Finance Monthly November 2019 Edition

3. Be Proactive and Plan Ahead. Successful merchants, with knowledge of their credit card processing agreements, tend to carefully review and promptly challenge, as appropriate, (a) the imposition of fees and costs that are not otherwise provided for under the agreements, (b) the imposition of chargebacks, (c) the holdback of additional amounts in the Reserve Accounts, and (d) the timing of holdbacks within Reserve Accounts to avoid unnecessary delays in payment. In addition, successful merchants develop meaningful cash flow projections which will typically include some “reserve” for credit card sales based on prior experiences. Recognising that some sales do not result in immediate cash receipts can help a merchant effectively manage its cash flows. 4. Properly Evaluate Payment History With Various Processors. Monitor performance. Review chargeback and payment history with various credit card processors. Distinguish between those credit card processors that offer poor terms versus those that offer more favourable terms, and, within this analysis, how each of the credit card processors performs on its agreements. In some instances, despite tough deal terms, a credit card processor will not seek to hold back the maximum amount permitted but choose instead to hold back a reasonable amount consistent with the financial risk involved. Develop a means of evaluating reasonable behaviour amongst the processors. 5. Shop For The Best Deal. Negotiate the best terms possible, paying particular attention to the time in which the credit card processor may holdback money in the Reserve Account for potential chargebacks. In addition, pay attention to a credit card processor’s past behaviour—sometimes it makes the most sense to work with a processor under less friendly terms that has a history of only taking holdbacks in the Reserve Account for actual credit risks (as opposed to general business risk). Credit card processing is a highly competitive industry—take advantage of the competition to cut your best deal. Of course, pay attention to the best rates as well! Credit card sales represent a vital source of working capital for today’s merchants. The ultimate choice of a credit card arrangement depends on finding a processor that both provides for reasonable terms and conditions and then demonstrates a consistent willingness to work with its merchants. Look for the right credit card processor for your company. Simply locking in the best rate may not be enough! Contact details: E: jpomerance@sulmeyerlaw.com P: (213) 617.5244 W: https://sulmeyerlaw.com/ “Credit card sales do not always result in actual cash revenues to a merchant, and even when the merchant is paid, payment may occur significantly later than the actual underlying sale.” 27 www.finance-monthly.com FINANCE & BUSINESS - MANAGING CREDIT CARD TRANSACTIONS