Choosing payment methods
Payment methods are the ways that your customers can pay for your goods and services. It is important to consider what payment methods you will offer when you start your business, and review it regularly to see if you are keeping up with your customer's payment preferences and if you are meeting the needs of your business and customers.
When starting your business, you need to decide how you will collect payment from customers as part of managing your business finances. This is an important aspect of ensuring you manage the cash flow of your business effectively. The payment methods you choose will also determine the facilities your business will need.
It's also a good idea to periodically review the payment methods you offer based on cost, as costs can often reduce if a payment method becomes more popular.
Some examples of payment methods include:
- credit and debit card payments
- direct debit payments
- EFTPOS payments
- online payments (eg Paypal)
- money order payments
- gift cards and vouchers
- bitcoin and digital currencies.
How to choose a payment method
Each payment method has different advantages and disadvantages. No one type of payment is best. The best payment method depends on the needs of your business.
When choosing payment methods, think about how their advantages and disadvantages affect your customers and your business operations.
For example, cash can be anonymous and reliable, but also expensive to handle and has a higher risk of theft. On the other hand, EFTPOS is quick and has a lower risk of theft, but it requires electricity, specialised equipment and a fee for the service.
Check out these questions when choosing a payment method:
- How do your clients customers prefer to pay for your goods or services?
- Do you need quick access to business funds to keep your business moving forward?
- Will you have to follow up with customers for payment of your goods or services?
- What costs are involved for each payment method?
- Is there a delay between purchasing and distributing your inventory and receiving payment?
Some of the things you will need to consider when choosing a payment method for your business include:
- Customer preference – Choosing a payment method your customers prefer will make them more likely to pay you on time. The most common payment method is through electronic credit and debit cards. For example, there has been a 42% growth in Paywave and other tap-and-go accounts and 74% of all MasterCard in-store transactions are now contactless.
- Risk – For example, cash has a higher risk of theft since it doesn’t go directly into your bank account. There's also more risk of mistakes.
- Privacy – Different payment methods are more private. For example, credit cards automatically record transactions. Some customers might prefer to pay cash for certain goods and services, such as medication, for privacy reasons.
- Service fees – For example, EFTPOS and credit card providers often charge service fees.
- Transaction costs – e.g. the bank may charges a cost for each transaction.
- Reliance on electrical and telecommunications infrastructure – For example, EFTPOS uses electricity and needs access to a phone network. These payment methods can be unavailable if these systems go down.
- Read more about business finance to help you manage your finances.
- Browse our Inventory management topic for information on purchasing, managing and distributing your inventory.
- Check out information on finding customers, providing good customer service and keeping loyal customers.
- Learn more about on setting and displaying prices.