When it comes to business operations, how you choose to make or accept payments may be critical to your cash flow. Inefficient payment methods not only can keep your business from growing, but can also cost you money.

Here are four ways to help improve your payments.

1. Accepting payments: Switch from cash to plastic

"While the fastest method of collecting payment is cash, the problem with collecting cash in bulk is that it is costly for banks to process, so fees could add up," says Gabriel Sofaer, business banking manager at Wells Fargo.

Plus, by only accepting cash and restricting the way you receive payments, you may prevent your business from attracting new customers. According to recent studies, 80% of consumers prefer to pay with a card. Consumers are also switching from cash to card due to concerns about health and safety. According to the Electronic Transactions Association, consumers prefer to make payments without touching anything other than their own card or phone, which has led to a dramatic increase in the use of contactless payments, and a decrease in the use of cash.

2. Accepting payments: Go digital

Consumers' inclination to use digital wallets and contactless payments over traditional methods is on the rise.

Small business owners should be prepared to accept multiple payment types, be more tech savvy, and be able to understand how their customers want to pay.

One digital form of payment that's increased significantly in the past year is contactless payment, which is also known as touchless, or tap-to-pay. Chip-based technology allows consumers to wave or tap their credit card, debit card, smartphone or other wearable tech to complete transactions  Consumers are becoming more familiar and experienced with these types of payments. The use of contactless payments increased 150 percent from March 2019 to 2020 , and 69 percent of consumers say they plan to use more touchless payment options in the future.

For many businesses, adding an e-commerce option may be a way to make going digital work for them. "Online purchases have skyrocketed and consumers are becoming more comfortable making payments online," says Isaac Dixon, treasury Merchant Sales Manager for Wells Fargo Merchant Services. "Business owners should look for ways to accept the payment types their customers prefer, and this should include online. There are many options for accepting payments online for every type of business, in every type of industry, whether you have a website, or not."

3. Accepting payments: Consider all-in-one point-of-sale technology

As your business grows, your needs will change, and there are point-of-sale (POS) systems such as Clover® that can grow with you. These devices come equipped with tools to help you manage your business – and enable you to accept multiple types of payments such as credit cards, debit cards, and digital wallet payments such as Apple Pay®. These tools can help you with cash flow by giving you insights into your customers' purchasing habits, and how your goods and services are performing, and plus marketing and loyalty apps that are designed to help you drive traffic and purchases to help support cash flow..

"These systems enable business owners to help improve their business with detailed and robust reporting," says Dixon. "From how to grow your customers to creating a customer loyalty program, good reporting helps you see the big picture."

The robust reporting capabilities of the right POS system may lead to better business decisions affecting cash flow. For example, a business owner who is considering extending operating hours may be able to look over reports from their POS system to see when their busiest or slowest times occur. From there, the business owner may choose to close early on some days and extend operating hours on other days to help increase cash flow.

4. Making payments: Look beyond checks

Checks can be inconvenient for your cash flow management: you'll need to account for that check's payment until the check is processed, despite the sum still appearing in your account. Failing to do so can lead to disruptions in your cash flow. From start to finish, it could take weeks for a check to clear.

With paper checks, you'll also face the risk of potential payment loss, or a bank hold, says Sofaer.

Sending checks by mail can result in fraud, which can have grave consequences.

For these reasons, Sofaer says, "Doing business electronically is the most effective way to manage cash flow on both sides." However, it's important to only consider electronic options that are safe for your business, such as ACH payments, electronic wire transfers, and Wells Fargo Direct Pay.

Another method to pay vendors may be to use a credit card. Card programs are designed to help in two ways when properly managed.

  1. Most credit card programs (that remain in good standing) offer a period of float that is interest free. This is a proposition that most businesses may not want to pass on because you are getting a float on your money and therefore, potentially increasing your cash position in the business by way of extending your payables interest free.
  2. Rewards are a great tool in this regard as well. Most card programs offer a 1-2% reward (cash value) for purchases. In effect, and over the course of spans of time, this can be viewed as a discount to the cost of whatever is being purchased. The amount accumulated can result in a significant amount over time. Consider a customer that spends $10,000 a month, and gets 2% back on monthly purchases. That adds up to an annual reward of $2,500.

As you explore your payment processing options and additional available resources, consider how each may impact your cash flow to choose the option that makes the most sense for your business's current standing.

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