Monthly Archives: November 2016

Learn More About Merchant Account

Credit cards don’t process themselves. This is where merchant accounts come in. A merchant account is essentially the middleman that lets businesses accept credit and debit cards in person and online.

Usually provided by banks and other financial institutions, a merchant account processes electronic payments by transferring funds between customers’ and merchants’ banks. During a sale, the merchant account works behind the scenes to withdraw funds from the customer’s bank and deposit them directly into the merchant’s checking account. The process works the opposite way during a refund.

Here is a simple explanation of how a merchant account works, what to look for in a merchant account and how small businesses can get one. For a more in-depth look at merchant accounts, check out our Credit Card Processing Buyer’s Guide, which will also help you figure out whether your business needs a merchant account and how to find the right one for your business.

How a merchant account works
When a credit card transaction is processed, information must be sent to a payment gateway to see if the cardholder has sufficient funds. For traditional transactions, this is generally part of the point of sale (POS) machine, which reads the cardholder’s data and checks with the credit card company to ensure the transaction can go through. This is known as a “swiped” or “card present” type of merchant account, which can include retail, restaurant or lodging merchants.

But in a “keyed” or “not present” transaction, this is done online by a payment gateway, which connects to the credit card company. These kinds of merchants can include mail order companies, telephone order companies or e-commerce/Internet merchants. When merchant accounts are set up, the same company, called the payment processor, can often set up the payment gateway in the same process.

Within the e-commerce category, there are a number of different kinds of merchant accounts:

Direct — applied for directly at a merchant bank.
Local — an account in one’s home country.
Offshore — an account outside of the country of the merchant, known as an international merchant account.
High-risk — for online businesses with a high percentage of chargebacks and returns.
Third party — connected via an additional secure payment gateway to a direct credit card payment processor, contributing to the work of the processor and sharing its expenses. Ideal for beginner e-commerce companies.
Generally, merchant transactions are not posted to the account at the time of purchase/refund. These transactions are usually posted in a batch during the merchant’s settlement process. Depending on the business, the settlement process can either be automated to occur at a specific time of day, or manually initiated. This is dependent upon the specific payment gateway.

How to get a merchant account
To get a merchant account, a business must apply and be approved. Credit card companies guarantee that a cardholder is entitled to receive a promised good or service; if such good or service is not delivered, then the cardholder is entitled to their money back. As one of the most basic consumer-protection principles, this also mitigates the risk that the credit card processor faces. The payment processor has the potential to lose money every time it processes a credit card transaction for your business. Thus, all businesses who want a merchant account must apply, and sometimes there is a fee associated with this.

It’s important for businesses to stay grounded in reality when applying for these merchant accounts. When applying, the prospective processor should be able to provide clear answers on the type of documentation required and how long the approval process might take. If the processor makes unrealistic blanket promises or statements, it would be a good idea to be skeptical and take a closer look at the company.

When applying for a merchant account, it’s important to have financial documents in order to leverage the best terms of approval possible. Having a strong processing history is another valuable tool that you could use to leverage your application. An old-fashioned cover letter will help explain exactly what your business does and why it deserves a merchant account.

Find a merchant account
From credit card processors to POS system providers, small businesses have many merchant account options to choose from. To help small businesses find the right merchant account, Business News Daily has done extensive research and analysis to find the best credit card processors and the best POS systems, where you’ll also find a roundup of reputable credit card processors and POS system vendors.

How To Choosing a Secure POS System

Choosing the right point-of-sale (POS) system is key to a business’s success. While factors like type of POS system, features, cost and limitations are all important considerations, it’s easy to overlook one of the most critical aspects of using POS systems: security.

Understanding POS security isn’t for the faint of heart. Not only are regulations complex, but keeping up with changes is a whole other beast. As a small business owner, however, dealing with POS security is a necessary evil if you want the convenience and benefits of accepting credit cards.

To help you make sense of POS security and better protect your business and customers, we asked experts to share their tips on what to look for in a secure POS system.

1. Is the POS system PCI compliant?

The first thing to look for is whether your new POS system meets the required regulations for accepting credit cards.

The first thing to look for is whether your new POS system meets the required policies for accepting credit cards. For instance, new credit card regulations require merchants to have EMV chip-enabled POS systems by Oct. 15. [Learn more about EMV].

There is also a huge change happening soon. Starting June 30, businesses are required to comply with version 3.1 of the Payment Card Industry Data Security Standards (PCI DSS). These new PCI 3.1 standards are mandatory, and any business that fails to comply could face steep penalties. Although vendors have taken the necessary measures, it’s your responsibility to make sure your business is truly compliant. [Learn more about PCI 3.1.]

“Any business that accepts credit card payments for goods or services must be PCI compliant,” said Tony Ciccerone, a Detroit-based territory manager for Heartland Payment Systems. This means that in addition to following the Payment Card Industry Data Security Standard (PCI DSS) rules for credit card processing, your POS itself must meet PCI standards for merchants.

This is important because if your customers’ information is leaked, you could be on the hook for financial damages, even if your company uses PayPal or some other third-party service provider to process your credit card transactions, said Vikas Bhatia, founder and CEO of cybersecurity firm Kalki Consulting. “Make sure to ask your service provider for proof that they passed their PCI DSS evaluations,” he said.

2. Update and maintain purchased technology

Technology is changing rapidly, and credit card payment processing systems are, too. When you choose your new POS system, ask the service provider about the maintenance schedule. An outdated system may put your business and customer credit card info at risk for a security breach.

That includes your firewall. “Consumer-class routers that are commonly used in SMBs generally include a firewall; however, it needs to be configured correctly in order to protect your network,” Bhatia said. It’s critical that you change the default login and password on every network device you purchase, including your new POS system, he added.

“The most advanced firewall is worthless if it has the default login and password in place,” Bhatia said.

In addition to ensuring your POS software is up-to-date, it’s important to check the changing PCI compliance rules regularly, to make sure your POS systems meet them, Ciccerone said.

“Visa and MasterCard, for example, change PCI rules and regulations about once a year,” he said.

3. Isolate your POS systems

When choosing a POS system, it’s also important to consider whether you can keep the system completely separate from the rest of your business technology.

“POS systems are often the weak link in the chain and vulnerable,” said Mark Bower, vice president of product management and solutions architecture for retail security tech provider Voltage Security.

Bower said POS systems often run a standard operating system and, therefore, are easy targets for attacks if they’re exposed to a malware delivery channel such as a browser, a compromised POS management system, patch system or — worse — from an insider.

“In use, POS systems should be isolated from other networks to restrict access to payment data flows, but often are connected to many systems,” Bower said.

4. Encryption services and fees

With security being such an important issue in electronic payment acceptance, it’s important to understand the encryption options available for a POS system.

Encryption is the process of changing information into a form that’s unreadable except to holders of a specific cryptographic key, according to the PCI website glossary. Using encryption protects your customers’ payment information from unauthorized access until it’s decrypted with the key.

Ask the POS salesperson if the system in question requires separate encryption services. Keep in mind that encryption could require an extra monthly fee. Also ask if they offer a system with end-to-end encryption, which can simplify the process, thus saving you time and money.

“Point-to-point encryption (P2PE) from the instant the card data is read, also called end-to-end encryption, addresses this risk by encrypting all the payment card data before it even gets to the POS,” Bower said. “If the POS is breached, the data will be useless to the attacker.”

Should You Know About Accounts Payable

Accounts payable are the bills and other debts that the business needs to pay. As a matter of fact, the only thing that a business pays that is not considered accounts payable is payroll. Everything else falls under the category, making it a critical aspect of your business.

“The accuracy and completeness of a company’s financial statements are dependent on the accounts payable process,” said Harold Averkamp, founder and author of accounting advice website Accounting Coach. “The efficiency and effectiveness of the accounts payable process will also affect the company’s cash position, credit rating and relationship with its suppliers.”

Implementing a dependable accounts payable system will produce accurate financial information you need to plan for both the short and long term. Here’s what you need to know about keeping up with your business debts.

Tracking accounts payable
Accounts payable, sometimes abbreviated as A/P, are tracked monthly for many small businesses, but as the business grows, it is better to make it a weekly task to take advantage of early payment discounts and resolve any credits due to inventory returns. It is handy to keep a record of accounts payable in case there are any payment disputes, to remind the business of current or outstanding invoices, or as proof of spending at tax time. These records can be kept manually or with accounting software.

Working with accounts payable requires a great attention to detail. Each invoice needs to be verified for accuracy, billing date and payment date, and then entered correctly in the general ledger or accounting software. Based on our research, here are some general tips to set up your accounts payable and help the process run smoothly:

Work from the original invoice whenever possible. Some invoices are sent electronically — print once and then file the email away to minimize confusion.

Use the same entering system every time. Each vendor has their own system of invoicing but assigning the invoice number in your system should be consistent. Determine the method, such as using leading zeros, and stick to it.

Enter every invoice individually. This includes multiple monthly invoices from the same supplier. In the event of a dispute, you will want to be able to track it down in your system easily.

Get invoice approval from the appropriate person before entering it. The person approving the invoice should be different than the one entering it. If you are a sole proprietor and do your own bookwork, this may not be possible, but still have a clear process for approval and entry. Keep solid records to support each one.

Look for early payment discounts to save money. It can add up by the end of the year. Some vendors offer a small percentage off the invoice if you pay it within a specified time frame from the invoice date, such as within ten days. If you typically only work with accounts payable once a month, consider a system in which you identify early payment discount opportunities when the invoice is received and pay those separately from the monthly pile.

Cash flow is important to a small business. A solid system of monitoring and paying accounts payable gives you a clear picture of your expenditures against your revenue, enabling better business decisions.