8 Ways to Receive Payments as a Small Business Owner

Hello. If you're a small business owner or self employed, or if you have a side hustle, one of the first things that you have to figure out is how to get paid. And of course this can evolve over time as your business changes. So in this video, I am going to go over the most common payment options for your Canadian small business. My name is Ronica Can. I am a cpa, a CFA, and the founder of Montreal Financial, where you can find lots of resources for your small business. And I encourage you to sign up for my newsletter. Okay, so let's go through the payment options. Number one, tried and true and tested is cash. So cash in recent years has become less, less common. And in some cases, especially during COVID it became almost obsolete. Especially in some places, it wanted contactless payments as much as possible. But there are still businesses, most notably retail, restaurants, et cetera, that do still accept cash. And this is certainly an option. The pros to cash is that there are no fees and you get the money immediately. The downside is that cash is easy, easy to lose or misplace. It's harder to control, it's harder to track. And so if you do accept cash in your business, then I recommend ensuring that you have a system in place. You deposit it immediately or at the very least, record it in your accounting system so you can keep track of it. Next option, which has also been around for a very long time, are checks. And checks are also becoming far less common these days, but they are still accepted. And there are certain arrangements, like if you're paying your rent or sometimes to pay your suppliers, or some customers might just want to pay you by check. That's what they're used to, particularly with respect to older generations. And so if you do receive checks, the pros of checks are that some businesses have just been using them forever. They have a system in place, they have their checkbooks, they have their printer that prints the checks, etc. And also, you don't really need a special platform. There may be some fees that are associated with checks with your bank, but these tend to be lower than some of the other options. The downside is that they are checks. You get a piece of paper that you hope clears, or I mean, is it in the mail? Is it not in the mail? So it can be difficult to verify that you've actually sent payment. They can obviously bounce or be delayed. So even once you have cashed a check, you cannot be 100% sure that you're receiving payment. And one of the other downsides with checks is that you actually have to take the check, take it out of the envelope, and then go to your bank and deposit it. There are also online apps that allow you to deposit it relatively easily. But for example, I received a check the other day, it was fine, the person had the money in their account, but it still bounced. And we, we have no idea why. So sometimes, and this happened several days after I received the check. So there was issues all around. And this again is a risk with receiving checks. If you do still take checks, first of all, it might be worth it to try encourage your customers to switch to a more reliable payment method. Or if you, if there's nothing you can do about it, then just make sure you record your checks promptly and you have a good recording system. And that's going to be, you know, the same advice for all of these payment options, obviously. Okay, so the next option, and this is specific to Canadian businesses, is that you can accept E transfers. And what that means is that you can receive payments from your customers via email. The E transfer, many of you probably probably used it. You can simply go to your banking interface online or through a mobile app and you can initiate an E transfer and then it gets sent to you and to whoever's email address or phone number it gets sent to can simply deposit the payment once they know what the secret password is. So this is super easy to do and to accept. And it's very low cost for more people. For most people, some banking plans actually have it for free. And people use it, they know it, they trust it. The downside to E transfers is often there's a limit on how much you can send. So this becomes problematic if your invoice amount is for an amount that is over the limit. But you have to receive payments, so they'll have to be paid in installments. You might have to follow up to receive the next installment. So that can be a huge pain. You also need to again have a good system in place to ensure that you're matching the E transfer to the invoice that was sent to your customer. The next option are credit card payments. So what has become vastly easier in the past few years is for any small business to receive credit card payments, you do have to apply. But as long as you meet certain criteria and your credit is okay, chances are you will be accepted to receive credit card payments. And then you can use services like Stripe. Stripe is probably one of the most popular ones, as well as PayPal. And PayPal is great because it is also international and you can accept payments and many, many people use PayPal. And another specific option includes QuickBooks payments. And as some of you know, I talk about QuickBooks Online a lot on this channel. Setting up to rece receive payments through QuickBooks Online is relatively easy. And the automation aspect is of that is really good. It takes all the friction out of the process.

So as discussed, the pros of receiving credit cards is that they're fast, they're easy, and they make you seem more professional, like you have a system in place and you know you likely have a number of customers. The biggest downside are the fees. The fees tend to be, some of them fairly standardized, tend to be about 3% of a transaction, unless you have a lot of transactions, in which case you can probably negotiate your rate with your payment processor. And the other downside of credit card payments is sometimes it takes a few days to settle, so you don't get the cash in your account right away. You might actually have to wait until your credit card processor, until Stripe or PayPal or QuickBooks Payments settles the payment. And one other upside is that because they come directly into your account, there's a tag. They're easier to record because you can always find a record of who paid you. Okay, so the next option are bank transfers. And there you can receive for, especially for higher value clients, you can receive bank transfers, wire payments, etc. From your bank and the customer has to initiate this on their side. There's often a fee that's higher than the other methods that we discussed associated with wire transfers. However, that being said, if you do receive wire transfers, say you have international clients or you have clients within Canada who send you higher amounts and like to pay by wire transfer. There are a couple of services that you can use. I personally use something called Pluto, which is pretty good for receiving payments from customers, especially if you want to set up a pre authorized debit with your customers. So this is just recurring and automated and as long as they sign an agreement, it happens every month. And another option is Retessa, which also works similarly. And the way that it works is you ask your client to fill out their banking details and then the payment just gets debited from their account and credited to your account. The upside of this is these tend to be lower fees than credit cards and they're a great way to automate the process, save yourself some time, and you don't really have to worry about recurring payments, having to go in and initiate them and contact your client, etc. The downside is that there's a setup process involved, each customer has to be set up individually. They have to sign the agreement. In addition to that, settlement may also take a few days, similar to credit card payments. So you might not get the payment right away. Okay, so the next option are online store payments. So if you are an online creator, you sell online products or services, there are various options for you. Shopify and Squarespace are two of the more popular ones. There's WooCommerce. And what these do is they help you set up to receive payments. They are the front end and the back end tends to be something like Stripe or, or you can also use PayPal or credit cards, et cetera, to receive payments. But it's just very easy to do through your online store. And in addition to it being easy for your customers, there tends to be a low friction checkout process. So they click on the product or the service that they want to buy and then they go through the steps. Most people are used to doing this already and in fact some people just have their payment information saved their web browser. So it all happens very quickly. The cons are that there are fees and costs involved and there's a setup process. But once that's done, again, it is quite easy to do. And one of the other potential downsides, there's again, there's so many online stores that you can use. Some of these online stores also take fees in addition to the payment processing fee, depending on what plan you're on. So that's something you want to figure out and calculate and compare to other options that you have. So the next option, and which again overlaps with the options above, is that platforms like QuickBooks Online and Wave Accounting allow you to send invoices and receive payments by various methods, usually credit card payments. And basically once you send out the invoice, the customer can simply click on pay, it will take them to a credit card payment interface, and then they can just simply go through that process. And it is quite simple and easy to do. And the other pro of this approach is that your accounting system will tend to, especially if you're using QuickBooks Online or Wave will automatically record the payments. So there's not anything, there's nothing that you have to do on your side. The downside of course again is fees and 3% can be significant for a lot of us. So it is again something that you want to consider versus an E transfer, for example, which has very low costs associated with it. And finally, in terms of payments, we are going to look at foreign payments. So if you receive invoices from international customers, then you have a few options. In Canada, the most common option tends to be PayPal. A lot of people internationally will have people accounts set up, so it's very easy to Send from one PayPal account to another. The other fairly simple option is Stripe. Stripe allows you to receive payments from foreign customers or if you're receiving larger amounts, you do not want to offer credit cards. Again, you can receive wire transfers as mentioned above, directly through your bank, whatever bank you use, TD or RBC, etc. Or if you want to reduce your foreign exchange fees. A lot of people use Wise and I personally don't use it, but I've heard good things about it. And again, the big upside is that there are lower foreign exchange fees. And the one thing you want to keep in mind when you are recording payments in your accounting system, often there will be, there will almost always be an exchange fee. And you want to make sure that you reflect this and that all of your invoices and payments ultimately are reflected in Canadian dollars because that is how you are required to report your income. And then a final note on payments is with respect to taxes. So if you were selling anything, a product or a service, regardless of whether you just do it part time on the side or if you do it full time as a freelancer, if you were a resident of Canada, you were required to report these as business income on your tax return. And if you are a sole proprietorship, even if you're not registered, it doesn't matter. It's irrelevant whether or not you're registered. CRA considers you to be a good business regardless of registration, as long as again, you are receiving payments in a business context and that business context is the selling of products or services or both.

So that is essentially a summary of all the ways in which you as a small business owner can receive payments. When starting out, you may just have a couple of payment options. Maybe it's just e Transfer or PayPal. And as your business grows and gets bigger, you might want to add more payment types into the mix. It's really dependent on what you sell and how you sell it, whether you sell online or whether you simply invoice your customers an amount every month or every couple of weeks. So I hope this was helpful. If you have any questions, don't hesitate to leave a comment and I will try my best to answer it. And please like and subscribe to my newsletter. Have a great day.