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By Joe Watkins, Director of Financial Management Market Performance, Pinnacle Financial Partners
There are more ways than ever for small businesses to pay their bills and expenses. Debit cards, credit cards, purchase cards; even Automated Clearing House (ACH) transactions and payment apps.
What is the most efficient, cost-effective, and secure payment method? Consider the following priorities:
- safety
- Company burden
- How fast you need to make payments
- Most effective return or protection
For example, some vendors offer discount options for timely or early payments. Credit cards come with purchase protection.
paper check
The majority of small businesses still use paper checks to pay other businesses, at least sometimes. While it may not be realistic to eliminate checks completely, there are many reasons to move away from paper, with check fraud and postal delays ranking high on the list. Reserve paper check payments only for employees and vendors who do not provide banking information to make electronic payments.
credit card
Credit cards are tools that can help your business if used properly. Business cards often have better APRs than personal cards, but interest on unpaid balances can still be higher. Be sure to check the card’s annual interest rate and annual fee (if any). Uses and benefits include:
- Make recurring payments. Not only does this provide built-in fraud detection, but it also improves your business’s credit score and allows you to keep more cash on hand.
- Track expenses. Credit cards make it easy to keep track of your business expenses. Credit card interest on business-related expenses is deductible, subject to IRS limits.
- Cover short-term expenses. Credit cards are useful when you need a short-term expense and expect to get your money back quickly.
- Stay up to date. A credit card can also help you keep up-to-date with vendors if you need to hire subcontractors before receiving payment.
- Take advantage of perks. Many cards offer rewards on office supplies purchases and hotel stays.
There are several types of business credit cards, including purchasing cards, including virtual account types and ghost account types.. They are useful for businesses that delegate purchasing power to multiple teams or individuals, and provide key security and control features such as cardholder expense reporting. Virtual and ghost accounts have all the security benefits of physical credit and purchase cards, such as limits on transaction types and amounts, but with limited card fraud and less chance of theft. Become.
Automated Clearing House (ACH) and Wire Transfers
Tiered authorization is possible for ACH and wire transfers. This means your team can initiate a transaction and you, the leader, can approve it. Everything is done through a secure online portal that you control, using both ACH and wire, and banks have built-in safeguards to verify your identity before anything is processed.
Wire transfer is a reliable and secure way to transfer large amounts of funds. Transfers incur fees (depending on the amount and destination), but are efficient, effective, and secure if protocols are followed to verify the identity of the recipient and the legitimacy of the request.
payment app
There are many payment apps that allow you to connect your credit card, debit card, or bank account. These are convenient for payment recipients you know and trust, with the main benefits being speed (some apps will transfer funds directly from your account to the recipient’s registered account within minutes) and (the recipient’s protection of your card or account number (from). What are the downsides to its speed and efficiency? Money sent via Direct Transfer cannot be retrieved. It also doesn’t protect your payments even if a fraudster tricks you into authorizing the transfer. Additionally, the protection of your card and account data is only as good as the security of your app, so choose a company you trust and read the details carefully.
cash
Cash payments have become somewhat outdated, but are useful for small amounts and on a local level. Large cash payments are an insecure and untraceable payment method and offer no protection for your purchases. So keep your cash payments to a minimum and use them to cover low-cost pop-up costs.
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