The difference between a business you absolutely love doing and a hobby is the business pays. In this section, we discuss the different ways your clients can make payments whether you are serving them off or online.
1. Income: Cash, Credit & Checks
a. Cash
For many small businesses, payments are made in cash. Cash payments are the fastest ways to close transactions when your client is physically in your presence. However, handling cash can pose a lot of risk for both you and your customer.
Some of the risks you face include being attacked by anyone who knows you have cash, having your client attacked, receiving fake money, and losing the money to dishonest staff. If you only do cash transactions, you also face the possibility of losing large business deals if your client is not comfortable handling cash. You can address this by using other payment methods that you can comfortably implement. There are various ways to reduce risks associated with handling cash.
- i) Get insurance for the cash in your office and in transit.
- ii) Even with insurance limit the amount of money you have around you.
iii) If cash transactions are significant to enlist the services of a cash management security firm to handle banking.
- iv) Employ only trusted personnel. Have a background check and get a police credibility record – certificate of good conduct – before you recruit personnel handling cash.
- v) Don’t mix personal finances with office money or use one for the other unless this is pre-determined so that you can account for the money.
- vi) Budget for every expenditure.
- vi) Avoid making cash payments for deliveries, if necessary, use mobile money instead.
vii) Draw a salary and handle personal expenditure in your personal time. Continuous purchases tend to give the wrong impression and attract attention you do not want.
b. Credit and Debit Cards
These have many advantages over handling cash. Many banks are offering either MasterCard or Visa cards. A great advantage of taking credit and debit card payments is that you can get loans – merchant advances – from your service provider. These are based on your credit card transaction volume. This is great if you are bootstrapping your business and run short of working capital.
However, identity theft is closely associated with card transactions and your main concern as an entrepreneur should be to protect your clients as they make card transactions with you online and offline. Below are some tips to make both you and your clients feel safe when transactions are done using a debit and credit card:
- i) All card transactions should be done in front of the client or provide an opportunity for this to happen. Say, if the client uses a card at a restaurant and the machine is at the counter, they should be free to go to where the credit card machine is as it is swiped. New chip cards require that the client input their passcode so this is in many ways addressed.
- ii) Do not store credit card details on your site.
iii) Where transactions are done online ensure your site is secure or use a third-party platform like PayPal or PesaPal.
- iv) Check that the credit card is not blacklisted before making transactions.
c. Mobile Money
This is one of the most secure ways to handle payments though it can be expensive for your customers if transactions are small as the transactions are often fixed rates per transaction and not a percentage. These differ from country to country. To be able to take mobile payments you should register with your bank and mobile service provider. The client can then pay money directly to your account via their phone application or pay to your mobile account via a code number given by your service provider. To ensure you do not get into trouble or lose money when using mobile payments:
- i) Ensure only your trusted staff have access to making transactions.
- ii) Limit the amount that can be transacted.
iii) Take insurance if the limits for you are high.
- iv) The money transactions can either sit on the mobile application or in your bank account. Ensure you frequently remove the money from your phone to your bank account.
- v) If you have significant amounts of money in your bank, put it in an account that is not connected to other accounts or cards. This ensures in case of identity theft, you have a secure account. However, this does not protect you if the bank system is hacked.
- vi) Don’t make transactions based on SMS messages or phone conversations with someone you do not know personally.
vii) Periodically change your password in all your devices; computer, email, phone, etc
viii) Do not store passwords other than in your head or with trusted personnel.
d. Cheques
In this digital age, cheques a quite secure and can be processed electronically or manually making it easy for businesses. Checks can be risky in the event of a forgery or if you supply products before the cheque has cleared and you have verified it with your bank that the money is in your account. Digital verification is possible however it is a good rule of thumb to supply goods or services the day after you verify that the money is in your account.
If you are making payments to suppliers, expect the same rules to apply and allow ample time for your cheques to clear. Write your cheques carefully so as not to allow room for forgery and keep your checkbook safe.
If your business is a partnership or limited company put limits on what can be drawn by only one signatory. Adding a third person to sign should any of the other two not be available is a good idea. This could be the company accountant or secretary who is conversant with the business and trusted. Some people will use the power of attorney e.g. in the case of incapacitation or sickness.
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