This year, an economic climate defined by elevated interest rates and high-profile labor disputes has pushed many small businesses (SMBs) to the brink, and consistently exceeding consumer expectations is crucial. Yet, a sizable minority of SMBs (30%) are currently falling short in a key area: payment processing. According to a recent Xero survey, although 90% of US consumers typically opt to pay via card, these businesses are unable to process any payment method other than cash or check. The disconnect nearly guarantees that some customers will be unable to complete their purchases as planned.
Already on the ropes after a tough year, SMBs cannot afford to lose customers to avoidable causes such as archaic payment processing. That said, digitization is easier said than done.
What’s Holding SMBs Back?
Moving away from cash and checks to embrace cards may be a given for consumers, but the decision is far less clear for cash-strapped SMBs. For one, these additional options introduce added costs, and undertaking adoption of a new, modern payment processor can be daunting.
SMBs must overcome the following to integrate new payment options for shoppers:
- Incompatible Hardware: If a business has already digitized their point-of-sale (POS) but not added additional payment methods, retroactively adding a new processor can be challenging. At best, the old POS will need to be reconfigured, or at worse, it may need to be replaced entirely, adding additional costs. Since the POS in this scenario is likely still functional, these costs could be seen as unnecessary to a business owner.
- Disjointed Customer Service: Adopting a new payment processor can be difficult, and busy shop owners often don’t have time to wade through telephone prompts to reach a qualified support person if issues arise. Some frustrated owners may give up on the entire endeavor as a result. Even worse, contracts with payment processors can be unnecessarily complex, adding additional pressure points that must be sorted out over the phone with often difficult-to-reach customer service agents.
- Incapable or Unwilling Personnel: Using a new system comes with a learning curve, not only for SMB owners, but their employees. If employees are incapable or unwilling to use a new payment processor on account of its added complexity, a business’ digitization efforts will fall short.
- Added Fees: While consumers will undoubtedly appreciate the added flexibility that comes with additional payment options, they most likely won’t be as thrilled with the 3-5% markup that often accompanies debit and credit card payments. However, the solution is not to abandon offering additional options, but rather to incentivize cash and check payments instead. Offering a small discount can go a long way towards pushing consumers towards preferred legacy methods, while offering additional options like ACH payments and Apple Pay/Google Wallet can ensure business is not lost if customers don’t have either payment form on hand. With only 22% of Gen Zers currently using cash in-store, and younger shoppers projected to overtake baby boomers in spending by 2029, the ability to process card and digital wallet transactions is no longer optional.
The Payment Processing Survival Guide for SMBs
For the SMBs who have yet to modernize their payment processor to accept cards on account of the hurdles mentioned above, there are still measures that can be taken to ensure timely payment from customers, regardless of payment method:
- Invoice and Automate: For some businesses, payments can be processed via invoice and not through a point-of-sale, making an exclusive cash or check operation more tenable, although still not preferred. In this scenario, customers don’t have to produce these payment methods on the spot, and instead have a few days to produce payment. This latent period can help reduce cart abandonment. As for ensuring invoices are paid in a timely fashion, define payment terms clearly in the document itself, and investigate using an online invoicing platform to send payment reminders on a recurring schedule.
- Get Creative: Businesses should consider rewarding reliable customers who pay their invoices early with a small discount and can also look into accepting partial payments upfront. In either case, having more cash on hand ensures businesses can more easily balance their checkbooks if other payments are late.
- Streamline with Software: DIY’ing implementation of new payment methods can be difficult. Thankfully, software gateways make accepting payments via card and digital wallets easier than ever, and accounting/invoicing software can take the guesswork out of managing payments and billing clients. For business owners looking to modernize how they process payments and keep records, integrating these software tools is a no-brainer.
In a recent survey by PYMNTS Intelligence, 72% percent of consumers surveyed were found to be more loyal to companies who offer a preferred digital payment method, and 91% deemed real-time payments essential. With this in mind, SMBs can no longer afford to delay conversations around how they process payments, and whether it’s time to modernize. In an unsettled economic climate, SMBs stuck offering only cash or check payment options must reconsider to set their businesses on a more solid course ahead of 2025.
Petr Marek is the founder and CEO of Invoice Home, an invoice generating platform designed for small businesses, freelancers and entrepreneurs. Invoice Home currently has over 10 million users worldwide.
Invoice payment stock image by jittawit21/Shutterstock