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Give Your Small Business A Competitive Edge
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Article 6: Vary Your Payment Methods and Terms
One of the best ways to gain a competitive advantage in the marketplace is to make it as easy as possible for your customers to pay you for your products and services.
Accepting credit and debit cards is a great way to do this. Not too long ago, only larger business had enough volume to afford to accept credit and debit cards. But banks are now offering cost-effective merchant card services to smaller businesses as well.
Other benefits of accepting credit and debit cards are improved cash flow and potentially higher sales, as customers paying with plastic tend to spend more than those paying with cash or check.
You’ll pay an average fee of about 2 percent to 3 percent to the credit card processor (this is known as the discount fee) and a transaction fee of about 25 to 30 cents for every credit or debit card transaction. To get started, talk to your bank about its merchant card.
In addition to offering multiple ways to pay, consider offering payment flexibility to your customers when it comes to your payment terms.
“I think businesses should take the words ‘standard payment terms’ out of their vocabulary forever, because there really should be no such thing,” says Steven S. Little, an expert on the subject of business growth and the author of “The 7 Irrefutable Rules of Small Business Growth” (John Wiley & Sons, 2005). “Just having arbitrary payment terms — like 15 days, 30 days or whatever — is a thing of the past.”
Standard payment terms should be “whatever terms the customer needs,” Little continues. “Of course, you should charge accordingly. If a customer needs 90 days to pay but will pay you 5 percent more, do you take that deal? Most companies would in a heartbeat.”
This is a great example of being customer-driven with your processes, says Little. “These are the little things that can really give a small business a competitive advantage. Don’t just say ‘no, we can’t do that,’ but look for a way to make it work instead.”
Many companies will say they’re afraid that customers will take advantage of flexible payment terms like this, but that’s usually not the case, says Little.
“In my experience, customers are more likely to pay you on time if you’re willing to work with them in meeting their payment needs.”
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