You have to pay the rent, make payroll, deposit taxes, pay vendors, and more. You want to do this in the most efficient way, meaning you want to minimize fees and your time and effort, while ensuring your payment method is secure. You likely will use various methods for different purposes. For example, in the restaurant industry, “instant payments,” such as debit cards and PayPal, are the most popular, but ACH transfers, checks, and credit cards are still popular for sending payments. Which payment methods work best for you?
Factors in deciding your payment method(s)
It’s probable that you use more than one method, depending on the expense. The different methods of payment, such as credit cards, ACH, and digital assets, are discussed in a previous blog. The following are some of the considerations in choosing your method of payment:
Recurring expenses.
- You can set up recurring payments, such as your monthly QuickBooks charge, on a credit card or bank account (an ACH payment). Doing so ensures the expenses are paid automatically, saving you time each month.
Speedy payment.
- If you wait until the last minute to pay bills, ACH payments, PayPal, and even wire transfers can be used for immediate payments. Consider the cost for certain payment options (e.g., a bank fee for a wire transfer).
Taxes.
- Federal payroll taxes usually have to be deposited directly with the Treasury; a check won’t do. Use EFTPS.gov to arrange for ACH payments. There are a number of ways to pay federal income taxes, including estimated taxes. If you use a credit card, you’ll pay a convenience fee to the processor; the government doesn’t charge for this payment method.
Tracking expenses.
- Payment with plastic can be useful because monthly statements provide a clear picture of what’s been purchased. Of course, expenses should be entered into your accounting software (e.g., QuickBooks), but a visual reminder with your credit card statement can be helpful.
Rewards.
- A number of credit cards hype the benefit of rewards…travel discounts, cash back, etc. Are rewards important to your business?
Cash flow problems.
- Credit cards can be helpful when lacking the ability to pay for things in full immediately. For example, a credit card can be used to pay for equipment over time. Of course, using credit cards can be costly if you don’t pay the balance in full and are stuck paying high interest rates.
Purchase protection.
- Plastic may offer certain protections not available with other payment methods. For example, you may obtain insurance for a car rental when using the American Express card. And any unauthorized charges on a credit card can be wiped out.
Final thought
It’s vital to pay your bills on time. Doing so may entitle you to discounts and will certainly help to establish a good credit rating for your company. Use the payment method that best suits your situation. Be sure to monitor your cash flow so there are sufficient funds to meet your payment obligations.
Read more blogs concerning payment solutions here.
