How a Payment Policy Can Help Your Business

It is the goal of this column to answer questions about QuickBooks and how it is used in the REI arena. Knowing how to record transactions in the proper way and have your set of books in good shape when it comes time for taxes. It is our intention to do this with you, the members, submitting questions to info@smallbusinessadvisor.biz and getting answers here in this column.

From time to time I have clients ask me questions that are related to the finances of their business and how they should implement certain business practices. These questions do not always relate directly to QuickBooks® but how these things are handled may directly affect how they are entered in QuickBooks®. I felt that one of these may be of interest to the AtlREIA membership and have compiled a few answers here:

Q: Why would I need a Receipt of Payment Policy- in writing – for my business?

A: A uniform payment policy keeps customers and employees on the same page and improves cash flow management. You may use your payment policy to spell out accepted methods of payment and accounting practices. If your business extends credit to customers or sells a subscription or membership service, you should clearly define the expectations for payment as well as the consequences for failing to make payment. As a landlord you should have already done a credit check on your tenant – which does not mean they can’t have problems from time to time.

• Cash – While cash is the easiest method of payment to accept, it does present some security and record keeping concerns for small business owners. If your business receives cash payments you should implement cash handling and sales receipt policies. Train managers and employees on how to follow the policies. Good accounting and cash handling procedures will limit theft and fraud. Always use counterfeit detection pens for larger bills ($20’s and higher) and make frequent bank deposits to avoid keeping large sums of cash on premises.
• Personal Checks – While the popularity of personal checks has waned in recent years, some customers may still insist on paying by check. As landlords you will usually receive a personal check. Only accept personal checks from local banks. Do not accept temporary, non-personalized or undated checks. Never give cash back on checks written in excess of the purchase amount. Confirm the identity of customers who pay by check. Review their driver’s license or other official ID and collect personal information, including an address and telephone number. It is important to review these procedures with your employees and keep a written copy of the policy at checkout. Make a copy of the check to go with your deposit papers so you have everything to enter properly into QuickBooks®.
• Returned Checks – If your business frequently receives payment via personal check you may consider using a check scanning service. Check scanning services help spot stolen and forged checks and identify individuals who have been flagged for writing bad checks in the past. The rules for collecting on bad checks vary from state to state so be sure you know the laws in your state.
• Credit and Debit Cards – With payment systems now integrated into smart phones and tablets, accepting credit and debit cards has never been easier. There are fees and regulations associated with the payment card industry (PCI). When looking for a merchant services vendor it is important to examine the costs and terms of your agreement. Most vendors charge per-use fees that may be flat or percentage based. It is important to carefully calculate how those fees will affect your bottom line. In addition, if you store, process or transmit customer payment information, your business may need to be PCI compliant. While PCI compliance is not federally mandated, some merchant services vendors require compliance and several states have enacted laws with requirements similar to those of the PCI Security Standards Council. Visit pcisecuritystandards.org to learn more about PCI compliance standards. 
• Invoicing and Credit – In some industries, such as business-to-business sales and manufacturing, it is common practice to bill customers for products or services after they have been provided. It is vital to examine the risks of extending credit to customers and develop a firm payment policy that each customer reviews and signs. Your policy should spell out the time frame for payment and any potential late fees or interest. Be sure you understand the laws about collection in the states where you do business. 

While the above may be covering some areas that do not pertain to your business this overview will provide a general idea of the type of practices you should have in place for your business and your accounting. If you have any questions please feel free to call Karen at 770-356-1234 or send an e-mail to info@smallbusinessadvisor.biz.