How many small business owners ask this question very soon after starting up a new business….why bother with credit cards? There are a lot of reasons why it doesn’t make any sense to accept credit cards. The biggest and most obvious is the cost. If the credit card companies take 2% to 4% of all my revenue, why the heck should I even consider it? Not to mention the enormous hassle of setting up a merchant account and a payment gateway. If most of my clients don’t mind sending me a cheque, and I get 100% of this money, then it’s a no brainer.
Or is it? In many small businesses, saying cash is king is a very fair statement. Too often if you are running a small consultancy or freelancer business and you run out of cash, your business grinds to a halt. If you are a young business, you probably aren’t able to get much help from the banks unless you have a fancy house to put up as collateral. Therefore, without much financial security, your business is at a major risk if a few clients do not pay on time. If you start to collect credit cards, it makes it that much easier for your clients to pay you immediately. Not only can they pay with credit (which helps them if they are also a small business), but you will receive the funds immediately instead of waiting for a cheque to arrive in the mail and having to make an extra trip to the bank to make the deposit.
At first glance it seems really crazy to give up 2-4% of your revenue right off the top to the bank. However, when you consider the ease of payment and steady cash flow, it is likely worth every penny. At the very least it is worth it to run the numbers on accepting credit cards. Maybe it isn’t worth it until you reach a critical mass of customers, or maybe you could start by just accepting PayPal. Either way, you owe it to your business to do your homework.