We’ve all been told that cash is king, but paper currencies are falling out of favor – especially since the pandemic broke out in 2020. Digital payments have become so common and convenient that, according to Forrester, digital payments accounted for 69% of payments in 2023.
People have more ways to pay now than ever before: different payment apps, mobile payments, contactless payments, or the same old cash or paper check that has worked in the past. With all these different payment options, as a home services business owner, it can be overwhelming to decide which payment options will actually help your business grow, keep it competitive, and get paid faster. Let’s go through the pros and cons of traditional payment methods versus digital payment methods.
Traditional Payment Methods
Cash and paper checks have been the main payment method for centuries. They are convenient and cost-effective.
Cash is easy for businesses. Cash can be used immediately, even when you deposit the cash into your business bank account. The downside is that most people do not have cash readily available, which makes the transaction inconvenient for your customer. Cash is not for your customer to trace, either – they must remember what the cash was used for because it isn’t noted on their bank account.
Your customers can track paper checks, though. Although the lengthy processing time for paper checks (up to 14 days) allows your customers to float cash, it can put a kink in your business’s cashflow. Checks are also vulnerable to fraud and lack finality. Even after a customer pays you with a check, they can stop payment on the check, or they could still have insufficient funds when the check goes to clear.
There is a cost to taking traditional payments that most business owners don’t factor in. First, it takes time: you must take traditional payments from getting the cash or check directly from the customer and then deposit the money into your business account. This can take even longer if you’re waiting for a check to arrive in the mail. Time is money.
Secondly, there is the cost of late payments which are usually contributed to customers not having cash on hand or not having money in their checking accounts. Late payments stall work and can lead to not being able to pay your employees or yourself. Having multiple ways to pay helps your customers pay on time.
Read: Eliminate Late Payments with Instant Invoices and Quick Pay
Digital Payment Methods
Digital payment methods are payment methods in which paper is not involved. These payments are taken by transferring account information electronically from the customer to the business. The most common forms of digital payments use credit or debit cards and eChecks. Digital payments skyrocketed to become the common form of payment during COVID-19, and the trend continues today.
Digital Payment Pros for Your Customer
- Using a credit card helps with emergency or unplanned repairs and expenses.
- Digital payments can be taken anywhere there is internet service: over the phone, through an online portal, or via mobile phone app.
- Digital payments are more traceable and secure.
Digital Payment Pros for Your Business
- Digital payments arrive in your business bank account within one to five business days.
- Digital payments are easier to trace and manage within invoicing and payment software like Project 2 Payment.
- Digital payments are more secure and less susceptible to errors from manual handling.
- Using software like Project 2 Payment, your business can set up recurring billing and automate payment collection.
There is a cost to taking digital payments, and that is usually the reason small businesses won’t accept digital payments. Digital payments typically cost 1.5% to 3.5% of the transaction total. With surcharging legal now in many states, a business can charge a fee offset the payment processing fee.
According to the Association for Financial Professionals, “Digital payments are faster, cheaper, and more efficient than paper, allowing companies to better manage cash flow and optimize working capital.”
Boost Payment Tracking and Reporting by Accepting Digital Payments
When using software like Project 2 Payment, payments received can be linked directly to your customer accounts and corresponding projects. This allows you to search by customer name, project, or invoice to see who has paid and when they paid. Electronic search puts the information right at your fingertips so it’s quicker to respond to customer inquiries. With the ability to pull and export payment reports, it’s also much easier to track down who still owes payment.
In the past, digital payments appeared complex and expensive. Most small home services businesses felt that only large companies could afford the tools to process online and mobile payments. Some even felt that turning on digital payments meant they needed to hire a full-time accounts receivable employee to maintain payment records or an IT security expert to make sure the digital payment data is secure. Today, this is no longer the case. The right digital payment software will be easy to use and secure for your business and your customers.
Payments have evolved, and Project 2 Payment makes it easy and affordable to accept and track digital payments to keep your small business moving forward.
