Accepting credit card payments seems, at first blush, pretty straightforward. The customer gives you their credit card, you swipe it, and voila, done. At a basic level, that’s all correct. But as a sales professional who is looking for ways to optimise their sales process, understanding the best payment practices, offers you a number of ways to improve your conversion rate, maximise the profitability of a deal, and lengthen the life of a customer.
1. Swipe Don’t Type
Most sales professionals know that taking an AmEx card is going to cost their business more (around 3.00%) than taking a debit card (around 0.10%). What you may not know, however, is that the way in which you accept that payment can also dramatically affect the cost to the business.
If you physically swipe a payment through a credit card terminal you will in general save 0.3% to 0.4% over accepting a payment over the phone or keying it in. That may not sound like a lot, but losing $0.50 on every $100 in revenue starts to add up. And for businesses that operate on relatively low profit margins, it can eat up 10-20% of the profit in a deal.
So, as a rule, if you can swipe a card, you should always do so.
2. Take Payment Where the Customer Is
Given that rule #1 is that sales professionals should always swipe transactions when possible, what do sales professionals who work in the field do? The answer, is to use technology that allows you to take swiped payments remotely.
Mobile swipers that plug into your mobile phone used to be the exclusive domain of Square. The problem for anything but the smallest companies, is that Square is very expensive and doesn’t integrate with your main credit card processing account. Thankfully, mainstream credit card processors like Soar Payments and Global Payments have started offering mobile swipers at a cost of $25 to $40 per swiper. Unlike Square, payments via these mobile swipers deposit into your main credit card processing account, use the same cheaper pricing as a swiped transaction you accept in the office, and show up in the same monthly report as your regular processing.
The other benefit to taking payments directly in the field, is that once you have a client committed and ready to make a payment, you’re ready at that instant to accept it. Relying on the home office to follow up and accept payment, or relying on the customer to not have second thoughts inevitably lead to some lost sales.
So, rule #2 is, take payments where your customers are.
3. Obtain Recurring Authorisations
Obtaining an authorisation and enabling recurring transactions in a situation where your customers will pay you via a payment plan is the exception to rules #1 and #2. It is an exception because a recurring transaction is not a swiped transaction, but rather a 'card not present' transaction. As a consequence, accepting a payment via a recurring transaction costs the business an additional 0.3 to 0.4%, which is charged by the credit card companies due to the increased risk of fraud in these types of transactions.
Despite that additional cost, however, it’s still worthwhile in situations where a customer has signed on to a payment plan. The reason, is that relying on a customer to regularly send in a check to make a payment based on an invoice is a recipe for losing customers. By contrast, a customer who signs an authorisation form which gives the company the right to put the customer on a monthly or weekly recurring billing plan, will have far fewer problems collecting payments each month. That’s because the payment process is passive insofar as the customer doesn’t have to do anything to initiate a monthly payment, but has to do something (call you to cancel) to stop payments. Combined with the fact that this saves you from the expense of having to send out a physical invoice and process a check, since recurring payments all occur automatically, recurring billing is a powerful tool whose benefits far outweigh the additional costs.
So, rule #3 is, whenever a customer is on a payment plan, enable recurring transactions.
Understanding the byzantine cost structure that credit card processors charge, the latest in processing hardware, and ways you can structure your payment plan clients to require passive rather than active customer participation can enable savvy sales professionals to optimise their sales processes. These three basic rules, while by no means exhaustive, can help improve your own numbers and your company’s bottom line.