Charlie Trainor, director of product and platforms for Interac, presented an overview of payment types and a full discussion of Interac’s e-Transfer service and the ways it can help small businesses pay and get paid quickly, conveniently and securely.
The webinar, "Get Paid: a guide to managing money for small businesses," was moderated by Giovanna Fariello, senior manager of product marketing for Interac. The session laid out payment behaviour trends, strategies businesses can use to solve their payment issues and potential uses of the e-Transfer service.
ARE CASH AND CHEQUES STILL KING?
More than a million employer businesses in Canada use cash and cheques for payment, and more than half of these are micro-businesses with less than five employees, Trainor told participants.
When surveyed, their biggest challenges were found to be managing payroll and receiving payments. Many small businesses safety and security, low transaction fees and faster payment processing.
Cash and cheques are still the most common payment method, for example, 60 per cent of businesses use cheques to pay their expenses, Trainor said. Overall, about three-quarters of merchants accept cash payments, but more than 30 per cent prefer cash payments for in-person sales because they think cash is cheaper, quicker to process and more secure.
Even more small businesses (40 per cent) prefer cash to cards, in general, because they are perceived as more secure, and some stay with cheques because of security concerns.
Interestingly, most micro-businesses (one to four employees) do not accept card payments.
Research undertaken by Interac challenges these beliefs, Trainor said.
ISSUES WITH TRADITIONAL PAYMENT METHODS
With cheques there can be issues with cost, speed and uncertainty. Each cheque costs $15, he said, when you factor in labour costs, postage, production fees, distribution and financial institution fees. In addition, cheques can take up to 60 days to process and release funds, cheques may be lost in the mail or be deemed NSF). All of these efforts tie up staff, Trainor pointed out.
Although cash is convenient, they pose similar inconveniences and risks. Several factors must be taken into account: time and staff required to manually process cash payments, time wasted waiting in line to deposit, risk of loss from holding and carrying large amounts of cash, manual reconciling of payments against purchases and invoices and the cost of human error.
More than half of small businesses believe their business spends too much time on payment processing, Trainor said, and some businesses are starting to use wire transfers and electronic funds transfer (EFT). However, there are costs and resources needed for these methods as well; for example, wires involve higher transaction costs, require specific financial information, and incur development and configuration costs. They are meant to handle sensitive information that some customers won’t share.
Small businesses say the cost to use and the cost to set up new payment methods are the two problems that stop them from adopting new methods. Micro-businesses also say pricing is a key factor: about one-third have said transaction costs would need to be cheaper and some point out that infrastructure costs would need to be cheaper to get them to switch.
Credit card fees for businesses accepting them have long been a challenge for small businesses, with some merchant fees as high as four per cent of the transaction value.
Many prefer to use cash and cheques, but data and research show that’s not always the case.
AUDIT YOUR OWN PROCESS
Trainor recommended businesses analyze their profitability, track and forecast cash flow, consider financing or leasing for big outlays, focus on collecting receivables and accept electronic payment.
Audit your own process, he suggested, including when you make and receive payments, what payment types you use, what effort is required for each, what risks are involved with each and what is the impact of each on your cash flow. Once you’ve done that, it may be time to investigate other types of payment.
E-transfers are popular with businesses, Trainor said, noting that one in six businesses used them in 2017.
He pointed to several benefits:
- Funds are immediately available.
- The transaction is fast, with most taking less than a half-hour.
- The transactions are secure.
- They are convenient and may be sent and received at home, work or while travelling.
- Using the service gives you an electronic record of payments.
- It is inexpensive (and sometimes free) to use.
- It is available to everyone in Canada.
- The “Request Money” feature lets you add an invoice number and due date. It gives you immediate access to funds through online and mobile banking while requiring only a small fee to be paid by the requestor if the request is accepted (the person fulfilling the request doesn’t pay).
- With “Autodeposit” there is no need for exchanging security questions and answers. Trainor said it is great for small and micro-businesses because it is safe, secure and does not require private financial information to be shared. No action is required by the recipient and the sender is shown the name of the recipient to be sure it’s going to the right person.
SAMPLE USES FOR E-TRANSFER
The webinar provided examples of convenient uses for the e-Transfer including, collecting rent, invoicing for onsite work, paying service contractors and invoicing for supplies. One benefit is taht Interac will send regular reminders about payments.
In conclusion, the presenter said, businesses need positive cash flow, need to get paid and make payments with low transaction fees using a secure method. Contrary to popular belief, cash and cheques are not more convenient, cheaper or safer. Digital methods, including Interac e-Transfer, are convenient, cost-effective and secure ways to request and receive money.
More information, including a list of participating financial institutions, is available a developer.interac.ca.
During the question-and-answer session following the webinar, it was established that if businesses want to receive money into multiple accounts, they need to use a separate email address for each account and let the people who are paying you know.
As yet, Canadian vendor cannot be paid with U.S. funds, but Interac is working on a feature that allows this function.
Another participant asked what’s to stop a staff member from depositing a payment to another account? Trainor said it’s an issue of trust and that it’s also a great reason to use the autodeposit or request money features.
Finally, it was noted that operators may have multiple email addresses associated with one bank account; for example, when using different trade names or types of business.
This is just one of several free webinars the Canadian Federation of Independent Business hosts throughout the year. Learn more.