10 Payment Alternatives to Get Paid Faster as a Small Business
Explore a range of modern and traditional payment methods to optimize cash flow and reduce bad debts.
One of the major benefits technology has brought to small businesses is the vast array of payment options now available. Gone are the days when cash and cheques were the only methods of payment. Today, businesses can choose from a variety of options—including debit and credit cards, mobile payments, and direct debit services—that streamline transactions and help manage cash flow more effectively. In this guide, we’ll explore 10 payment alternatives, discussing what each method is, how it works, and the advantages and challenges it brings to your business.
1. Cash
What It Is:
Cash remains one of the simplest and most tangible forms of payment. It’s immediate, requires no processing fees, and provides instant liquidity.
How It Works:
Customers pay with physical currency.
Transactions are recorded manually or via your accounting system.
Pros and Cons:
Pros: No processing fees; immediate access to funds; simplicity.
Cons: Risk of theft; not ideal for high-volume transactions; declining usage as more services move online.
Example: Many small retailers still accept cash, but note that the COVID-19 pandemic has accelerated the move away from cash in favor of digital methods.
2. Cheques
Overview:
Cheques are a traditional payment method that remains in use today, particularly in industries where a formal paper trail is valued.
Key Considerations:
Processing Time: There is often a delay between issuing a cheque and the funds being deposited in your account.
Risks: Bounced cheques can lead to financial losses and administrative headaches.
Challenges:
Time-consuming preparation and mailing.
Reconciliation delays that can make your bank balance appear higher than it actually is if cheques haven’t been cashed yet.
3. Credit Card Payments (Onsite/Mobile)
What It Is:
Credit cards are a popular payment method that offer convenience and fast transactions. They can be processed onsite using a terminal or through mobile devices.
Details:
Traditional Setup: Businesses sign contracts with payment processors (e.g., Global, Moneris, TD) and use physical terminals.
Mobile Solutions: Smartphone add-ons (like Square) allow you to convert your device into a card reader, with fixed transaction fees (e.g., 2.75%) and no monthly contracts.
Software Integration: Platforms like QuickBooks Online offer direct credit card processing, automatically recording payments on invoices.
Pros and Cons:
Pros: Fast payments (funds received within a couple of days); reduced bad debt risk; convenience.
Cons: Processing fees can be high; contract requirements and fee structures vary.
4. Internet Credit Card Payments
What It Is:
Online payment processors enable businesses to accept credit card payments via their websites or invoices without the need for physical terminals.
Examples:
PayPal: Offers global accessibility, multi-currency support, and a built-in bank account feature.
Stripe: Provides a seamless setup for online businesses, with funds transferred to your bank account on a weekly basis, net of fees.
Integration:
Both services integrate with various invoicing and accounting platforms (e.g., Xero, Calendly), making it easier to manage payments and automate bookkeeping.
5. Direct Debit Payment Services
Overview:
Direct debit solutions allow you to automatically collect recurring payments from customers. This is especially useful for subscription-based services.
How It Works:
Customers sign a pre-authorized debit (PAD) agreement.
Payments are automatically debited from the customer’s bank account.
Notable Services:
Examples: Telpay, Plooto, Waypay, Rotessa.
Benefits:
Lower fees compared to credit card transactions.
Convenient for recurring payments, though settlements may take a few days—affecting immediate cash flow.
6. Wire Transfers
What It Is:
Wire transfers are electronic funds transfers that move money directly from one bank account to another, often used for larger or international transactions.
Considerations:
Cost: Generally higher fixed fees compared to other methods.
When to Use: Best for large transactions where the cost is justified by the amount being transferred.
7. Email (E-)Transfers
Overview:
Interac e-Transfers (commonly known as email transfers) are a popular, low-cost method for sending and receiving money in Canada.
How It Works:
Available through most online banking platforms.
Requires the recipient’s email and a security password.
Advantages:
Quick and efficient, with funds typically available within hours.
Minimal fees, though limits on daily amounts may apply (which can often be adjusted by your bank).
8. Electronic Transfers (ACH/EFT)
What It Is:
Electronic transfers, including Automated Clearing House (ACH) and Electronic Funds Transfer (EFT), offer a cost-effective solution for moving funds between bank accounts.
Usage:
Ideal for processing bulk transactions or recurring payments.
Authorization is required from the customer, and the clearing time is usually a couple of days.
Benefits:
Lower cost per transaction compared to paper-based methods.
Efficient for periodic billing and large volumes of payments.
9. Debit Card Payments
Overview:
Debit cards allow customers to pay directly from their bank accounts. They are a common payment method in Canada and often come with lower fees than credit cards.
Key Points:
Direct Withdrawal: Transactions are deducted directly from the customer’s account, ensuring lower fees.
Convenience: Widely accepted, reducing the need for cash handling.
Impact:
For Businesses: Debit cards streamline payment processes and reduce the risk of non-payment, though they might not offer the same credit benefits as credit cards.
10. Money Orders, Drafts, and Certified Cheques
What They Are:
These payment methods are used when there is concern over the debtor’s creditworthiness. They provide a more secure form of payment than personal cheques.
Usage and Considerations:
Often used for infrequent or large transactions.
They are generally more expensive for the payer and are less practical for recurring transactions.
Useful when a guarantee of payment is required.
