Well the Economy Must Be Up…

Growth is Good

Our firm has a particular insight into what is happening with the world at large as we see one thing and one thing only: the transactions going through all the businesses we handle. It stands as a great litmus test for business and how businesses are doing. As a whole since businesses are doing 10% more than in the past quarter and 30% over their same numbers last year (minusing out particularly volatile companies as well as new businesses which have signed up), I’d say they are doing well.

New machines, new equipment, and more pieces for the branching out areas of existing clients is also a great sign to see. After all, if there is one thing we love, it’s setting up a business we already have with the capacity to do more. This is because common sense dictates that the best resource any company has is its current client base. It just plain costs less to sell to them than to anyone else. In our industry though, when they need more, they come to you. Though placement of check processing equipment is down (it brought that on itself), credit card terminal placement is up per business. Simply stated, more businesses are having more credit card stations per location. That is generally a sign of one of two very divergent things: a very tough market where customers simply will not wait, or an increase in overall sales blooming into new areas and management answering the call. As a provider, I will take either one, but I clearly prefer the latter.

Third a drop in chargebacks. A charge back is a particularly nasty bug where a person reports to the credit card company that they did not make said purchase from your business. Sometimes it’s legitimate as with a stolen identity. However, there are plenty of people out there (and I mean right here in hometown, USA) that will make a purchase and then fight the charge. It’s the definition of dirty, but when the economy is down, false chargebacks go up. We are seeing them go down and that is a wonderful thing. Especially as a chargeback rating of 1% will get your merchant account de-listed. That means MC/Visa just cut you off from accepting credit cards at your business. Fear not though, good and faithful servant, as that is considered a very large number compared to how many chargebacks there actually are.

Finally, the level of attrition is down as the number of businesses closing are down, and that is a good thing. I remember hearing my grandparents speak of the depression (ie: the Great Depression, but what was so great about it no one knew). The amount of headache and heartache people, banks, and businesses saw was devastating. My grandmother said that it was so bad, she saw the worst fight in her life between two men over a rabbit. A RABBIT (I have an off day if the cell won’t text while I download on my ipod). Areas of commerce became wastelands of yawning, broken out windows in decrepit buildings. I never want to see that, but I saw plenty of companies closing doors as the forms passed my desk. That thankfully seems to be well passed us all.

Good news is good to the soul, and we love to see the growth in our area. The storm is not passed and I often complain that the mistakes we made in the housing market are hitting businesses with Rewards cards, but that is another rant. As for this month, this quarter, and this very day: business and thus the economy from where we see it, is up.

Merchant Account Scam #1: The Threat of Being “Turned In”

The Credit Card Gestapo are coming...!

OK, so what I am about to tell you is not a “for instance…” example. This happened last week right here in Savannah.

There’s an elderly man that owns a Bed & Breakfast right here in Savannah. He has seen a lot, done a lot, and is a cancer survivor. He has the scars to prove it. It has eaten up part of him and left his eyes badly damaged so that he cannot be in bright light and has trouble reading. He was referred to me like 99% of all our clientele by other very happy customers and he was in a pickle. A good guy,  a likeable guy, “a real mensch” was the actual terminology used about him.

So I call him. He was not happy. He was in a pickle.

Why? He had been thinking about moving his credit card business for his B&B from his current company to someone else and a man came calling on him (this is not coincidental, it’s just that guys from my industry are always calling, it’s why my firm is almost completely word-of-mouth). So the man presses and presses him until he is finally let in. Our mensch is honest and shows him his credit card machine and describes what he does. This is when it gets thick. Salesman informs the man that his old credit card machine is illegal. Illegal? (It’s a harsh term, but if his machine is too old it can be non-compliant, but there are no credit card police coming to get him). It is not only illegal, but it illegally stores all of the customer data ever (no, it doesn’t), and cannot ever be destroyed (yes, it can), and he is risking fines of $5,000-$15,000 per incident of use (only in terms of malfeasance, and if he were illegally storing his customer data which he wasn’t).

This is when the salesman pushes the contract. Well our mensch doesn’t want to sign a contract today. He wants to see if what he says is accurate. After all, he just filled out a compliancy form with his current company who supplied the machine years ago and they had not mentioned anything. Well now we turn from thick to ugly. The salesman informs our good man here who has been doing everything he was told up until that moment that the salesman is a ‘certified compliancy officer’ and that he is honor bound (I don’t think honor has any place in this article outside of the proprietor of the inn) to report him. He also said that he would be in the office until 3pm that afternoon and then he goes home (who goes home at 3:00 pm?), but that if he received his contract or a call to finish up the contract by then he, “could go ahead and take care of it”. Really? That’s sweet.

Did you miss that? There was a threat in there. He would report him. He was honor bound to do so. Well if it’s a matter of honor, wouldn’t he have to report him no matter what? Is this the way people are doing business now?

Here’s the truth: There are no credit card police. No one was coming to get him. He did in fact have an older machine. It was non-compliant. Whoop-de-doo. This added a small fee to his account every month and when he changed to a newer model (which a good company will give him for free, mensch or no…) it was gone. Still even then there’s a $4.95 PCI compliancy fee that he would have to pay, but any reputable company will wave that for the first twelve months of an account.

Here’s How to Handle It: If you are EVER put remotely in that situation: stay calm. Think. Would your current company you work with put you in this much danger? Perhaps. Here what you do. While your ‘officer’ waits for you to decide if he should report you or not, call your current company, get customer service, inform them who you are, and then tell them that a ‘certified compliancy officer’ is there at your business and says he is going to report you. Then hand him the phone…

You will never see so much back peddling in your life.

How Businesses are Punished (this time with debit…)

You're not the only one who feels swallowed by fees...

If you read my blog at all you will see that I do not like Rewards cards. At all. It punishes businesses for being in business. It forces them to pay for someone else’s coupon. Don’t want to pay for someone to get skymiles? Tough, if it says Visa on the card and you take Visa you must take it. Don’t want to lose profitability so that a card holder gets cash back from their credit card? If it says Mastercard on the card, and you accept Mastercard, you have no choice.

Well at least the businesses have the safe haven of Debit cards to flee to, right? Wrong. Enter the Rewards Debit Card. They are now everywhere. Suntrust sent me the chance to punish all the businesses I love and frequent, by allowing me to upgrade my debit card to a rewards debit card. For a mere $75 annual fee I can make sure that the places I love do not get a better rate as they are accepting my debit card, but instead are charged a premium just to open their doors.

Let me put this in perspective: People yell on TV, especially during elections about all of these tax-breaks are for the rich and isn’t this bad? What they are speaking of is that America has always rewarded business. Why Business makes money that America needs to be strong. No business, no America. You start a business and have two employees (yourself and your spouse or best friend). You work 90 hours a week to keep the doors open because after taxes you make about $2.15 an hour. You slowly start to grow and now you need some more employees to handle the load. So you’re business hires three people and you now have a total of 5 employees. Congratulations! You’re creating jobs and stimulating the economy as people want to buy from you, and you’re buying from people in order to make product, market, etc. To make sure you keep going Uncle Sam gives you a discount to make it easier for you to pick up the pace and work harder to grow more and add employees and buy more. Good, right?

No! You are ‘the MAN’. You are a fascist. You are rich. Seriously? Several years ago my accountant said to me when I still struggling along after going out to hang my own shingle, “I’ve got good news and bad news. The Good News is that the government is only taxing the rich. The Bad News is that you’re rich.” He and I both knew the joke and it wasn’t funny. I was as far from rich as the desert is from being the ocean. I couldn’t get a credit card as I was pushing tin on everything I had to keep the doors open while waiting for my client list to be big enough to support, my business, my employees, and then leave something …anything left over for me.

Sound crazy? We’re doing it now. Rewards cards punish businesses. They do not have the ability to not accept a Rewards card without risking getting de-listed (having their merchant account turned off). Couple this with the fact that a debit card is one of the lowest fees out there (or was), but now the banks are going to start jacking up the fees on those cards as well and there is no port in the storm for the ship of business in turbid sea…

Asking “Debit or Credit?” is Throwing Money Away…

It never fails…

The number one flaw that costs businesses money is not an incorrectly setup merchant account, nor machine fees, but instead the person punching in the data. The owner, the employee, or whomever either doesn’t know, and often simply wants to expedite the sales process. However it costs money to do.

Here’s how: Credit cards costs a Retail business somewhere around the 1.7% range. A Debit card costs them about 1.55-1.58%. PIN based Debit will cost $0.90 or less. Studies show that if a customer is asked ‘Debit or Credit?’ they will go for credit almost 90% of the time. Why? Most people mistakenly believe this will make their checking/ debit card work like a credit card and will run against a line of credit and their good name rather than a finite dollar amount they have in a checking account. Wrong. Running a debit card as a credit card does two thing: 1) it passes the card through the credit network to check against the money they have in their checking account which means they may manually sign for the sale rather than enter a PIN number. 2) It charges the business more money. Why? Because the transaction is not as safe. If the customer had put in their PIN number to verify the transaction, the risk would have been reduced, and thereby the fees involved would have dropped.

Here’s the rule that you should etch deeply into your business mind-set: The Riskier the transaction, the more your business pays to accept that card. The safer the transaction, the more of your own hard-earned money you keep.

Here’s the better way: Train your employees. Anyone can look at a card and tell whether or not it is a checking/ debit card rather than a credit card. It will say ‘debit’, or ‘checking’, and it will often have the bank name printed on it. Instead of asking “Credit or Debit?”, have the employee look at the card. If it’s a debit card, push the debit button, swipe the card, then hand the PIN-pad to the customer and say, “…Now if you’ll please enter your PIN number…”. Again, studies show that in excess of 95% of people at this point will enter their PIN number. Congratulations, you just saved your business hundreds, perhaps thousands of dollars across the course of the year for that small change.

Is that not enough of a reason? Because, oddly enough I have had business owners say that it’s not worth the trouble. Really? My questions here is always the same: “If you get an electric bill for $170, do you send in a check for $190?” They always look flabbergasted. “Of course not!” Then why would you pay an expense here that you do not have to? A little training goes a long way.

Apps & RoamPay: Best Business Combo Yet…

Smart phones have been burning the midnight oil boosting their abilities and ability to boast all on the myriad of apps one can get for their smart phone. The credit card world was not going to go unnoticed and unrecognized in what could easily add a notch to their gun belt. There have been cell phone packages for a few years, but not all were reliable. There has been apps for the i-phone, blackberry, and droid for a little while now, but with RoamPay’s new $20 smart phone swipe the world has opened up.

Here’s what you do, you get a merchant account (Retail, no less), buy a $20 RoamPay plugin, download the credit card app for your phone, and once you have installed the account: you’re done. We had to try it here in the Batcave, so we ordered a RoamPay and plugged it into a Droid phone and voila, it was done. Super light, superbly easy; and it allows someone to take their business with them AND still get a swiped card rate instead of a hand-keyed rate which is a substantial reduction in fees. It also tries to make it easy and less cumbersome by giving the business the customer an option of having a receipt emailed to them.

Since it’s official release to our spectrum of the merchant account world two weeks ago, we have had cabs, contractors, and even tradeshow vendors jumping to add this to their ability. This is because as long as they can get a single cellphone bar’s worth of signal, they now they can keep processing transactions and all at the Retail Discount Rate.

A lot of people wonder how this can be done using a simple 10mm headphone jack to pass the data and still maintain PCI compliance (if you don’t know PCI, simply picture an Orwellian Big Brother for the merchant account’s bleak and dismal dystopian world which is terrorized by an Uber-Third Reich risk department with REJECTED stamp the size of a small continental shelf). Well for once, the answer is simple. The magnetic swipe reader that is compartmentalized inside of most credit card terminals is a simple machine at best. It is often found outside of a terminal stuck to teh side of a monitor or stuck in a keyboard and simply plugs into the back of the computer. It’s magnetic or mag reader collects the track one and two data that is stored on a credit card stripe and ports it into a computer or terminal. Its sole job it to pick up and hand off data like a runner in a relay race. there is almost no need for PCI compliancy as the technology for this one piece of hardware has barely budged in years.

No, all the real work is built inside the smart phone app. Having been in the industry now for over a decade and getting my start and earning my executive’s chair in a company that built and marketed credit card processing software, I can easily say that is where the Herculian tasks fall. The app builders had to jump through slightly less than ten zillion hoops just to get the app to work within the parameters of the data size they have all while maintaining PCI compliance. Hat off to them. The RoamPay is simply a clever way to bundle the mag swipe up and have it phone ready and user friendly.

Lodging Has Ups and Downs

How was 2010 to your business? Some may have had it better, and some definitely had it worse. Notable in this category would be the lodging industry. If you know a hotelier, bed & breakfast owner, or inn keeper, it’s OK to give them a hug.

2010 saw a lot of changes to the credit card world and the lodging industry had a lot of it. If you did not have an autonomous point of sale system, you more than likely had to replace your whole terminal. Even if you did have a self contained POS, you still probably had the get-the-new-downloads hoop jumping experience. The explanation from your merchant provider rep probably sounded as thin as why you have to pay for under carriage spray when buying a car, but I am here to tell you the need was real and the hurdles were the cost of doing business. It was necessary.

Why?

The short answer: The Economy. The longer answer: Because rewards cards beat up the lodging industry like Rocky Balboa with a nuclear powered heart taking on your average 42 year old programmer. It wasn’t pretty. Here’s what happened. The recession came and everyone pretty much stopped buying everything which does not help the recession leave. Then the recession stayed longer than the worst party guest you’ve ever had and never wanted. However, by then the businesses that were going to close closed, and the people that were going to lose their jobs did. Those that survived the turmoil fiscally intact started to realize that they could still travel and still go on vacation, but maybe they should trim it down a bit. Oh yeah and get more bang for their buck by trying to get double-coupon day at the market. This means using their rewards card. Or in other words, “We can go on vacation, but let’s get sky miles, bonus points, or cash back for having done so.”

I hate rewards cards. It punishes businesses for taking credit cards.

When you go to Old Navy, Pizza Hut, or the Wiener-schnitzel, when you use a Rewards Card, the cost of the sky miles, points, or cash back comes out of the business you are buying from. Seriously, Delta’s sky miles programs costs the business you love and frequent. Here’s what’s worse. All those travelers who decided to go ahead and travel made the lodging industry’s reward card numbers quadruple from the previous year. That ate up huge amounts of revenue that they needed to exist, and made the entirety of the payment industry react in order to capture, classify, and treat all of the extra data needed to be processed in order to pass rewards card data.

Because of this, new machines with bigger memory and extra features popped up and were dumped into the lodgers’ combined laps making all the old stuff as obsolete as Burgess Meredith in a Twilight Zone marathon. Many of them had to once again bear the cost.

If you like a business and want to really support them. Keep the rewards card sheathed, and use your debit card if possible. Otherwise, they may not be there next time you need them.

How Your CPA Can Help Save You Money

Do you like to go see you accountant? I like to go see mine. He’s a friendly guy, good personality, we have a couple of similar hobbies, and he saves me money. Lots of it. When he gives me bad news it’s generally something that he warned me about, I had to learn the hard way, and then he fixes it for me. That’s good.

Here’s the best thing about seeing him: There’s no pulling teeth.

Simply put, I do not have to drag things out of him. How could I? I am not knowledgeable in taxes. I do not know what I would have to volunteer to get him to save me the most money. He does. He is intimately familiar with me, my life, and my business. This is not because we go golfing together, and it’s not because I force volumes of useless data on him while he tries to do my work. It’s because he asks. A good CPA is always asking questions. Are you married? Still married? Children yet? Did you end up buying that house? Sell it? Kids in school? Any major health issues or medical work done this year? Why? Because he needs to know. If not, when he’s wrapping up my taxes and I volunteer I am married, it changes everything. If I buy a house, or even more so, sell a house that I have lived in for two of the last five years, it affects me and my taxes.

Because he asks questions, he sends me lots of clients as do a passel of other CPA’s about town that think their clients are paying too much on their various merchant accounts. This is because a good CPA is not a stenographer. They do not merely take numbers from you and copy and paste them to a new sheet. They process and formulate the data with years of experience and they know what burns and what heals. In this instance they look at what a business has paid over the course of the year in merchant accounts fees and percentages, and if it rings a little high they send it to a specialist.

A buddy of mine who just so happens to be a CPA, and just so happens to refer clients that may or may not be overpaying, recently got a call back from me. The call was to let him know his client had been over paying in merchant fees to the tune of $8,000+ annually. This made him very happy. His client saves eight grand a year, and he looks like a hero for having helped find the issue. Pretty soon he starts looking like one of the Big Eight.

What’s the Big Eight? Years ago, there were eight very large accounting firms known collectively as, you guessed it: the Big Eight. Basically, if you were lucky enough to have them do your books, you saved quite a pretty penny. Mainly because no matter what you did, there was an accountant there who specialized in that. Whether it was chickens, Spanish doubloons partially cut into pieces of eight, or lobster juggling; there was an accountant there who could handle that and knew the ins and outs that only pertained to the chicken/doubloon/juggled lobster industries of the world.

Today’s modern CPA’s can do the same thing, they are just a lot leaner and more agile. After all, not every garage on the planet works on every engine type, some have specialists that they can send work out to. Good CPA’s know to look for merchant account fees in order to expense them. They also know to check them and see if they might be a little high proportionately. Many times, they call someone like me in to do that for them as a specialist. It makes the CPA more of a one-stop-shop, makes their customer happy as they save the money, and it makes me happy as I have a healthy work load of just plain healthy work.

I hope you like your CPA like I like mine.