Staring up any business can rack up the bills instantly – it’s essential that every business-owner realises how much effort, time and money needs to be expended before any profits can be make. Initial overheads can, in many cases, cause the requirement of a loan or use of a government-backed scheme before trading even really starts.
Costs expected off the bat include:
Sales and marketing – This takes into account printing, advertising and public relations. Getting the SME out there is essential.
Administrative – Office supplies, business insurance, packaging, rent, utilities…anything that you need to run the business needs to be bought first off.
Technology – It’s very difficult to successfully run a business these days without either some internet presence or use of emails. There’s also essential computer hardware to take into account.
Sales cost – the actual cost of the items sold.
A cost which SMEs may not at first consider is the cost of actually selling items and services – that is, when accepting payment with a credit card.
The Cost of Plastic
Giving customers the option to pay with card rather than cash makes services and products more accessible. Increasingly, consumers prefer not to carry around money – being able buy anything with card is quick, easy, and doesn’t require a visit to a cash machine.
That said it’s got hidden prices for retailers. Companies can expect to pay a transaction fee on any credit card payment they take. This is a world-wide issue: in the UK, credit card transaction fees have been accused of been ‘disproportionately high’ by the British Retail Consortium.
A hefty 38p per transaction is common on credit card transactions. That makes it an incredible 25 times more expensive to accept a credit card payment than a cash payment.
But cutting out card transactions could cut out a large proportion of customers – so what can be done?
Make it Cheaper have done a more in depth review of the damage being done by card transaction fees on retailer profits.
Making the Switch
Retailers are not obliged to stick with their merchant services provider. Finding a merchant sales provider which charges less doesn’t need to be hard – a quick search online does the work – and some providers have started to slash transaction fees in a bid to gain the custom of more small, start-up businesses.
One such provider is Square, having recently simplified credit card payments by eliminating its 15-cent transaction fee.
Keeping card transaction fee costs low can really rack up the savings at the end of the financial year – and saving money wherever it can be saved is essential for any SME.
Image Credit: 401(K) 2012