It’s no secret that there is a cost to credit card acceptance. Actually, it is one of the main reasons cited by B2B companies for not accepting credit cards. According to a survey by First Annapolis Consulting, 67% of suppliers noted that high credit card acceptance fees are the main reason they resist credit cards. This is a fair reason as fees are a cost to their business, but what many suppliers do not understand is the benefits of credit card acceptance. The value it creates can significantly outweigh the cost. Particularly in a changing marketplace where consumers are driven by digital convenience, accepting credit cards is a topic that is on the minds of many suppliers – as it should be. In a November 2015 report “Canadian Payment Methods and Trends 2015“, findings show that check acceptance declined by 50% from 2008-2015 while credit card acceptance grew by 30% and EFT grew by 9% per year.
These are telling numbers; check is a dying form of payment and customer preferences are changing. Customers want an online experience, enjoy using their credit card to gain reward points for their next big trip, trust the security of paying with card vs. check, and benefit from the credit card terms to extend days payable outstanding (DPO).
There’s no denying credit cards are a great method of payment to extend to customers for their convenience, but the big question is: “Does it make sense for your business?” Not every relationship and buying behavior is appropriate for card, but for those that are, there is a huge opportunity to reap value. This opportunity is exactly what Rob Nicholson, Head of Commercial Solutions at Visa, addressed in our webinar last week: “B2B Credit Card Acceptance in a Digital World“.
1. Cash Flow: Offering credit card acceptance to customers has allowed suppliers to decrease their days sales outstanding (DSO). Without credit card acceptance, some customers will sit on their invoice to optimize their days payable outstanding (DPO). But when card is added to the environment, customers tend to pay with their card to gain benefits of improving their DPO (defer payment with their card program 45-60 days), in turn improving the supplier’s DSO.
If you’re interested in learning more about how credit cards can be a cash flow tool, Rob and Mislav share some additional ideas in the webinar (e.g. instead of term discounts, offer card to outweigh fees and get paid faster).
2. Process Improvement: According to a survey by Aite Group, 88% of suppliers current method of receiving remittance data is manual – a document via email that needs to be rekeyed into their system. This is a tedious process and involves a large processing cost of manual labor. With credit cards this cost can be eliminated. Robust remittance data is automatically flowed back to your system which increases labor productivity. During the webinar, Rob touches more on the improvements that card can bring to your process.
3. Cost Reduction: We all know that the collections process can be monstrous for accounts receivable departments. It involves the typical scenario – chasing invoices and customers to pay their bills and ultimately, waiting for a check to be sent back along with the risk of losing it. With credit card acceptance this is all eliminated, especially with an automated system. Customers can log into their online invoicing portal, view their invoice and pay with card online. Payment is automatically received and there is no need to wait for a check in the mail. Another aspect of cards Rob addresses is how they avoid credit adjudication for new customers. Have a listen to the recording above to learn more.
4. Risk Mitigation: Have you thought of credit cards as a risk mitigation tool? In the webinar Rob addresses how accepting cards allows you to mitigate risk against bad debt, secure receivables, reduce fraud exposure, and the risk of handling cash.
5. Customer Satisfaction: As mentioned in the beginning of this post, customer preferences are changing. By offering credit cards, you meet the needs of your customers and their desire to use card payment as their strategy to improve their DPO, increase the speed of invoice settlement and to realize personal benefits (gain those trusty rewards points.)
Are you on the fence about whether you should accept credit cards for your business? I recommend you to take a look at Rob’s webinar. In 30 minutes, he shares a lot of great information that will help you determine if the value of credit card acceptance, outweighs the cost.