Choosing payment methods
Payment methods are the ways that your customers can pay for your goods and services. It is good to consider what payment methods you will offer when you start your business as well as periodically after you start it.
When starting your business, you’ll need to decide how you will collect payment from your customer as part managing of your business finances. This is an important aspect of ensuring you manage the cash flow of your business effectively.
The payment methods you choose may determine what extra equipment and facilities you require in your business. You should also periodically review the payment methods you offer to minimise unnecessary costs and make the most of business opportunities.
As your business grows, you may find you need to expand or change your payment options to meet the needs of your business and customers.
Some examples of payment methods include:
- money order payments
- credit and debit card payments
- direct debit payments
- online payments (eg Paypal)
- EFTPOS 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 is private and reliable, but it is 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 requires electricity and a phone connection.
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:
- 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.
- Risk of theft – Some payment methods increase the risk of theft. For example, cash is easy to steal since it doesn’t go directly into your bank account.
- 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.