Electronic Payments Are Exploding

The online payment industry continues to grow rapidly in the United States and abroad. By electronic, I am referring to everything from credit cards, debit cards, Automated Clearing House (ACH or echeck), and mobile payment systems. Despite that, most accounting firms don't accept electronic payments and continue to process payments the old fashioned way. This process is slower and far more labor intensive.

Think about the mobile payments industry, it was not that long ago when we were unaware of Venmo, Zelle, Apple Pay, Google Pay, and the phone in your pocket. In fact, Asia is outpacing the world with mobile payments and surprisingly, China is probably the leader. My point is that you need to expand your horizon and provide more options for getting paid faster because mobile payments is projected to grow 38% in 2019.

Or think about payments for Uber or Lyft ride versus hopping into a cab. The payment methodology for taking a cab seems antiquated after you've gotten used to using Uber or Lyft.

According to our estimates, approximately 50% of accounting firms to not accept electronic payments. While this estimate may be rough, the point is that the accounting industry has been extremely slow to adopt electronic payments.

ACH or eCheck Payments

Let's examine Automated Clearing House (ACH, echeck) which was novel within the accounting industry about 10-15 years ago. Yes, it's been around that long and yet many accounting firms have been slow to get on board.

Simply said, ACH payments are a cost effective way to transfer money from one bank account to another without using paper checks, credit card networks, wire transfers, or cash.

In a nutshell, ACH processing is approximately 90% less expensive than credit card processing and was originally started as a system to replace paper checks. And while paper checks still exist, you want to accept echeck payments because they enable you to get paid faster than waiting for checks to arrive in the mail (float).

ACH payments are standard operating procedure for payroll processing (direct deposit), commercial rent payments, fitness centers, and many insurance providers. In other words, ACH payment processing is ideal for recurring payment processing, like your accounting practice. And as our industry continues to evolve towards pricing in advance and fixed fees, recurring payment processing becomes a larger portion of your practice.

ACH vs Wire Transfers

Wire transfers are processed in real time and with higher certainty than ACH. Wire transfers are popular with large ticket transactions (e.g., home closing, M&A, etc.) and international transactions while ACH transactions are processed in batches and take several days to clear, like a paper check.

Typically, wire transfers cost $20 to $30 per transaction, versus $.30 to $.50 for an ACH transaction. Wire transfers should be part of your practice but it really depends upon your need for immediacy, certainty and the situation given the huge difference in pricing.

Credit Card and Debit Card Payments

Credit card and debit card processing continues to explode despite the high costs for the merchant (seller, provider of service). In the United States, credit card processing is growing at a 10.8% rate despite higher rates of growth for ACH and mobile processing. In the world of ecommerce and marketing of reward cards (mileage and cash back offers), credit card processing is here to stay despite the high costs of credit card networks (e.g., over 3%).

Typically, the convenience of accepting plastic payments will cost the merchant (seller) at least 3% to 4% of gross sales after factoring in all costs.

By all means, the funding speed for plastic payments is faster than ACH processing by a couple days (excludes time for disputes).

What's Declining?

With the rapid growth of ACH processing, mobile payments and double digit growth of credit cards, guess what is not growing in the United States? You guessed it, paper checks.

The use of paper checks is a white elephant in the room that will slowly decline. Many businesses will continue to use them because:

• The float – Yes, the float on paying by check is huge.
• Some businesses charge extra for credit card payments

Like it or not, paper checks will eventually die a slow death. Here's a 2017 article from CPA Practice Advisor illustrating the "widespread problem" with paper checks.

The second fundamental shift in payment processing is integration with QuickBooks. In other words, the days of manually keying in transactions into QuickBooks is rapidly going away with integration tools that sync with QuickBooks Online and QuickBooks Desktop.

The Opportunity

Online payment processing platforms are now enabling accounting firms to shrink accounts receivable (AR), have more control over getting paid faster (auto bill), reduce labor associated with managing AR (Sync capabilities with QB), and lower the ABSOLUTE cost of getting paid significantly below 0.6% while still providing customers with plenty of payment options.

Here's a few ways BizPayO can accomplish this for your accounting practice.

• Fixed fee clients are set up on autopilot. Client signs your engagement and authorizes you to get paid each month.
• One-time payments are accomplished too.
• Credit card and debit card payments are accepted but marked up to recover credit card processing fees so you can get paid around net $0 for plastic payments of all types. Even Amex and reward cards.
• ACH processing fees are processed for most clients at a 90% discount to traditional credit card processing.
• As more and more clients use BizPayO, your float and AR quickly shrink and cash flow becomes more predictable each month.
• BizPayO Sync Manager integrates with QuickBooks Online and QuickBooks Desktop to save time.

Or said another way, BizPayO starts to help you maximize your cash flow in every way possible.