If your business does business with other businesses, chances are payment processing makes up a much larger part of your annual expenses than you would like it to. Corporate, Purchasing and Business Cards have the highest cost or “interchange” rate to accept out of all non-international card types. Your customer’s “rewards” are paid by you and not the generosity of the credit card companies. That doesn’t include the cost of equipment, PCI-compliance and other hidden fees, which leave many businesses with huge annual costs.
The good news is that “the times, they are a changin”. There are a number of ways B2B companies can reduce or eliminate these payment processing costs altogether:
1. Level 3 Processing Can Slash Your Costs by over 25%
Interchange is the fixed cost for each card type issued by Visa, Mastercard, Discover, American Express and other credit cards for US merchants. It is regulated by the Federal Reserve, and changes every April and October. There are hundreds of different rates, based on the type of card and issuing banks. Visa, Mastercard and the other credit card companies publish these rates on their websites and every processor in the US, regardless of size, has these exact same fixed costs. For more information check out this blog: https://teammerchant.com/blog/2017/11/8/credit-card-fees-interchange-explained
For B2B companies, Level 3 Interchange Optimization can slash those costs significantly, often times lowering the rate to below what a traditional consumer or rewards card would cost to accept. If you accept Business, Purchasing and/or Corporate cards and aren’t qualifying for Level 3, chances are you're paying way too much in payment processing costs. The difference in the rates just goes in the coffers of the credit card companies, and they don’t really need the handout from you (but will gladly take your money).
2. Large B2B Tickets = Large B2B Savings
Your Business just closed a HUGE deal with another business. Congratulations! Getting paid on a huge deal feels great, paying processing fees on one, not so much. With Level 3, merchants who are accepting payments higher than $7,500 are eligible for what is called “Large Ticket” discounts, depending on the card type and size of the transaction. Merchants can save between 25-75% of the total cost of the transaction by lowering the risk associated with these transactions. Best of all, there are solutions that can do this seamlessly on the back-end, with no additional work from you. Stop paying almost 3% on every credit card transaction and instead pay as little as 0.5% with Large Ticket Discounts.
3. Surcharging is Legal For Some Businesses 2019 (if you follow the rules...)
If you’ve ever thought (or screamed) “These fees are too high, why do we even take cards?”- there is good news. Surcharging, also known as cash discounting is now legal. For B2B companies with slim margins, 2-3% can make all the difference. There are strict rules and regulations about who can and cannot surcharge, as well as signage, rates and notification of card brands that merchants need to follow. If you live in California,Colorado, Connecticut, Florida, Kansas, Maine,Massachusetts, New York, Oklahoma and Texas, there are unfortunately state laws that ban surcharging credit cards(with some exception). Companies in any other state however that surcharge can look to increase their bottom line significantly- by passing the cost of accepting cards to the customers that choose to pay with them.
4. It’s All About That ACH, ACH
Accepting cards, even with Level 3, can still be expensive for B2B companies and surcharging doesn’t work for everyone.. ACH and other bank to bank transfers have come a long way and there are new solutions that make accepting ACH payments as simple as accepting credit cards. Moreover, if your business still accepts checks, ACH can dramatically increase your cash flow with a fraction of the costs to push paper between you and your customers. ACH fees are miniscule compared to Credit Cards and you can avoid the downsides of card acceptance like fraud and chargebacks.
5. Connecting Your Payment Processing Can Transform Your Business
The previous entries are all about reducing the cost of accepting cards.. However, the overhead associated with reconciling these payments can often be more expensive than interchange rates. There are 1,000’s of software solutions from accounting systems like Quickbooks and Xero to CRM and ERP solutions like Hubspot, Salesforce and Oracle, not to mention ticketing, analytics, HR, and other SAAS solutions that have helped bring many businesses into the 21st century.
The problem is these software systems don’t talk to one another, costing your business money and wasting time. If you find yourself having to do manual entry, reconciling multiple items or having to export/import data constantly, there are many new solutions that can help better connect your business ecosystem. If you’re thinking, “it would be nice if X could talk to Y” in 2019 chances are it can and probably should.
-Andrew & Brian
Team Merchant provides a no obligation Discovery Analysis to B2B companies to help evaluate these areas and more (including PCI compliance and data security). Our partner company Paycove is a software solution that connects CRM, Invoicing, Quoting, Accounting systems and more. Schedule a meeting with us today to see how we can help your business in 2019 and beyond.