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PaySmart > Payment Options | Client Decides Client Decides |
Option 3 - Allow the Client To Decide How To Pay•This is when a client is offered the option to pay with a credit card or a bank account. •This method has the following advantages: i.Your client can decide how they would prefer to pay your invoice ii.You have the option to provide them with a cash discount if they pay with their bank account iii.Regardless of how they pay, your firm doesn't lose any income •This method has the following disadvantages: i.There is more math involved with this payment option. See below for examples. Allowing Cash DiscountsWhile this option allows your clients the freedom to pay with their credit card or receive a cash discount, it is important to understand that the billing with this method is a bit more involved. Let's look at an example: •Suppose you are proposing to a client a number of items on a proposal and that your sell price for these items would be $10,000.00 were the client to pay in cash/check. •Now let's assume that you add a Credit Card Processing Fee of 3% so they can pay with the credit card. This raises the price of the items but it means that you won't lose revenue. •So now the total proposal amount would be $10,300.00 •We'll say that you want 50% of this proposal amount as a deposit so the amount will be $5,150.00 (10,300 x 0.5 = 5,150)
--- Paying the Required Deposit Amount --- If you allow the client to choose to pay with credit card or ACH, they will see the following two options: If they select to pay via credit card they will see: Total Deposit Amount $5,150.00 Amount Due $5,150.00 If they select to pay via ACH they will see: Total Deposit Amount $5,150.00 Cash Discount - $150.00 Amount Due $5,000.00
Depending on which option they select, they will enter the required information and process the payment.
---- Paying the Final Invoice Amount --- So far so good. The above is easy to follow. It gets slightly more complicated when it is time to send the final invoice. For the final invoice, what they will see is the following: Scenario 1: If they paid the deposit amount by credit card they will see: If they select to pay the final invoice via credit card they will see: Total Invoice Amount $10,300.00 Amount Paid $5,150.00 Amount Due $5,150.00 If they select to pay the final invoice via ACH they will see: Total Price $10,300.00 Amount Paid $5,150.00 Cash Discount - $150.00 Amount Due $5,000.00 =============================================================================== Scenario 2: If they paid the deposit amount by ACH they will see: If they select to pay the final invoice via credit card they will see: Total Invoice Amount $10,300.00 Deposit Applied $5,000.00 Cash Discount Received -$150.00 Amount Due $5,150.00
If they select to pay the final invoice via ACH they will see: Total Price $10,300.00 Deposit Applied $5,150.00 Cash Discount - $150.00 Amount Due $5,000.00
SummaryAllowing your clients to choose their payment method empowers them to pay in the manner in which they choose, but it also means that the accounting process is slightly more complicated. All of the numbers above make sense and are correct, but there are more numbers to deal with. And keep in mind that this example was relatively simplistic. It excluded sales tax and other subcharges like freight. On the other hand, this isn't rocket science and we are just dealing with basic math. More math than the other two options, but still doable math. |