As a tradesperson, your expertise lies in delivering quality service, be it plumbing, electrical work, or any other skilled trade. Managing payments efficiently, however, is just as important for the success of your business. This comprehensive guide covers everything you need to know about accepting payments in the field, from choosing the right payment methods and ensuring prompt payments to setting payment terms that work for your business.
Top Payment Methods for Tradespeople
It's important to make it as easy as possible for your customers to pay you promptly. The best way to that is to offer diverse payment methods to cater to your clients’ preferences. Here are some of the most popular payment methods in the US, UK, Canada, Australia, and New Zealand:
1. Accepting Credit Cards and Debit Cards
Accepting credit cards and debit cards is almost a must these days for small businesses. Your clients want the convenience (and the points!), and it’s a secure way for you to process transactions without the risk of handling cash. When you’re considering card payment processing solutions, look for quick payment processing times and low transaction fees.
How To Accept Credit Cards and Debit Cards
These days, there is a wealth of options available to accept card payments as a trades business, including:
- Portable Card Reader and Smartphone or Tablet: Use a mobile POS app like Square, Zettle by PayPal, or SumUp, along with a portable card reader to accept payments directly in the field.
- All-In-One Mobile Devices: Devices such as the Square Terminal or Clover Flex are designed for mobile use, combining a card reader, receipt printer, and touchscreen interface in one portable unit.
- Contactless Payments: Accept payments through smartphones and smartwatches using Apple Pay, Google Pay, or Samsung Pay.
- Payment Apps: Use mobile payment apps like PayPal, Venmo (US) and PayID (Australia) that allow customers to make payments through their mobile devices.
- Manual Entry via Virtual Terminals: Process credit and debit card payments over the phone by manually entering card details into a virtual terminal, accessible through a smartphone, tablet, or computer.
- Online Invoice and Payment Links: Generate and send invoices and payment links through SMS or email, enabling customers to pay quickly and securely from their mobile devices or computers.
Of course, the easiest, most robust way to accept credit and debit card payments is to use job management software with best-in-class payment options for trades, such as ServiceM8.
Providing Multiple Card Payment Options with ServiceM8
ServiceM8 integrates with Stripe to facilitate quick and cost-effective credit and debit card payments. It provides multiple card payment options for your clients without any additional hardware or the need to set up a merchant account with your bank.
With ServiceM8 as your invoicing software, you can offer:
- Scan and Pay with a QR Code: Clients scan a QR code on your iPhone or iPad and pay directly through their mobile devices.
- Tap to Pay on iPhone: Use your iPhone to accept contactless payments on the spot, no card readers required.
- Online Invoice and Card Payment Portal: Send invoices with links to an online payment portal where clients can pay using their credit or debit cards.
- Apple Pay, Google Pay, Microsoft Pay: Accept mobile payments through these popular digital wallets.
- In-App Credit Card Entry: Enter credit card details directly into the ServiceM8 app for immediate processing on the spot or over the phone.
2. Accepting Bank Transfers
Some customers prefer the simplicity of transferring funds directly from their bank accounts, especially for larger transactions. From a tradesperson’s perspective, bank transfers are great - they typically have low to no fees, they’re processed faster, and they reduce the risk of fraud and chargebacks.
How To Accept Bank Transfers
Clearly include your bank details on your invoices, along with easy-to-follow instructions for making bank transfers. Make sure any bank transfers are reconciled in your accounting system against the relevant invoice.
3. Accepting Checks (Cheques)
While less common in today’s digital age, some clients may still prefer to pay via check, particularly in the US and the UK.
Benefits To Accepting Checks
- For high-value transactions that exceed a client’s credit card or bank transfer limits, a check is often the most practical option.
- Accepting checks usually doesn’t incur additional transaction fees, which saves your business money.
Drawbacks To Keep In Mind
- Checks can bounce due to insufficient funds, which leads to potential losses and additional bank fees for your business.
- Checks need to be deposited and cleared, which can take several days and delay your cash flow.
How To Accept Checks While Minimizing Risk
Before agreeing to accept a check, evaluate the reliability of your customers. For new or infrequent customers, you may want to require upfront payment through more secure methods, while allowing long-term clients to pay by check.
You could also use check verification services, which validate the check’s authenticity and the customer’s account status. These services typically have a combination of monthly fees and per-transaction charges, so if you choose to go this route, shop around for the one that best fits your budget and anticipated volume requirements.
Either way, if you do choose to accept cheques, be sure to establish and communicate clear policies regarding check payments, including the handling of bounced checks and any associated fees, and use mobile banking apps for quick deposits.
4. Accepting Cash
Some clients will want to pay you in cash. Accepting cash payments offers immediate access to funds (the money is literally in your hands!) and eliminates transaction fees and the risk of chargebacks.
However, some clients may also put pressure on you to accept cash payments as a way to avoid paying taxes. While you may choose to offer a “cash discount” as a sales incentive, it’s important to report and remit sales tax as legally required on all transactions, regardless of payment method. And mind your margins - these days, with the speed of payment processing, the tradeoff of having cash in hand a day or two early may not be worth the cost of the incentive.
Accepting Bank Transfers, Checks, and Cash with ServiceM8
It’s easy to accept non-card payments while maintaining accurate record-keeping when you use ServiceM8 to manage payments for your trades business.
Payments made via direct bank transfer, check, or cash can be recorded against a job in the ServiceM8 app, syncing seamlessly with accounting software like Xero, MYOB, or QuickBooks Online for reconciliation.
Using the mobile app, you can generate an invoice marked “paid” to provide to your client immediately upon receipt of cash, or you can email it to them as soon as you have confirmed the payment is in your account.
Ensuring Prompt Payments from Clients
Use the following strategies to ensure you receive payments promptly:
Clear Communication
Clearly communicate payment terms and due dates to clients before starting the job, and repeat all necessary details on your invoice. Transparency helps in setting the right expectations.
Prompt Invoice Delivery
Don’t let the paperwork pile up - send invoices as soon as the job is completed. ServiceM8 generates and sends invoices automatically upon completion of a job.
Automated Reminders
Sometimes, customers just need a gentle reminder. ServiceM8 lets you set up automated reminders that prompt clients to make payments on outstanding invoices. You can set how many follow-ups you want to send, the timing, and if you want to send them via text, email, or both.
Late Fees
Consider charging late fees to encourage timely payments. If you do, clearly state your payment terms and late fee policy on all invoices and contracts to avoid misunderstandings. With ServiceM8, once a payment is overdue, you can edit the invoice and add a new line item as a “Late Fee” with a specified amount.
Payment Plans
For high-value projects, offering a payment plan can make it more manageable for clients to afford - which not only increases the likelihood of you getting paid, but also for securing the project in the first place. You can offer payment plans without hurting your cash flow by requiring a significant initial deposit (for example, 20-50% of the total cost) before starting the work, then creating a payment schedule that aligns with project milestones for the balance.
Setting Payment Terms
What payment terms should I set for my trade business?
Here are some standard payment terms used to manage payments in trade businesses, and when to use them:
- Prepaid: Payment is due before work starts. Use this term for large projects or with new clients where trust hasn’t been established. This ensures funds are secured before starting work.
- Cash On Delivery (COD): Payment is due immediately upon completion of job. Use this term for smaller jobs or materials deliveries where immediate payment upon completion or delivery is feasible and preferred.
- 7 Days / Net 7: Payment is due within 7 days of invoice date. Use this for repeat clients with a good payment history, as it balances quick payment with a short grace period.
- 14 Days / Net 14: Payment is due within 14 days of invoice date. Use this for medium-sized projects or regular clients who need a bit more time to process payments, but have a reliable payment record.
- 30 Days / Net 30: Payment is due within 30 days of invoice date. Use this for larger clients or commercial projects where payment processing times might be longer. This is common in B2B transactions where payment cycles are typically longer.
- 20 Days EOM / 30 Days EOM: Payment is due 20 or 30 days after the end of the month. Use this for B2B transactions where clients prefer to process all payments at the end of the month.
ServiceM8 lets you set default payment terms across your standard invoice templates, but also gives you the flexibility to apply customized payment terms for specific clients as required.
Managing Taxes and Financial Records
Managing payments in the field isn't just about accepting the money for the work you do. It's also about being able to understand the tax implications and collect accordingly, then report your income and your sales accurately.
Collecting Sales Tax
(The following information is general guidance only. Always seek advice from a qualified accountant or your local tax authority for specific information and compliance.)
Ensure all invoices include the correct tax rates for your specific country and region, and keep thorough records for tax filings:
- UK: In the UK, you need to register for, and collect, VAT if your business’s taxable turnover exceeds the VAT threshold. (As of this writing in Aug 2024, the VAT threshold is £85,000, and the VAT rate is 20%.)
- US: In the US, you may need to collect sales tax, depending on the state and local jurisdictions where you are performing services. Refer to your state's Department of Revenue website for detailed information about sales tax rules, registration, and filing. (The SalesTaxHandbook is also a great resource.)
- Canada: Canadian trades businesses need to register for GST/HST if their revenue exceeds the threshold ($30,000 as of Aug 2024). The sales tax you need to charge varies by province and territory - check the CRA website (Canadian Revenue Agency) for which rate to charge.
- Australia: In Australia, tradespeople must register for GST if their annual turnover exceeds the threshold ($75,000 as of Aug 2024). Charge 10% GST on taxable sales and ensure accurate reporting to the Australian Taxation Office (ATO).
- New Zealand: In New Zealand, if your business’s annual turnover exceeds the threshold, you must register for GST. Charge and report GST on all taxable supplies. (As of this writing in Aug 2024, the GST threshold is $60,000, and the GST rate is 15%.)
ServiceM8 lets you choose whether you want your business to use the tax-inclusive setting (where the tax is built into pricing and not displayed separately) or tax-exclusive setting (where the tax is shown separately).
Record Keeping
As you collect payments, maintaining accurate and detailed financial records is vital for tax compliance (and for good business management!). Here are some tips:
- Invoice Management: Keep copies of all invoices issued and received. Use digital tools to store and organize these records.
- Expense Tracking: Record all business-related expenses, including materials, labor, and overhead costs. This will help in calculating net income and preparing tax returns.
- Bank Statements: Reconcile bank statements with your accounting records regularly to ensure accuracy.
- Digital Tools: Use a cloud accounting software like Xero, QuickBooks Online, or MYOB to automate record-keeping and generate financial reports.
- Retention Period: Keep records for the period required by your country’s tax authorities. This is typically between 5 to 7 years.
A great job management app (hello, ServiceM8!) can facilitate all of the above by integrating with accounting software, automating invoicing, and providing a centralized platform to manage payments, expenses, and financial records efficiently.
Conclusion
Choosing the right payment methods and managing payments accordingly is a key element of good business management. By accepting a variety of payment options, setting clear terms, using the right tools, and managing your taxes and financial records, you can streamline your payment process and improve your cash flow.
Ready to streamline your payment processes and ensure you get paid promptly in the field?
Take a tour of ServiceM8 today.
