January 30th, 2008
Accepting Online Payments
Why does anybody offer online payments? After all, there is a mark-up that takes money out of your pocket on every transaction. Unless it’s the only way you accept payments (which is true for some businesses), you’re complicating your accounting and business processes by adding another special case for how a payment is received.
The answer of course is that it is more convenient for the customer. They pay the same amount either way, and typing in their credit card number is a lot faster than sending a check in the mail, giving payment information over the phone, or driving to where ever your cash register happens to be. In theory, making the process more convenient means you will have more casual browsers convert into actual paying customers.
The test for a merchant is whether the additional cost of accepting online payments is offset by the additional revenue of more customers. As a merchant for your services, you should apply the same criteria. On most of my projects the first half is due up front and the second half is due when the work is completed. So I’m looking at two transactions with a relatively high dollar amount. Depending on how the fees for my online payment processor are structured, I could lose a pretty hefty chunk of change.
From the convenience side: I have actually had clients ask for this before. Since I don’t start work on their project until the payment is in my hand, they wanted to pay online and have me start that day. (The first problem with that is I don’t have very many mornings where my work schedule is not already full before I wake up.) Did the customer go to someone else because I didn’t offer an online payment option? No. Were they ultimately satisfied with the quality and timeliness of my work? Yes.
At least from a strictly financial perspective, there isn’t a very strong case for me accepting online payments. There are other considerations that aren’t strictly financial. You may find that it’s a great pseudo-portfolio piece. When a customer has concerns about accepting credit card payments in a secure fashion, you can calmly direct them to the page of your web site where you accept credit card payments.
It might also be an advantage if you are operating on a particularly tight cash flow situation. If having the money a few days earlier is going to make or break you, then accepting payments online speeds up the process. Of course if receiving money a few days later than you expect is an alarming notion to you, you may have other aspects of your business you want to clean up before tackling online payments.
