This year, many small businesses find themselves struggling due to high interest rates and well-known labor disputes. It’s become crucial for them to consistently exceed customer expectations. However, about 30% of small businesses are falling behind in one important area: payment processing. A recent survey from Xero shows that while 90% of American consumers prefer to pay with a card, a good number of these businesses can only handle cash or check payments. This disconnect often leads to customers leaving without completing their purchases.
After a challenging year, small businesses can’t afford to lose customers due to outdated payment methods. Still, moving to digital payment systems isn’t always easy. There are a few hurdles holding these businesses back:
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Incompatible Hardware: If a business has already set up a digital point-of-sale system but hasn’t added new payment options, updating it can be tricky. Sometimes, the existing system might need a complete overhaul, which can be costly for business owners who see their current setup as still functional.
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Disjointed Customer Service: Switching to a new payment processor can be complex, and busy shop owners often lack the time to deal with difficult customer service processes. Frustration with complicated contracts can lead some to abandon the idea altogether.
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Incapable or Unwilling Personnel: New systems come with a learning curve, both for business owners and their staff. If employees are not ready or willing to adapt to a new system, digitization efforts may fail.
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Added Fees: While additional payment methods provide flexibility, there’s usually a 3-5% fee attached to card payments. Instead of scrapping these options, businesses can encourage cash and check payments by offering small discounts. Adding ACH payments and digital wallets like Apple Pay or Google Wallet can also ensure business isn’t lost, especially since only 22% of Gen Z still uses cash in-store, and their spending is expected to surpass baby boomers by 2029.
For small businesses that haven’t upgraded their systems for card payments yet, there are still ways to ensure timely payments:
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Invoice and Automate: Some businesses might manage payments through invoices rather than in-person sales. In this case, customers can have a few days to pay instead of needing cash or a check immediately. To improve payment timing, clearly set payment terms and use online platforms to send regular reminders.
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Get Creative: Businesses can motivate customers to pay invoices early with small discounts and consider accepting partial payments upfront. This helps maintain better cash flow even if other payments are delayed.
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Streamline with Software: Implementing new payment methods can be simplified with software gateways, making it easier to accept a variety of payments. Using accounting and invoicing software helps streamline managing payments and billing clients.
A recent survey by PYMNTS Intelligence found that 72% of consumers are more loyal to businesses offering preferred digital payment options, and 91% see real-time payments as essential. Given these trends, small businesses need to rethink their payment processes and consider modernization to stay competitive, especially as economic uncertainties persist.
