Tag: cash management

Reasons To Take Credit Cards

Finance

If you sell your product directly to customers, taking cash and cashier’s checks are the safest way to insure you get paid. They are also quick to get your money, usually they are available funds right away when you deposit them in your bank, and you can spend the cash without depositing it. Although depositing all of your receipts does give you a record of the revenue for later when it’s time to fill out your tax forms.

The problem with taking only cash or cash-equivalent payments is that it is inconvenient for the customer.  They have to make a visit to their bank or ATM to get money to pay you, as often people carry very little cash.  You can accept your customer’s personal check to improve the convenience a bit, but ultimately you are going to have to be as flexible as possible so that it’s easy to do business with you.  Accepting all means of payment possible is the best choice, which means accepting credit cards.

Credit cards have fees associated with them, but your customer’s payment will be in your bank account in about 3 days.  For remote orders, either internet or telephone, accepting credit cards reduces accounts receivable significantly, as you don’t have to send out a bill and wait for payment.  You just take the numbers over the phone and run the credit card right then.  You can imagine this is a much safer way to take payment remotely also, as you know you are going to get paid.

One other major advantage of taking credit cards that you may not know is that many people will balk at making a $50 purchase, but putting a $50 on their credit card is not as big a deal.  For some reason people don’t associate a credit card payment with spending money.  For this reason they are likely to spend more.

In our business, we did everything we could to avoid taking credit cards but one thing made it unavoidable: Our business ramped up quickly and we could not afford to wait for money from our customers, often for 30 days or more.  We were selling around $10,000 per week to customers so our accounts receivable was around $50,000, which was unbearable.  I carried a very large balance on my American Express and was fearful of the day I couldn’t pay it.

To take credit cards, you must contact a company that specializes in merchant services.  You fill out some paperwork, get a credit card machine or software for your computer, or connect with your provider through your website, a little set up and then you’re taking credit cards.  Make sure you price your products so that you can afford the fees… they can vary so you may want to shop around a bit.

Do you accept credit cards in your business?  What have you found the advantages to be?

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The Danger Of Spending Money On Advertising

Finance, Sales And Recruiting

You can promote your web site in many ways for free on the internet and off the internet.  You can give out business cards, put a sign in your yard or on your car, put an ad in the free classifieds, get listed on search engines, and so forth.  Advertising for free has one thing in common no matter how you do it: Any business you get from your effort is free from expense.  And by expense I mean actual outlays of cash.  Advertising always has a cost and for free advertising, the cost is usually your time.  Still, you can spend gobs of time advertising for free and you won’t worry about paying your mortgage payment, you just won’t get to watch as much TV or do things outside of your business as much.

When you start spending money on advertising one thing will be perfectly clear: You will get business but there is a cost that you will feel.  And sometimes your paid advertising will get you less business than your free advertising.  Yes that’s right, often you will get business that will not match what you were able to generate for free.  So why spend money on advertising?  Because eventually you will want to do things bigger than you are able to do with free advertising.

Paid advertising is not cheap.  Some advertising is more effective than other advertising though.  For instance, you can spend 25 to 50 cents per click through for google advertising, but I notice that visitors from google will spend more time on the site than visitors from stumbleupon.  Still, you will pay only 5 cents per click from stumbleupon so you can get 5 – 10 more click throughs with them than google.  And stumbleupon could actually be more effective per click because some people that visit will link to the site by giving it a thumbs up.

It is always good to test advertising, both media and format, before going larger with it.  Usually I’ll spend $100 – $200 on a test to see what kind of results I get.  If the test works well, the sky is the limit on how much you can spend.  I used to have a contract with Excite to spend $3000 per month on banner advertising.  You can go much larger than this though.  You usually spend this kind of money after you start making at least this much money with your business, by the way, because advertising will not give you an immediate return on your investment.

In fact, it is probably a good idea to plan out your advertising, to see what your return on investment probably will be and how long it will take you to make money from your efforts.  You can usually figure this out based on your current marketing results if you can gather the right kind of data.  Mainly you want to know what an average customer spends over what period of time, and what kind of dropout rate you have.

In our past business, we tried advertising in many different ways.  I used card decks, small display advertising in magazines, a full-page ad, banner advertising, and several other forms.  Magazines have good hang times, as they stick around for long periods of time.  Banner advertisements are better over time but die quickly.  So there are different advertising strategies that can be used with different effects.  Overall we found that our best advertising was what we could get for free, it just took a lot of time to get it.

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