Dec 2, 2016
Contractors Accepting Credit Cards Make More
*We do not provide merchant services. We suggest you start by contacting you bank and doing your own research. I know from many years while we were contractors it paid off handsomely so I am simply passing on a mere "scrap of information" to help you get more cashflow and profit.
Unplanned Emergencies - Are stressful now add "how am I going to pay for this" to the mix and the anxiety increases exponentially! For most people cash in short supply which leaves using a credit card, getting a bank loan or selling something to raise cash as their best options?
For Example - Homeowner with leaking roof is going to get it fixed right away because rain water is damaging the interior of their home including some irreplaceable sentimental treasures including items passed down from parents and grandparents.
Who Will They Call? - You I hope! If you are their contractor and you are actively working and the contractor they like and trust.
Accepting All Credit Cards - Makes you the hero because they get instant financing and your Electronic Armored Car takes your money to the bank.
"Everybody wins, your client gets roof fixed, they earn airline miles and other perks and you made a sale which you could have easily lost to a competitor that accepts credit cards.
Add On Sales - Will more than make up for any fees you pay to accept credit cards. Prove it to yourself by asking twenty contractors that accept credit cards why they do and then ask twenty that don't and make up your own mind. In our past construction businesses when we accepted credit cards the profits increased over 100% and if I told you how much I guarantee you would not believe it!
Create additional cash flow by accepting credit cards. Why? Everyone uses credit cards. When was the last time you wrote a paper check? When you go to the Grocery Store, Drug Store, Office Supply Store, Post Office, Gas Station or your Favorite Restaurant; do you use your checkbook or your debit or credit card? How often do you use an Electronic check when paying your bills? Do you even have a book of checks for your checking account? Many of us would say “No” – why do I need a checkbook when I have the routing number, and checking number, or I pay all my bills using Online Bill Pay. Not a problem, I setup automatic payments. I don’t write checks because [fill in the blank with your answer].
It is the Holiday Season, time for Skiing, next is Spring Break, then it is Summer Vacation full of fun, shopping, eating and travel. Are you going to write a check, pay by debit or credit card? More and more places decline to accept checks especially if you are from Out Of Town. I want those reward points.
Credit Cards are here – Every year I write fewer paper checks than I did the year before. I also know to make the system work effectively there has to be a seller and a buyer.
Where would you be if you were out of town doing something special and everywhere you went you were told: “We Don’t Accept Credit Cards”? Oh, maybe you carry lots of cash – Just in case. Perfect!
Comcast sent out a postcard expecting an increase in the use of credit cards in 2017. Comcast was suggesting business need a faster internet connection to deal with the increased Online Traffic. If their information is true, then maybe the banks will be offering credit to more people and raising the credit limits for their existing customers. This suggests the economy may be improving.
As a Contractor, don’t you want some of that new business?
Some contractors feel that taking credit cards costs too much, that there is not enough margin to still make a profit. For years’ studies, have shown that a Client who uses their credit card they will spend more money. Some American Express users will only purchase using their American Express. Short Answer: Taking credit cards has the potential of Plus Dollars that will increase your Cash Flow to do the things you want. (Buying something new, paying off something old, saving for future purchases)
Do you want to be deselecting your customers based on payment method? Do you want to spend ALL THAT MONEY on Marketing only to say No Don’t Choose Me because I refuse to accept your credit card payment? By searching the various processors, you find a process that will be a process at a reasonable rate. Depending on the processor there maybe monthly statement fees.
Many invoice programs have a Merchant Services add-on. Apply for it.
How much would you pay an outside sales person?
What is it worth to get a customer?
What is your marketing budget?
Isn’t Merchant Fees marketing?
Why I accept credit cards? The most obvious one. It’s Convenient. You are across town, in a nearby city or located in another state. Relying on the mail to promptly deliver mail is one of the reasons that everyone uses their email (even if a paper letter follows) Even faxes are now more in the form of junk faxes more that any really important documents (except to your tax accountant at tax time).
That was not the case 15 or 20 years ago (oops – showing my age) Of course if you are local and come into the office I have a terminal and can swipe your chip-enabled card otherwise I use a virtual terminal.
Yes, I accept Visa, MasterCard, American Express, Discover Card AND Paypal.
Yes, It is a higher rate when it is a personal designer rewards card.
Yes, It is a higher rate when it is a Business Credit Card
No, I am not going to ask you to pick the credit card that will have the cheapest processing rate.
Unless the card is swiped and a PIN number entered it is treated as a Credit Card. You may have noticed other merchants who treat Credit and Debit Cards all the time. The rate on a Debit card is at the same rate as the Credit Card, but the Store Owner never has to be concerned about employees seeing the PIN number.
Terminals are a great way to go.
Years ago, our terminal was wireless for onsite visits and connected to cell phone towers and worked on all platforms. This is the type of terminals you will see at Trade Shows, Home Shows, and Conventions.
Wireless Terminals will work when individual cell phone coverage may be spotty. As “Stuffy Accountants” we not a crazy using the cell phone as a terminal. Cell Phones are too easily stolen.
An alternative to a traditional payment processor is Paypal.
Almost everyone has a personal Paypal account. As a consumer – apply for the Paypal credit. Typically, the credit line is not as large the credit line with the bank. No harm if you never want to use it. It is there if you need it and if you buy using Paypal, it is easy to pay with Paypal credit instead of one your other credit cards.
PayPal Credit has Special Offers emailed to everyone who has a Paypal Credit Account.
Every business should accept Paypal to use when you want to; no fees when you do not want to use it.
One of the features is that Paypal offers it the ability to send electronic invoices to your clients.
Clients then can follow the link and pay. No chasing, to meet the client and receive payment.
Works especially well for the Job Deposit or the final payment on a job.
Fees only apply when you process.
Even if you do not intend to accept credit cards on a regular basis, it is a good idea to setup a business Paypal account. It will ready for when that One Client says YES if they can use their credit card. Paypal is there if you need it. Ignore it when you don’t. There are no Monthly Statement Fees.
Of course, your client has to be willing to pay you for your services because they have to follow the link and submit payment. Will the client pay this way – In many cases the answer is Yes. Why, because it is easy for them; to take less than 5 minutes and pay then trying to connect up with you to give you a check. Your clients have busy lives and may not be comfortable leaving a check under the mat.
As a Contractor, you can now offer to finance.
Paypal currently offers a Paypal Credit with a special offer of 6 Months Same As Cash on purchases over $99.00 from Qualified Merchants. (No, you are not waiting 6 months to get paid)
As a Contactor accepting Paypal; ask Paypal support to enable this feature on your account. Then if your client is paying by Paypal, this open will populate as a payment method. If Clients does not have Paypal credit, it will give them an opportunity to apply.
Think about all the projects that you can do that are around $2000.00.
Are they Quick and Easy, and Profitable to do?
Would they lead to bigger jobs in the future?
Would they increase your Cash Flow?
Contractors - Anyone remembers having a relationship with your local finance company. A packet of forms needed to be filled out, sent into initial approval, even more forms to be filled out at the end of the job. Then you had to wait for the check and make a special trip to pick it up for the finance company. The key word is WAIT, get signatures and WAIT some more. This type of financing is for larger amounts and is still available (though harder to find). Usually available to finance Windows or Heat Pumps.
Leverage Your Credit:
Apply for a credit card at a Traditional Bank or Credit Card company.
Apply for a Credit Card with Lowes and Home Depot.
Open a 30-Day account at your local Lumber Yard or Supply House.
Take advance of better pricing by using a couple primary suppliers. They will treat you well.
The advantage of using 30 Day Accounts is able to effortlessly assign a Job Name to your material receipts. All Construction Suppliers have a place for a Purchase Order (PO). You do not have to have an elaborate naming convention for jobs or issuing POs. Use your Customer’s Name and Address.
This information will translate over to the priced invoice and then can easily be added to QuickBooks
Beware Of Easy Credit When It Seems Too Good To Be True – It Might Be!
Many merchant services have a division that offers easy financing. This type of financing usually is “Factoring Your Accounts Receivable.” We do not recommend you do this.
These lenders appear to offer an easy approval, but then it is difficult to get the loans paid off. A few NonTraditional Lenders have the payback terms similar to Pay Day Loans. If there is No Cash Flow; another loan needs be gotten to make the mandatory payments.
Sometimes talking to your vendors is a better solution.
I could say more on the subject of credit or the lack thereof. Call me, and we can talk more.
I trust this podcast helps you understand that outsourcing your contractors bookkeeping services to us is about more than just “doing the bookkeeping”; it is about taking holistic approach to your entire construction company and helping support you as a contractor and as a person.
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Bye for now until our next episode here on the Contractors Success MAP Podcast.
Randal DeHart | Contractors Accountant
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