THINKBIGBEBIG ENTREPRENEURS » Payment http://www.thinkbigbebigentrepreneurs.com Wed, 08 Sep 2010 12:00:11 +0000 english hourly 1 http://wordpress.org/?v=3.0.1 Understanding Merchant Accounts http://www.thinkbigbebigentrepreneurs.com/2010/08/understanding-merchant-accounts/ http://www.thinkbigbebigentrepreneurs.com/2010/08/understanding-merchant-accounts/#comments Thu, 12 Aug 2010 15:39:31 +0000 Guest Author http://www.thinkbigbebigentrepreneurs.com/?p=2646

This is a guest post by Dan Lewis is an industry veteran, having worked in the credit card processing industry for many years, most recently as an independent sales representative for North American Bancard
When preparing a start-up budget, one part of the document will “inevitably” be the costs and expenses that you will incur in the course of operating your business. One such cost that is vital to your success, especially if you are a retailer, will be credit card processing. Therefore, it is extremely important that you understand how the merchant account world operates. You must understand what a merchant account is and what the different options are for each type of business. I will present the two most common types of merchant accounts. So let’s get to it.

What is a Merchant Account?
If you want to be able to process credit cards, you must set up a merchant account first. A merchant services account is a special type of bank account that operates is written agreement between a retailer, a merchant bank, and a credit card processor to complete transactions from credit cards and debit cards.
When a retail customer presents their card at the point of sale, the cashier will swipe the card on a terminal that will relay the customer’s financial information to the bank that processes credit cards on behalf of the merchant (acquiring bank). The acquiring bank will verify the credit card information and sale amount with the bank that issued the credit card (customer’s bank). If the customer’s bank verifies the credit card information and approves the credit amount, the sale will be authorized, and the customer walks away with a purchase. The merchant stores the customer’s approval code along with all other credit card purchases for the day and sends a batch file to the acquiring bank. The acquiring bank then sends all the day’s transactions through a credit card network that disperses the transactions to customers’ appropriate issuing banks, and the issuing banks will pay the acquiring bank. Finally, the acquiring bank pays the merchant minus fees for monthly account maintenance and percent of sale. Confusing? It becomes second nature after you get experience in dealing with different merchant service providers.
Types of Merchant Accounts
Each business is unique, and thankfully the merchant services industry has recognized this by offering accounts that cater to many different industries. Two of the most common types of merchant accounts are explained further below.
Retail Merchant Account
As in the example above, retail merchant accounts are catered to businesses that have a physical location, such as grocery stores or restaurants. These types of accounts are the most widely recognized forms for credit card payment, since the swiping terminal is present, and people associate credit card processing with the swipe motion.
Since the merchant can ask for identification if he/she suspects a case of fraud, this mitigates the risk of fraudulent activity. This is the reason why these accounts are less expensive, since there are more protective measures taken with card-present transactions.
Internet Merchant Accounts
As e-commerce continues to grow, the demand for websites to be able to process credit cards online will grow as well. If you are an e-commerce owner and do not process credit cards, you are pretty much giving your potential customers a very good reason to buy from your competitors instead.
Unlike the physical terminal, an internet merchant account processes payments through a virtual terminal or payment gateway. Virtual terminals are typically for businesses that process sales at low volumes. They are less expensive but require manually verifying credit card information for each sale coming in through the website, which could become time consuming if the business is growing. Payment gateways are more expensive but cater to businesses that process thousands of transactions each day, as it is an automated verification process. Internet merchant accounts are typically more expensive, since the sale is a card-not-present transaction. Internet fraud has picked up in the past decade, so credit card processing companies have to protect their business interests against cyber crime.
Conclusion
If you start doing your research today, you will be ahead of the game. Now that you have an idea of how merchant accounts work, you can start digging for more details.
]]> http://www.thinkbigbebigentrepreneurs.com/2010/08/understanding-merchant-accounts/feed/ 0 How to Get Your Money http://www.thinkbigbebigentrepreneurs.com/2009/06/how-to-get-your-money/ http://www.thinkbigbebigentrepreneurs.com/2009/06/how-to-get-your-money/#comments Mon, 29 Jun 2009 10:44:50 +0000 Timothy Bosworth http://www.thinkbigbebigentrepreneurs.com/?p=1454

It’s old news now that many businesses, feeling the recessionary pinch, have been delaying payments to their suppliers. In boom times that might not create a crisis, but until the downturn ends, cash flow is probably a paramount concern. We collected some expert tips on how to get your hands on the money you’re owed:

Invoice Early
You’ve probably heard this a million times. Stay on top of your accounts receivable, and send bills out promptly to get paid earlier and show that you are paying attention to outstanding balances.

Invoice Often (Family Business Institute—which is not actually an institute)
If you bill weekly instead of monthly, you won’t be waiting until the end of the month to send out invoices—and can get paid faster.

Check Credit Histories (AllBusiness)
Do this even for customers who have paid on time in the past. Be ready to cut back on credit lines for those who have spotty records, and if you see problems with a company that has always been prompt, make a call. Better now than later.

Call Three Times (B2B CFO)
Ring your customer right before the invoice goes out, to make sure the goods showed up, review any problems, confirm the payment terms and make sure the bill is going to the right person. That will help ward off nasty surprises. Call two days after the invoice goes out, to make sure it was received. Finally, call the day the payment is due—especially if you’re offering early payment discounts.

Strike the Right Tone (BNET)
Be polite and friendly, but also clear and firm. BNET offers up an example for a letter: “In a few days, decisions must be made on accounts that are seriously past due. Your goodwill has always been important to us; that is why we are reluctant now to take any action that might jeopardize your credit standing and cause you added expense…” The same principles hold true for phone calls.

Original post via blogs.openforum.com

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