Not sure if it’s just me, but lately I’ve been doing business with others who have been asking for cash payment only, or if you want to pay with a credit card, there’s a convenience fee. They decide to charge this fee because the credit card processor charges them a fee for accepting credit card payments so they pass this through to the customer or client. So if I wanted to spend $20 and there’s a 3% convenience fee, that’s a total of $20.60, so maybe not a big deal. But what if you’re spending $1,000? That same fee would be an extra $30 that you may not have budgeted for or it may not be worth it to you to use a credit card (trust me, I love the cash back and travel rewards just as much as the next person). But what if you didn’t have to charge a convenience fee to your customers or clients? ‍

There are 3 ways to handle the fees you are assessed by your merchant provider (the company who accepts the credit card payments for you such as Square, Stripe, QBO, local provider, etc):

1. You eat that cost as a business expense, I mean, it is a tax deduction, right? It’s just the cost of doing business. While this may be true, you want to make sure that you’re not decreasing your profit because of this “added” expense either. Which is why I would personally suggest the other two options.

2. You increase your fees to account for that expense. So there’s going to be some math involved here… if you’re fees are $97 and you are (or used to) charge 3% for the convenience fee, that would be a total of $99.91. If you want to make sure that you are still earning $97 in real revenue, which is probably the number you used to determine your budget, I would recommend charging $100 for all customers no matter what form of payment they use (most people like rounded numbers). Then, on the back end of things (usually your books – ie, Xero, QBO), you would show that Income of $100, have a Cost of Goods Sold in the amount of $2.91 (assuming the actual rate of your merchant fee was 3%), and the difference would be your real revenue – in this case $97.09. Hey look at that! Not only did you still make your $97, you gained 9 cents and I don’t think the customer or client cared for the small difference for your service or product. The best part - they don’t actually have to know you’re doing this!‍

3. Give your cash-paying customer or clients a discount. While charging a fee has a negative response, giving someone a discount has a more positive response that may lead them to pay cash instead. So using the same fee example in #2, if you are charging $100, offer a 3% discount if they pay in cash. The customer or client believes they saved some money and you still have $97 of real revenue to budget for.‍

Wouldn’t you as a consumer prefer to have an option to receive a discount instead of being forced to pay an extra fee? And I highly recommend to inform your customers or clients up front what forms of payment you do accept so that they’re not surprised at the time of the sale. This happened to me with a large expense and I had planned on using my credit card so that I could earn the cash back rewards (yes, I did have it budgeted if I wanted to pay it off right away). Well, I wasn’t notified that there was a 5% convenience fee if I used a credit card, and I didn’t have time to run to the bank as it was more than an ATM would offer. So I was forced to pay that fee that I did not budget for. If you’re not sure how to price your services to account for this business expense or how to track it on the back end, I’d love to have a chat with you during a complimentary discovery session.