Payment Options: Barters and Transfers and Trades. Oh, My!
by Margot Carmichael Lester, Staples® Contributing Writer
There was a time when cash and check were the primary payment options. Credit cards once seemed like a great leap forward, but now there are even more choices for receiving payments. Some old-fashioned and others new-fangled, which alternatives are best for your business?
Payment Option: Barter
When Andes Hruby realized the economy was tanking, the yoga and fitness trainer knew clients would be tempted to save money by dropping luxury services like hers. So the founder of Studio Blue Yoga in Bend, OR, got creative and started bartering. In exchange for teaching classes and providing personal training, Hruby received:
While the economy struggled desperately, it really helped me, to keep the yoga and fitness business stay afloat, she says. I believe I gave some of the best services to the clients I traded with. Its an excellent way to get back to the grassroots of who we are and what we do for one another.
Takeaway: Using barter is easy because the terms are case-by-case. Its most useful for small business owners who dont mind negotiating with clients to find an exchange that feels equitable to both parties.
Payment Option: Trading Networks
Trading networks help small business owners sell excess capacity at regular pricing to other merchants in a group. For example, a dentist may not be fully booked for a day; [we] reach out to other companies in need of dental service and get the dentist a new patient, explains John Strabley, CEO of International Monetary Systems, a 16,000-member trading network based in New Berlin, WI, that serves 52 major metro areas. The dentist earns trade dollars he then can spend with any other participating business within the system.
Takeaway: According to data from the International Reciprocal Trade Association, $12 billion worth of transactions between 400,000 companies were completed through organized trading networks. Though any enterprise can benefit from trading network participation, its most valuable for businesses in time-perishable industries like the hospitality, advertising and service provision, where unsold capacity expires. Non-perishable inventory has a longer shelf life, so it can hold until demand rises again.
Payment Option: Electronic Transfers
Electronic transfer the old-school wire transfer and the newer direct transfer is a useful payment option for small business owners who want to get paid quickly or are dealing with large sums of money. While transfers are convenient, the party youre paying does have to know your bank account, so use this option with extreme care.
Takeaway: This is a useful payment option for smaller dollar value payments or for recurring payments, like for coaching or monthly retainer business.
Takeaway: This payment option is best when transferring large sums of money, because it avoids the 10-day hold most banks place on big deposits, or when doing business internationally.
Jay Frye uses wire transfers regularly to make and collect payments related to the historic properties he renovates. I have confidence in the wire transfer system both from a security standpoint and in avoiding issues with banks and other parties rejecting large dollar-value checks, the Durham, NC-based Frye says. It also reduces the danger of check fraud. There are very few frustrations. I can access the wire functionality by phone or Internet anytime, anywhere. And the $20 wire transfer fee is very worth it when moving larger sums of money.
Is one of these alternative payment options a good fit for your enterprise? If so, remember to avoid costly events by talking to your customers and your banker before making changes in how you accept payment.