For those not conversant with what a merchant account entails, a merchant account can basically be defined as a type of bank account that lets businesses accept payments in a number of ways, typically though the use of credit and debit cards. Merchant accounts come with numerous benefits not only to large businesses but also small medium enterprises and as such, it is imperative for such businesses to open these accounts. The following post seeks to highlight some of the benefits small businesses can acquire from merchant accounts as well as the steps that are taken when setting up a merchant account.
Benefits of having Merchant Accounts
The modern day consumers are increasingly adopting debit and credit cards as preferred methods of payment over the conventional cash payment. Thus, having multiple payment options will go a long way in ensuring the revenue of business is up which translates to profitability and survivability of the business. Some of the other benefits associated with merchants accounts include:
Increased productivity: keeping plastic money is much easier than keeping cash as it conveniently saves a considerable amount of having to count cash. This enhances the productivity of employees as it saves a substantial amount of time which can be invested in other areas.
Customer satisfaction: according to Smith, a financial analyst with New York Stock Exchange (NYSE), the popularity of cashless payment option has in the recent past grown to an all-time high. Hence, a majority of the consumers now prefer using checks, debit, and credit cards when doing transactions. Having a flexible payment method will definitely lead to customer satisfaction and thereafter customer loyalty and retention which are essential in the running of a business.
Enhanced management of cash: opening a merchant account will also enables better control of resources that may sometimes be lost through theft or miscalculations when returning change. As such, adopting merchant accounts help in the overall organization and management of a much better cash flow.
How to Set Up a Small Business Merchant Account
According to a recent publication by the Entrepreneur, many start-ups and small-medium sized businesses fail to live up to their 5th year and this is mainly attributed to their failure to sign up for merchant accounts. The following section outline steps every business person should follow to ensure they get a merchant account that accommodates their needs.
Step 1 Research
Research is the first step any business person should undertake to ensure they do not end up with a costly and time wasting credit card. These searches can be done through search engines such as Google as they provide useful information such as the different processing rate plans as well as some of the fees that different providers charge. Similarly, it is important to note that there are different merchant accounts available for business owners if they cannot be able to obtain one from the bank. Hence, they can also get similar service from independent credit card companies as well as internet merchant which is suitable if they deal with an e-commerce site.
Step 2 Setting Up business Profile
This should be done after he or she has established the ideal merchant account provider. In this step, the businesses provide the merchant account providers with information that enables them to know what type of processing risk involved, and how he or she wants the account to be setup. When setting up a business profile, businesses should be able to expound on how they intend to accept payments, how much volume they intend to process monthly or yearly, their average ticket price, the nature of business they operate I.e., permanent or seasonal, the type of credit card brands they intend to accept, and the different ways they want to accept payments i.e. through the website, virtual terminal or even mobile phones.
Step 3 Application stage
After setting up a business profile, the next phase is the application stage. In this stage, business persons apply to a handful of merchant providers which enables them to have a bargaining chip against the different providers.
Step 4 Negotiation of rates and terms
When applications go through, businesses persons should be able to negotiate the best rates and terms before setting up an account with their potential merchant account provider. This ensures they get better deals.
Step 5 Setting up bank account
After being approved for a merchant account, businesses are typically given merchant id which means they are now ready to start accepting credit and debit card payments. Good merchant providers offer user-friendly software packages that allow business to process their transactions with so much ease.