re running a larger business, for example, or need software specific to your industry, free software with basic features won’t be a good fit. You may want the whole gambit: invoicing, contact management, accounts, payable, time tracking, project management, and more. However, if you run a smaller business, have only a few clients, and don’t need a ton of added features, a basic and easy-to-use program is a good choice.
Online & Offline Options:Â Most business owners and entrepreneurs these days use online accounting solutions. There are many benefits, including no installations required, automatic updates, integration with apps, and access from multiple devices, such as your smartphone. However, there are also desktop-based options that may work for you, such as in locations that don’t have fast and reliable internet connections.
Your Accounting Skills: Before choosing accounting software, keep in mind your accounting skills. If you’re new to the game, look for software designed with the beginner in mind that offers an easy-to-use interface and has great customer service. If you have some experience in accounting, you can certainly dive right into one of the more complex programs.
Add-Ons:Â Some accounting software offers additional add-ons for an extra fee. Payment processing, for example, may be an additional feature that benefits your business. Again, consider the needs of your company and shop around your options for software that best fits these needs.
Not sure where to start? Compare some of the top options available to your business.
Stay On Top Of Bookkeeping
Accounting software certainly simplifies accounting and bookkeeping tasks, but it’s important to remember that it doesn’t do all the work for you. You will still have to keep on top of certain bookkeeping tasks. The specifics of your bookkeeping requirements vary based on the needs of your business, but some common bookkeeping tasks you may have to perform include:
Creating and sending invoices to customers
Reconciling bank statements
Reviewing expenses and income
Reviewing aged receivables
Sending payment reminders or setting up automated reminders
Analyzing and updating inventory
Reviewing and paying invoices to your suppliers and vendors
Running and reviewing financial statements
Run Financial Statements
Running and reviewing financial statements is made easier with accounting software. Financial statements not only help you stay on top of your business finances but also help when filing your taxes and may be required if you apply for a loan or other funding.
Let’s discuss some of the most common financial statements you need to run for your business.
Balance Sheet:Â A balance sheet reports assets, liabilities, and equity for a set period of time. This report provides an overview of owner investments, what the company owes, and what the company owns. The balance sheet uses the accounting equation we discussed earlier and is used in conjunction with other reports to analyze the financial health of the business. The balance sheet can also be used to calculate ratios, such as the debt-to-equity ratio.
Profit & Loss Statement:Â A profit and loss statement (also known as P&L or income statement) shows the profit or loss of a business over a specific period of time, such as quarterly or annually. The cost of doing business — including cost of goods sold and operating expenses — are deducted from the revenue (or top line) of the business. The difference between the two is known as the net income, or the bottom line, and shows whether the business had a profit or a loss.
General Ledger:Â The general ledger contains every financial transaction that occurs within a company. Transactions are broken down into accounts, which include assets, liabilities, equity, income, and expenses. The chart of accounts that we discussed earlier is typically the first page of the general ledger.
Statement Of Cash Flows:Â A statement of cash flows (or simply cash flow statement) shows how money comes into and goes out of the business. Cash inflows from operations, financing, and investments are recorded on this statement. Cash outflows are also recorded. This includes investments and expenditures for business activities. A statement of cash flow gives you a view of the financial health of your business, helps you analyze how your money is made and spent, and helps you plan for the future to ensure you have cash available to keep your business in operations.
These are just a few of the financial statements that you can run using accounting software. While these are the major reports that every business should run, the software you select may also offer additional reports that are important for your business like job costing reports, annual budgets, reports of sales by product, and other financial documents.
Don’t Forget Tax Deductions
It’s time to discuss the moment that most small business owners dread: filing and paying taxes. With good accounting, though, filing your taxes (or getting through an IRS audit) won’t be quite so painful.
The rates and requirements for filing taxes are based on the legal structure of your business. For example, a sole proprietor simply files the business income or loss on their personal tax return, while certain corporations may face double taxation wherein tax is paid on the income of the business and on the dividends received by the owners.
While filing your taxes can be scary, especially if your business made a profit, you can ease your tax burden by taking advantage of the tax deductions available to small business owners. This can include:
Furniture & expenses
Marketing & advertising expenses
Salaries & wages
These aren’t all of the tax deductions available to small business owners. Working with an accountant or tax professional can ensure you take advantage of all the deductions available to your business.
Know When To Hire An Accountant
While it is possible to handle much of your own accounting for your small business, there comes a time when many businesses need to enlist the help of an accountant. There are a number of reasons that business owners choose to hire an accountant. As the business grows, you may become too busy to handle the financial side of things and would prefer to focus on other activities within the business. An accountant is also extremely beneficial to have on board when it’s time to file your taxes. If you plan to acquire or sell a business, an accountant can provide advice and help determine if the transaction is a smart financial move. When you want to expand your business, an accountant can give advice and help you create a business plan.
There are several situations where hiring an accountant is in the best interest of your business. Even though this is an additional expense, it is often a critical move if you want to grow a successful and profitable small business. Learn more about when you should hire an accountant for your business.
The Benefits Of Good Accounting
We’ve established that every small business should have an accounting system in place. But why is it important to have good accounting? At the risk of sounding melodramatic, the success of your business depends on it — quite literally. Here are the benefits of good accounting:
Budgeting & Planning:Â Good accounting can help you set company budgets for your business and plan for upcoming projects.
Financial Health:Â As previously mentioned, having your numbers organized allows you to assess the financial health of your business to determine what you’re doing right … and what needs to be changed.
Track Payments: Without good accounting and bookkeeping, it’s difficult to keep up with customers that haven’t yet paid you for your products or services. By staying on top of your accounting and bookkeeping, you can easily send out invoices, payment reminders, and even collect payments.
Tax Time Benefits:Â Keeping accurate records makes it easier to file your taxes or go through an audit by the IRS.
Funding Opportunities:Â If you seek capital from investors or lenders, having accurate financial statements is critical to securing funding — and some lenders (like Fundbox) even require that you use accounting software to be approved.
Major Purchases:Â If you’re considering a major purchase to grow your business, the numbers can help you determine if it’s the right time to make the purchase, or if it makes more sense financially to hold off on spending the funds.
Cash Flow:Â Good accounting lets you assess the cash flow of your business to determine where you need to make changes to boost profitability.
Revenue Forecasts:Â With the right financial reports, you can more accurately forecast future revenues of your business.
Maximize Business Growth:Â Accounting allows you to track the growth of your business, allowing you to make important decisions and changes to help maximize growth.
The Bottom Line
Every business is different, but one thing should remain constant: good accounting. Whether you’re a sole proprietor running a business from your home office or you visualize running a large international corporation, all business owners and entrepreneurs should make accounting a priority. With so many great software programs and tools at your disposal, it’s easier and more affordable than ever to track your company’s finances. Take a look at the Best Accounting Software For Small Businesses to start your journey on finding the perfect accounting software.
Ready to learn more about accounting? Check out our eBook, The Beginners Guide To Accounting. It’s free to download and is a must-read for any business owner or entrepreneur that’s ready to master the basics of accounting.
The post Accounting 101: Understanding Small Business Accounting appeared first on Merchant Maverick.
Itâs hard to overstate the significance of the impact that eCommerce has had on the quality of our lives here in the early 21st Century. While in the past, consumers were limited to the choices provided by their local retailers and the closest big-box store, today anyone with a computer, an internet connection, and a credit card can obtain nearly any product or service they want from just about anywhere in the world. Unfortunately, it also makes it much easier for criminals to steal goods and services if they have access to these same tools.
Online payment fraud is simply any false or illegal transaction committed via the internet. It deprives the victim of goods, services, funds, or sensitive information â often without them being aware that this has happened to them until much later. In many cases, there will actually be two victims: the consumer whose information was stolen, and you, the merchant. Online fraud can involve not only fraudulent transactions, but also lost or stolen merchandise, or falsified requests for a refund. Fraud can be committed through email, instant messaging, or online auction sites. It can also occur through text messaging or even phone calls.
One common misconception among small business owners that weâd like to clear up right now is that they arenât as lucrative a target for cybercriminals as the larger retailers, and therefore donât need to be as thorough in protecting themselves from fraudulent activity. Unfortunately, this âit will never happen to meâ attitude can make it far more likely that itwillhappen to you sooner or later.
The truth is that large businesses are a âhard target,â because they have the resources to fully defend themselves against fraud. Smaller companies lack these resources, and thus often present a much easier target to cyberthieves. A cybercriminal knows that he or she can make more money by exploiting several inadequately protected smaller businesses than by wasting time trying to break into a fully-defended larger business. Fortunately, there are many tools available to even the smallest companies that can dramatically lessen the likelihood that youâll become a victim of online fraud.
In this article, weâll discuss the various types of online payment fraud, whether itâs committed via credit card, debit card, eCheck/ACH, or any other payment method. Weâll also present some sobering statistics about the growth of online fraud in recent years. Weâll discuss the importance of having a strategy to deal with fraud, and describe the many âred flagsâ that can indicate a fraudulent payment. Finally, weâll explain the numerous tools available to you that will help to protect your business from fraud. While the risk of becoming a cybercrime victim can never be completely eliminated, the use of all of these tools can protect your business and dramatically reduce the chance that youâll experience a loss due to online payment fraud.
What Is Credit Card Fraud? Eight Types You Need To Beware Of
Credit cards are usually the easiest and most convenient way for consumers to pay for their online purchases, so itâs no surprise that the majority of incidences of online fraud involve credit cards. However, other payment methods (including debit cards, eCheck/ACH payments, etc.) are just as susceptible to being used fraudulently if the consumerâs account information is compromised. Hereâs a brief rundown of the eight most-commonly recognized types of online payment fraud:
Account Takeover Fraud (Phishing)
Youâve probably already heard of phishing (more formally known as account takeover fraud). This is when a hacker obtains a victimâs online account information and uses it to make a fraudulent purchase. Unfortunately, phishing attacks often work by convincing the victim to voluntarily disclose this information. While a hacker might not break into your credit card account directly, they can sometimes get into other accounts for major online shopping sites and gain access to your stored payment method information.
Card Testing Fraud
Sometimes thieves will âtestâ stolen credit card information by attempting to make a small, insignificant purchase. If the transaction is approved, they go on to make larger, more lucrative purchases with the valid card information. Sometimes thieves will file chargebacks on each of these purchases. At around $15-25 per chargeback investigation, this can quickly get very expensive for merchants, with the cost in chargeback fees vastly exceeding the value of the stolen merchandise.
Sometimes, a cybercriminal doesnât have to steal someone elseâs credit card information to commit fraud. With âfriendlyâ fraud, a thief will use their personal credit card to make a purchase, then file a chargeback, claiming that the goods were never delivered. They get the goods for free after the issuing bank refunds their money, and youâre out the cost of the products and a chargeback fee.
A common scheme is for a thief to order a pizza, then file a chargeback after itâs been delivered. In this case, the thief has literally eaten the evidence! Unfortunately, âfriendlyâ fraud is becoming more common as thieves have learned to take advantage of consumer-friendly policies in the processing industry. (And it’s not just thieves who commit friendly fraud — unhappy customers do too!)
Merchant Identity Fraud
Sometimes, the merchant is the criminal. Merchant identity fraud occurs when hackers present themselves as a legitimate business. They then solicit funds from unknowing victims or offer goods or services that are never delivered. While merchant services providers have gotten better at sniffing out this sort of activity, itâs still possible for a cybercriminal to sign up with a legitimate payment processing service and collect money from unknowing victims. If the hackers cannot be identified and held responsible, the merchant services provider will end up being held liable for the losses. This is one reason why a prospective merchant services provider will go to great lengths to investigate the nature of your business before approving you for an account.
Sometimes cyber thieves donât want a particular product â they just want cash. Buying something online with stolen credit card information and then returning it for a refund thatâs issued to the thief is an easy and increasingly popular way to score some quick cash at someone elseâs expense.
True fraud is more commonly known as identity theft, and itâs probably the form of online fraud that youâre most familiar with. This type of fraud involves the classic scenario where a hacker illegally obtains a victimâs online account information (i.e., username and password) or their credit card information, and then uses that information to make purchases. They get the goods, and the victim gets the bill. Because issuing banks have made it relatively easy for victims of this type of fraud to dispute transactions they didnât make, liability for the illicit purchase usually falls on you, the merchant.
This form of fraud is also known as âpagejacking.â Sophisticated hackers are able to redirect traffic from your website onto a similar site that theyâve set up, where theyâre able to obtain personal information or credit card data from unsuspecting customers.
Wire Transfer Fraud
This form of fraud involves the use of the banksâ wire transfer services for fraudulent purposes. A cybercriminal will pose as a legitimate business or government agency, then contact a victim and attempt to induce them to send money to a fraudulent address. These types of solicitations usually occur over the telephone, but can also occur online through email. Common scams of this nature typically involve telling the victim that they have won a large sum of money, but need to pay a âfeeâ to have it released.
The State Of eCommerce Fraud
Ever since eCommerce began in the 1990s, online fraud has been a problem. Online merchants can never have access to a customerâs physical credit or debit card, relying instead on account information such as card numbers, expiration dates, and CVV codes to authenticate transactions. While this information is sufficient to confirm the authenticity of an account, itâs never enough to firmly identify that the customer making the purchase is indeed the true owner of that account. Although many steps have been taken over the years to improve the security of online transactions, a 100% foolproof solution has yet to emerge.
In 2015, credit and debit cards with EMV (Eurocard, Mastercard, and Visa) or âchipâ technology were introduced in the United States. Although the transition from the older magstripe technology to EMV hasnât been very smooth, it has resulted in a dramatic decrease in card-present fraud due to the encryption features available with EMV. Retail credit card fraud rates dropped a whopping 82% between 2015 and 2018, and continue to be very low.
Unfortunately, the drop-off in card-present fraud has resulted in a dramatic increase in card-not-present fraud since EMV cards were introduced. Put simply, criminals whoâve been shut out of opportunities to commit retail fraud are now setting their sights on the lucrative (and still relatively vulnerable) eCommerce market instead. In 2016 alone, online fraud rates rose 33%. In 2017 and 2018, they rose an additional 30% per year.
According to LexisNexis, online fraud cost the eCommerce community 2.38% of total revenue in 2018 alone, and this rate continues to rise. Online fraud is expensive on both a per-transaction basis and as a percentage of total revenue. As of this year, the average online fraud incident costs a merchant $408 in lost goods or services. In comparison, the average legitimate online transaction is only $213. However, the cost of fraud far exceeds just the value of the stolen merchandise or services. On average, a merchant will suffer a loss of over $1100 per incident of fraud due to chargeback fees and other expenses incurred in fighting the chargeback.
Why Not Having A Strategy To Deal With Credit Card Fraud Could Put You Out Of Business
Itâs far too easy for merchants to stoically accept that an occasional fraudulent transaction is just part of the âcost of doing business.â However, the statistics above show that total losses due to fraud can far exceed the cost of the fraudulent transaction itself. Chargeback fees, expenses incurred in investigating and fighting the chargeback, lost shipping costs, and other expenses can add up to far more than just the amount of a fraudulent order.
As a merchant, you should also consider that a single incident of fraud can lead to further fraudulent transactions. Once a cybercriminal does a âtest runâ and determines that youâre relatively unprotected, you can and should anticipate that youâll be subject to many follow-on attempts to defraud your business. If you suffer a fraudulent transaction â even a very small one â itâs imperative that you identify the shortcoming in your security procedures that led to the incident and immediately take steps to strengthen your defenses before the cybercriminals try again.
Suffering from fraud can also lead to the loss of your merchant account, and with it the ability to accept credit and debit cards. Fraudulent transactions inevitably lead to chargebacks, and too many chargebacks over time may cause your provider to close your merchant account â often without prior warning. If this happens, you might be able to get a high-risk merchant account from a different provider, but these accounts are much more expensive than traditional low-risk accounts. If all of your sales are online, however, being without the capability to accept credit or debit cards for a significant length of time can quickly put you out of business altogether.
Six Red Flags That Can Signal Online Credit Card Fraud
Any online transaction can potentially be fraudulent, but some transactions should raise your suspicions more than others. Unusual transactions should be scrutinized more carefully than others before being approved and processed. While not constituting conclusive proof of fraud, the following âred flagsâ indicate a higher probability of fraud and should merit further investigation:
Different shipping and billing addresses. Obviously, there are any number of legitimate reasons why a customer would want to ship an order to a different address. However, fraudsters almost always ship orders to somewhere other than their victimâs billing address. Itâs in your best interest to verify the shipping address â just in case.
Multiple orders of the same item. Itâs not out of the ordinary for a customer to order multiple quantities of an item. However, if you see an order for an unusually large number of the same item from an individual customer (not a B2B order), you might want to check it out before you ship anything.
Abnormally large orders. If an order represents a much larger ticket size than what your business normally averages, you should probably confirm that itâs legitimate before processing the transaction and shipping the goods. This not only protects you from fraud, but might also save you from having your merchant account shut down or the transaction held by your processor due to the unusually large ticket size.
Multiple orders to the same shipping address with different payment cards. Again, we have to emphasize that there are plenty of legitimate reasons why a customer might want to do this instead of just putting all orders on the same card. However, itâs a hallmark of fraudulent activity and you should definitely make an inquiry with the customer before processing the orders.
Unexpected international orders. If your business normally only processes orders in your home country, a sudden order that needs to be shipped to a foreign country should get your attention and warrant further inquiry before approval. As weâll see below, some countries have significantly higher rates of online fraud than others.
Velocity attacks. A velocity attack occurs when a hacker makes multiple attempts to run different credit card numbers in rapid succession. Often using bots, the idea is to keep trying until a number is found that works. While this is obviously fraudulent, a customer whoâs having a hard time typing in their credit card number correctly can resemble a velocity attack.
How To Prevent Credit Card Fraud: 19 Tools For Detecting & Preventing Fraudulent Transactions
If the above information has you convinced that thereâs nothing you can do to prevent online fraud from impacting your business, donât worry. There are plenty of tools â both manual and automatic â that can flag suspicious transactions for you and lower the risk of a fraudulent transaction slipping through. While itâs not possible to ensure 100% total protection, using all of the tools described below will give you the best level of protection available today. Be aware, however, that this list is not inclusive. Processors are continually working to develop new anti-fraud tools, and your provider might have other services available to help secure your account than just the ones listed below.
Use a verified merchant services provider. Although all providers claim to offer a complete suite of automated tools and features to protect against fraud, some are more effective than others. Look for good reviews (like ours!) and watch out for complaints from other merchants regarding poor account security. Youâll also want to determine whether a prospective provider offers anti-fraud tools as a standard account feature, or if theyâre only available as an optional add-on. While itâs definitely worth paying a little extra for additional security, we generally prefer to see providers offer fraud protection without charging extra for it.
Use manual (human) screening. Both you and your employees should understand how to spot suspicious buying activity that raises one of the âred flagsâ weâve discussed above. In most cases, itâs a better idea to contact the customer directly to verify the order, rather than blocking it automatically and potentially alienating a legitimate shopper.
Use the Address Verification Service (AVS). An AVS mismatch is a strong indicator that the order is fraudulent, as a hacker using stolen payment information is unlikely to know the actual card ownerâs physical address. Most merchant services providers mandate the use of AVS for all eCommerce transactions, so this tool is already part of your merchant account.
Confirm the buyerâs location. Geolocation and IP address verification tools can confirm with reasonable certainty that the customerâs IP address matches the billing and shipping addresses provided. This method of detecting fraud will not be 100% effective if a legitimate customer is placing an order while traveling, but can often catch suspicious transactions in most other circumstances. Unfortunately, some countries have significantly higher rates of online fraud than others. The âusual suspectsâ include countries such as Russia, Nigeria, Pakistan, and Indonesia. However, other countries such as Romania, Bulgaria, and even Israel also have high rates of online fraud. Note that âproxy piercingâ technology provides some defense against hackers who intentionally mask their IP address using tools available on the Dark Web.
Use CVV (and CVC) checks. Card Verification Values (CVV) and Card Verification Codes (CVC) are three- or four-digit codes that are printed on the back of all credit and debit cards. Whenever possible, youâll want to obtain and match the cardholderâs code against the value submitted with an order. Unless the card in question has been physically stolen, itâs unlikely that a hacker will have access to this information. As with AVS, many merchant services providers will require the use of CVV/CVC checks before accepting any online transaction.
Use Verified by Visa and 3D Secure. These anti-fraud tools allow customers to create a unique Personal Identification Number (PIN) to authenticate their identity when placing an online order. For more information on these two programs, see our article, What Are Verified By Visa And 3D Secure?.
Use device fingerprinting. Device fingerprinting looks at a computer deviceâs operating system, unique device identification number, and other available information to see if that device has been used to make fraudulent transactions in the past. Device fingerprinting tools are usually available via third-party providers, such as ThreatMatrix.
Use tokenization and encryption. These security measures are now standard features of most modern payment gateways. Both methods protect your customersâ credit card data from being stolen during a legitimate online transaction. The use of tokenization and encryption is an essential step in keeping your merchant account PCI compliant.
Use velocity attack protection tools. As weâve noted above, velocity attacks involve repeated attempts to place an order with different credit card numbers, often with the use of a bot. These types of attacks can be detected and blocked by IP address using payment gateway security tools.
Use biometric identity verification tools. As you might imagine, biometric tools, such as fingerprint readers, are not ordinarily available to eCommerce merchants. However, they can be set up if you allow users to pay on your site using digital wallets, such as Apple Pay on the Web or Google Pay. In this case, the userâs device becomes the biometric tool, using a built-in fingerprint reader or Face ID technology to authenticate the consumerâs identity.
Set flexible refund policies. Buyers are more likely to file a chargeback if they canât return an item due to an overly strict refund policy (i.e., the allowed refund window is too short). You can cut down on âfriendlyâ fraud by giving your legitimate customers a reasonable amount of time to complete a return.
Emphasize order fulfillment. Ensure that all orders ship promptly and verify that theyâve been delivered. Delivery tracking can provide proof that the goods were delivered and received, helping to protect against âfriendlyâ fraud.
Ensure high-quality customer service. Quite frankly, offering poor customer service will increase your risk of fraud as customers become frustrated with doing business with you. Strive to provide the best possible customer service during business hours, and, if you have the resources, offer 24/7 customer service via both telephone and email. After-hours customer service can be outsourced (just in case you like to be able to sleep at night).
Provide high-quality employee training. Employee training goes hand-in-hand with manually screening all orders (see above). You must ensure that all employees who handle orders are adequately trained to spot signs of fraud and know what to do if they see something suspicious. This training needs to be an ongoing process, with frequent refreshers to remind employees of what to look for and to update them on the latest developments in anti-fraud procedures.
Ensure that your merchant account is PCI-compliant. This one is not optional. You must maintain PCI compliance standards to safeguard your customersâ credit card data. Being out of compliance will increase the risk of a data breach, which in turn will result in more incidents of fraud as hackers exploit the data theyâve stolen. Even if you donât suffer a data breach, your merchant account provider will penalize you with a PCI non-compliance fee (on top of whatever theyâre charging you for PCI compliance) for every month that your account is out of compliance. Note that following the proper PCI compliance steps will not completely eliminate the chance of a fraudulent transaction. However, it serves as a strong defense when an incident occurs. The most critical steps in PCI compliance include configuring and using a firewall to secure your website, performing frequent antivirus scans, following good password security measures, and using SSL certificates (i.e., âhttps:â) for your site.
Analyze actual incidents of fraud. If you experience an actual fraudulent transaction, youâll want to go back and determine how it happened and what you can do to make it less likely that it will happen again in the future. If you uncover any weaknesses in your defenses, youâll obviously want to make some changes.
Practice good chargeback mitigation strategies. Chargebacks and fraud are two separate subjects, but they tend to go hand-in-hand in many cases. Youâll want to implement the commonly recognized best practices to prevent chargebacks and successfully defend against them. See our article, The Complete Guide To Preventing And Winning Chargebacks, for more information.
Upgrade to the latest in payment technology. If your business also makes retail sales, youâll want to use EMV-compliant equipment exclusively for accepting credit and debit cards. EMV has been the default standard in the United States for card-present transactions, although there are still many businesses that havenât adopted it and are putting themselves at risk for fraud. NFC payment methods (such as Apple Pay and Google Pay) should also be added, if you havenât done so already. NFC is more convenient for consumers and even more secure than either magstripe or EMV payment methods.
Use multiple fraud detection tools. Itâs essential that you donât rely exclusively on any one tool weâve discussed above. Instead, use a layered approach that incorporates firewalls, good password security measures, use of AVS, and CVV/CVC checks to protect your business. Automated fraud scoring tools, such as IP geolocation, AVS, CVV, and device fingerprinting tools can be used together to determine a fraud probability score. You can then set your payment gateway to automatically flag or decline transactions that score high enough to raise a reasonable suspicion of being fraudulent. Also, be sure to re-screen orders that are modified by the customer after being placed, but before the goods have been shipped. At the same time, donât be too trigger-happy when it comes to blocking transactions. Frequently screening out legitimate transactions will frustrate your customers and cost you their business. In an era where anyone can post their opinion of a business online, this could really hurt you in the long run.
The Final Word On Credit Card Fraud Detection
As youâve probably gathered from all the information weâve presented so far, payment fraud is a real and growing threat to your online business. While itâs not possible at this time to build a completely foolproof defense against it, you can minimize your chances of letting a fraudulent transaction slip through by following common-sense practices and implementing the anti-fraud tools weâve discussed above.
Protecting your business from fraud is an ongoing process, as fraudsters are constantly finding new ways to get around the latest anti-fraud measures. They arenât going to give up just because one particular avenue of attack has closed on them, and neither should you. Securing your account is a never-ending effort that will require coordination between you, your employees, and your merchant account provider.
Many of the tools weâve discussed above can be implemented by you as the business owner without the help of other parties. At the same time, a lot of the newer anti-fraud measures available today will require installation and configuration by your merchant services provider or gateway provider.
One thing weâve noted over the course of reviewing dozens of merchant services providers is that they all take payment security and anti-fraud measures very seriously. This includes even the worst providers on the market (of which there are quite a few). The difference is that a low-quality provider will often offer you only the most basic anti-fraud tools, and theyâll usually charge you extra for them. Protecting your account from fraud is extremely important, but you shouldn’t have to pay an unreasonable amount of money for anti-fraud tools â especially when other providers include the same tools as a standard feature with your account.
In evaluating a potential merchant services provider, look carefully at what types of anti-fraud tools they offer, and whether these come with your account. The best providers will include a full range of essential anti-fraud tools with your account, although more specialized services might be offered as an optional add-on for a reasonable fee. Paying a little extra to secure your account against payment fraud is a worthwhile investment, especially considering the potential costs of suffering a data breach or a fraudulent transaction that slips through your defenses. For some recommendations of great merchant services providers that specialize in serving the eCommerce community, check out our article, The Best Online Credit Card Payment Processing Companies.
The post How To Detect (And Prevent) Online Credit Card Fraud â And Why You Need A Solid Strategy To Manage Fraud For Your eCommerce Business To Succeed appeared first on Merchant Maverick.
Most people don’t like the idea of taxes in general, not to mention the excruciating minutia of what goes into calculating how much to pay the government and when. And if you do like those things, then you are probably an accountant or a payroll tax expert already. God bless you, you don’t need this article. However, if you are a small business owner who is entering the world of payroll, understanding payroll taxes can feel daunting. It’s true: there’s plenty to learn and making a mistake can result in costly fees. Using payroll software might take the guess-work out of the process and do the calculations for you, but it’s still important to have a rudimentary understanding of payroll taxes, especially if employees have questions about their paychecks.
In this post, we’ll cover what payroll taxes are, who’s responsibility it is to pay them and when, how to calculate them, and more.
What Are Payroll Taxes?
Payroll taxes are the money an employer withholds from an employee’s earnings to pay taxes to the state and federal governments. How much an employer takes out and sends to the government is based on the employee’s salary and wages, and it is the employer’s responsibility to manage these taxes. There’s only one exception: 1099 contractors are in charge of their own taxes! Contractors, freelancers, and small business owners pay a self-employment tax which is the equivalent of employee/employer payroll taxes.
Payroll taxes make up a substantial part of government revenue and are the second-leading money generator for the United States. (And we can often look to payroll in America as indicators of how our economy is growing or receding, too, as payments reflect growing trends in hiring and stagnation.) When an employer runs payroll, the process involves calculating the employee’s net pay. Net pay is the take-home paycheck employee’s receive on payday, and how you calculate that net has to do with how much state and federal taxes you, as the manager of the payroll, take out, collect, and pay to the appropriate agencies. It’s a detail-oriented process that has multiple opportunities for missteps and steep penalties for mistakes.
Bear in mind that when someone says “payroll tax,” they are lumping together all of the various taxes paid out of a person’s paycheck for services, but in the next section I’m going to breakdown where those payroll taxes go.
Types Of Payroll Taxes
When an employer removes taxes from an employee’s paycheck, that money is earmarked for state and federal services. Here’s how payroll taxes breakdown individually:
Federal Income Tax Withholding:Â Federal income tax is based on income level and the rates are progressive, meaning that as you make more income, your rates move, and your income tax increases as you travel up the tax brackets. There are currently seven tax brackets that tax income at: 10%, 12%, 22%, 24%, 32%, 35% and 37% as income increases.
Social Security Tax:Â This tax is also called the Old Age, Survivors, and Disability insurance, and it’s a flat-rate tax of 12.4% of taxable income. Both the employee and the employer are responsible for paying half (6.2%) of the social security tax.
Federal and State Unemployment Taxes: The Federal Unemployment Tax is a mandatory tax paid quarterly versus monthly. State requirements differ widely.
Medicare Tax:Â This tax is also a flat rate of 2.9% with the employer and the employee splitting the cost at 1.45% each.
State Income Tax Withholding:Â There are currently seven states that do not have a state income tax (Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming) but for everyone else, income taxes work similarly to federal income tax withholdings. The tax rates are very specific to each state, so check the withholding tables on the state government website where your business is located.
Local Taxes:Â Local taxes are very specific to city and state. Most states have a state unemployment tax that is accounted for in this local taxes section. These taxes are based on local tax laws and the tax rates vary, so small business owners need to check/verify those taxes through the state’s tax department.
Payroll Tax VS Income Tax
Payroll taxes include FICA taxes (social security and medicare) and local taxes withheld, and the additional percentages provided by the employer.
Income tax specifically refers to the federal, state, and local income tax rates
So, running taxes for your payroll involves collecting both payroll taxes and federal/state income taxes. When people say “payroll taxes” they are providing an umbrella term for all collected tax, but the term “payroll tax” refers to FICA taxes (social security and medicare) and local taxes withheld from an employee’s paycheck, plus the additional percentages provided by the employer. Income tax specifically refers to the federal, state, and local income tax rates. Even though the two are joined together in one lump, payroll taxes are specifically earmarked for certain programs. Income tax, on the other hand, is delivered to its respective federal or state governments and is used to manage the budget.
Who Pays Payroll Tax?
The burden of managing payroll and sending payroll tax payments is on the company, and the burden for paying those taxes falls on both the employee and the employer. Each state has different regulations and requirements for how state income tax is paid to the government, and the federal government collects payroll taxes quarterly.
Employer Tax Responsibilities
Okay. You are a small business owner and it’s time for payroll. What tax responsibilities do you have?
Social Security: You will pay your half of the 6.2% and you will withhold 6.2% from wages for your employee’s portion.
Medicare:Â You will pay your half of the 1.45% and you will withhold 1.45% from wages for your employee’s portion.
Federal Unemployment Tax:Â This tax is employer-paid and the current rate is 6% on the first $7,000 earned by an employee.
If you are self-employed or working under contract, you are the employer and the employee and it’s your responsibility to pay for both sides of the payroll taxes. That means that contractors need to withhold the full 12.4% for social security and 2.9% for Medicare, and withhold their own state and federal income taxes (saving 15-20% of each check to cover these taxes is the recommended practice). Some states also charge additional taxes for small businesses that become the responsibility of a contractor, as well. When contractors file their taxes, they will pay their portion of these taxes then.
When Are Payroll Taxes Due?
Once you have collected the payroll taxes for your small business, they are due on either a monthly or semi-weekly deposit. Semi-weekly deposits are primarily required just for large businesses with a large payroll tax revenue, so it is most probable that you will deposit your withholdings monthly. Payroll taxes are due on the 15th of every month (unless that falls on a weekend, then the next available Monday).
If you are self-employed, you most likely will file estimated quarterly taxes (although some states accept yearly payments if you make under a certain amount). Check your state’s specific rules and tax brackets for the most accurate information.
How To Calculate Payroll Taxes
Calculation of payroll taxes uses all the great basic math skills: multiplication, addition, percentages. Be aware that if you make a mistake or are late processing a payment, the government likes to slap fees around. (I mean, no doubt, fees are a source of revenue for the government, too.) While you can do payroll calculations by hand (and many do, including an adorable 80-year-old woman on Facebook who chastised me for suggesting someone run payroll using anything other than their head, a pencil, some paper, and the numbers), there are many great payroll software options that can do this part for you: Gusto, Square, Paychex, and ADP are all reputable companies that you can use to outsource payroll.
However, maybe you really want to tighten the budget and only have a few employees and you’re not gonna let me convince you to give the computers their chance at this one. Okay. Pencil. Paper. Calculator. Spreadsheet with equations, maybe?
You’ll need to know how many times you are paying/withholding taxes from your employees before you can run payroll, so determine whether you are running payroll, weekly, biweekly, or monthly. Then you will need to decide if you’d like to pull taxes using the wage bracket system (recommended by most tax experts for small businesses) or the percentage method (not recommended for small businesses attempting payroll on their own).
When you onboard employees, you will have them fill out a W-4. You will use that W-4 to note the employee’s withholdings and whether they are filing single/jointly/head of household. This is the data you need to calculate federal income taxes. The following image is from the IRS Publication 15 for the 2019 tax season and gives the step by step numbers for calculating the federal income tax withholdings through either method.
After you withhold the money for federal income taxes and any additional pre-tax deductions (retirement, worker’s compensation, healthcare), then you calculate the FICA (social security and Medicare) taxes. To calculate the social security tax, you will take your employee’s gross pay (the amount your employee receives before payroll taxes are removed for that pay period) and multiply it by .062 — the product is the amount of money to be withheld from the paycheck and matched by the employer.
You would do the same thing for the employee’s portion of Medicare by taking the gross pay for the pay period and multiplying it by .0145%. The product is the amount you’ll withhold and match for Medicare.
All state and local taxes are calculated on a state-by-state basis.
How To Report & Pay Payroll Taxes
When you run payroll, calculating the taxes and discovering your employee’s net pay (aka their take-home pay or the amount they make after payroll taxes are removed) is only the first part of the process. After you’ve run your payroll numbers, you face the important task of getting those taxes into the right hands and accounting for your payroll to the government. As a small business owner, it is your responsibility to:
Withhold all payroll taxes and submit them on time (the 15th of every month, or next available business day) to state and federal agencies.
Report income, withholdings, matching of payroll taxes to the government quarterly.
Keep records of yearly payroll for state and federal reporting agencies.
Send W-2s and 10-99s to employees and contractors listed with the correct amounts of their gross/net pay and tax withholdings.
When you have the monthly deposit to submit, you must submit the funds electronically (barring special circumstances allotted to small businesses only) using one of the following methods: via a third-party (through a software/payroll service like ADP, Gusto, or Paychex); through your bank’s Automated Clearing House (ACH) network; or by the Treasury Department’s free Electronic Federal Tax Payment System online/over the phone.
Some small businesses, especially those with low liability, can opt-in to a yearly payroll payment. This requires filling out a Form 944. Check the government’s website to check for current eligibility requirements.
Your Federal Unemployment Taxes are due to the government quarterly. Form 941 is your guide to reporting income, withholdings, and payroll taxes to the government, and the tax forms are due on the last day of the month after the end of the quarter. For example, quarter one ends March 31 and the report is due by April 30. And at the end of the tax year, you have until January 31 to deliver the necessary tax forms to your employees, former employees, and contractors, so they can file their taxes correctly.
If you are self-employed, you’ll need to gather your 1099-MISCs and file a Schedule C when you file your taxes (due April 15).
For both small business owners and the self-employed, it is imperative to maintain impeccable records of your state and federal payroll taxes, whether by hand in a notebook, in an old spreadsheet document, or by using online software.
Payroll Tax Penalties
Alright, here’s the big scary number: 100%. If you fail to withhold the proper amount from your employees, you the employer are 100% liable and will need to furnish the missing monies from your own pocket in addition to any legal penalties and fees you face. Look, people get real serious when you don’t give them the correct money owed. Also, these funds go toward employee services, so sometimes your employees can’t access these services if the account is behind. Employer error is costly because tax laws say that the onus for accuracy is on you, the business owner. And if you can’t pay those fees? That trickles down into every aspect of your business in a cycle: higher consumer costs, decreased employee wages, a hiring freeze. Not to mention that it erodes the trust between an employer and an employee.
If you don’t pay your payroll taxes on time, every month, you incur a 2% penalty for 1-5 days late; 5% penalty for 6-15 days late; 10% for 16+ days late or within 10 days of first hearing from the IRS. The maximum is 15%.
Also, the government doesn’t care if you outsource these jobs — if a third-party isn’t paying on-time (your payroll service or your bookkeeper), you still hired them and will receive the penalty all the same.
There are other ways you can be penalized, too, like if you miscategorize employees or you make an error on your reporting. There are too many potential errors to explain them all, so it’s important small business owners meet with tax attorneys or other tax experts for a full understanding of the myriad ways things can go off the rails.
Payroll Tax Deductions
But hey…those Statutory Payroll Tax Deductions (all the things we just talked about above: federal and state income tax, social security, Medicare, unemployment taxes) are not the only payroll tax deductions you’ll need to make as you process payroll. In addition to the mandatory deductions, you also have Voluntary Payroll Tax Deductions. These are things like health care, retirement benefits, worker’s compensation, or any other pre-tax deductions. As a small business owner, you might offer some of these programs and benefits but some of the cost can (and does) trickle down to employees.
Nothing concludes this post better than this: payroll taxes are complicated. But, they don’t have to be.
If you have a handful of employees, and you want to calculate payroll taxes yourself, then yes you can! You now know the basics of which payroll taxes you are responsible for, how to calculate them, and how and when to pay them. People have been processing payroll manually for longer than they haven’t been.
Or, you can opt for payroll software to help handle the calculation for you. Even if you do have a software program or an online program helping you, it’s great to know what those numbers mean and where that money is going. There are also free online calculators to use in lieu of a software program, or a regular calculator, or an abacus. All in all, these payroll taxes — while they may be an added stressor to the laundry list of small business owner responsibilities — are what pay into great social programs and protections. The most important thing to remember is that rates and guidelines can change yearly depending on inflation and tax laws, so keep up with current literature on the tax brackets from the IRS Forms. Know your state’s laws, file accurately and promptly, pay on time, and report on time. And if you want someone else to do it for you, check out our reviews of some of the leading payroll service vendors out there: Gusto, Square, ADP, Paychex.
The post What Are Payroll Taxes? And How Do You Calculate Them? appeared first on Merchant Maverick.