Determining the Best Customer Payment Options for your Small Business - and Managing the Bad Ones

As a small business owner you are dependent on cash flow - and making sure that your customer payments transact seamlessly, securely and reliably are critical to that cash flow.

Her;s an overview of the payment options you may want to extend to your customers as well as the best practices and self-protection tactics you should employ when accepting customer payments.

Which Customer Payment Options are Best for You?

Identifying which payment methods are best for you depends on the type of company you run and how you conduct business. For example, retail establishments can benefit from a variety of cash and non-cash payment options including checks, credit cards and, most securely of all, debit cards. For restaurants and fast food establishments, non-cash forms of payment are an absolute essential to boosting the volume of transactions.

If you transact any business online - otherwise known as 'e-tailing' - accepting credit and debit card payments are a must, but many smaller businesses are also embracing online transaction services such as PayPal that offer both lower fees and potential access to a greater number of buyers who prefer the enhanced security features.

To identify which payment options best suit your business, SCORE offers some sound tips in this brief article - Choosing a Vendor to Process Your Online Transactions*.

In addition, you should also familiarize yourself with guidance provided by the government on this topic. For example, did you know that if you accept a cash or cash-equivalent payment from a customer for more than $10,000 you are required to file Form 8300 with the IRS to capture more information about the buyer? For your own protection, yo-ll also want to understand which forms of customer ID are legally required and acceptable as a condition for writing a check in your particular state.

To find out more about establishing payment and collection policies and understanding the laws that regulate them check out this quick one-page overview from the government through its Business.gov Web site.

When Customer Payments go Bad

Despite all the initial skepticism and concern about making and accepting online payments, ironically enough i-s the more traditional forms of payments that pose the most problems for small businesses.

With over $50 million in bad checks written each day the impact on the small business owner in terms of associated bank fees, time and cost of collection (or not), is an unwelcome burden.

There are a number of practical measures that you can take to prevent bad checks hitting your bottom line, from the most drastic - not accepting checks at all - to more measured approaches such as accepting only cashie's checks, using a check-verification bureau, scrutinizing every check, and posting a bad-check policy. As with most lines of defense, yo'll need multiple strategies. Read more about putting these measures to work for you in this quick article: 'Making your business rubber-check proof*'.

Additional Resources

Get more information on determining the best customer payment options for your small business at these links:

• Business.go's guide to Managing Business Small Business Finances - Tips on collecting debt, extending credit, and more.
• How to Accept Credit Cards - Want to accept credit cards? This article explains steps entrepreneurs should take to research and apply for merchant status, as well as tips on getting your back-end and front-end business ready for accepting credit cards.
• How to Reduce the Cost of Bounced Checks - More tips from SCORE and Allbusiness.com.
• National Check Fraud Center* - All you want to know about Check Fraud. Provides information regarding types of Check Fraud, and how to protect yourself against check fraud, forgery, and counterfeit checks.

*Note: Hyperlink directs reader to non-government Web site.

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley