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Payment Acceptance: Protecting Profitability Post Covid-19

Now is an ideal time to look at ways to cut expenses. Post Covid-19, businesses are now more reliant on credit card processing to manage their payables and receivables.  The Business-to-Business (B2B) segment has seen the largest increase in credit card acceptance, as accounts receivable teams now need to operate in remote environments. Manufacturers, distributors, wholesalers, and service companies are turning to credit card payment acceptance for convenience, safety, and to reduce float time.

Unfortunately, with this increased dependency on credit card acceptance, businesses may feel the pain of excessive processing fees—a frustrating “cost of doing business.” Yet some may not realize that these fees can actually be managed and controlled.

The two most common issues surrounding processing fees concern rate transparency and solution setup.

Many businesses never receive the processing rate they believe they negotiated.

For example, businesses are typically presented with a favorable “qualified” discount rate during the sales process. However, only select credit card transactions will meet the requirements for this “qualified” rate. Transactions that do not meet these requirements will be classified as “non-qualified” and penalized, driving up processing costs for businesses significantly.

When businesses understand how credit card transactions are classified on their statements, they can better negotiate their fees.  There are likely opportunities to implement a few simple business processes to reduce the number of transactions considered “non-qualified,” thereby reducing costs.

Another key factor often overlooked is the need for a tailored solution specific to the business’ needs and classification.

Many sales groups simplify merchant processing, selling one type of solution to all customers. This can be detrimental to the business when it comes to fees. Often, a B2B payment is made with a corporate or procurement credit card, which are more expensive than the average consumer card. When the company is set up to optimize that type of payment, it results in lower Visa™/MasterCard™ fees. Correct account setup that is optimized for the business can be the single greatest area of cost savings, exceeding 40%.

As we continue to navigate Covid-19’s effects on our company-wide processes and infrastructure, we will most likely see more payments to businesses using credit cards. If your business finds itself needing to accept card payments, or is experiencing increased payments on credit card, it is important to have the right set up that optimizes your costs and minimizes risk, while providing simple remote payment capability for your customers and your staff.

If you are uncertain whether your business has the most cost-effective solution, seek assistance from a knowledgeable advocate, such your banker or accountant.

 

 

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