How to Set Up EFT for Contractor Payments (and How It’ll Benefit Your Business)
Paper, plastic, digital…does it really matter how you get paid? Who cares how the money comes in, as long as it’s the correct amount—right?
For starters, your customers care about how they pay for your contracting services. Payment is a crucial part of the customer experience. The payment method will also influence your bookkeeping, security compliance, and cash flow.
Cash flow is the lifeblood of any business. And payments form a big part of that cash flow. In fact, how you get paid is the backbone of your financial operations. The payment options you accept could very well mean the difference between succeeding and failing as a contractor.
So which is the best payment system for small-scale contractors?
Well, the answer is not so clear-cut. There’s a lot to consider when choosing a payment solution. And unfortunately, no single option works best for all contractors.
This article is a comprehensive guide on how to accept payments as a small business. Read on as we answer these questions:
- Which payment solutions are available to contractors?
- Is it a good idea to have multiple payment options?
- How do I set up a seamless payment system for my contracting business?
- Should I be worried about security when accepting payments?
Common Payment Methods Contractors Should Offer
There are several ways you can get paid for contracting services. Let’s explore the various payment solutions at your disposal while weighing their pros and cons.
Cash Payments
Payment doesn’t get simpler than this. Today, the idea of exchanging cold, hard cash for goods and services seems old-fashioned. Many entrepreneurs are indeed moving toward cashless payments.
But cash payments still have their place, particularly in small businesses. According to the Federal Reserve, 16% of payments in 2023 were made in cash. That might seem like a thin slice of the pie, but it did make cash the third most popular payment option that year.
As a contractor, cash may only work for small payments. You can’t expect customers to pay for home renovations worth thousands of dollars in cash.
The Pros
- No hidden fees or transaction costs
- Require zero technology
- Complete privacy
- Instant payment
- No third parties involved
The Cons
- No traceability
- Reduce bookkeeping to manual processes
- Risk of loss, theft, and currency fraud
- Inconvenient for large payments
- Hygiene concerns
Check Payments
Like cash, checks are another increasingly outdated payment method. The customer writes you a check, which you then deposit at your bank. It usually takes a while for the check to clear, and only then are the funds credited to your account.
But you’ll still find that checks are pretty common in the contracting business, especially among commercial contractors. Up to 33% of B2B payments in North America are made by check.
The Pros
- Easily traceable
- Allow the payer to float cash
- Ideal for large payments
The Cons
- Payment delays
- Vulnerable to fraud
- Have to deposit manually
Debit and Credit Card Payments
Card payments are by far the most popular payment method across all industries. Credit and debit cards currently account for over 60% of all payments in the US. This popularity is mainly due to the mutual convenience of card payments.
You can simply have clients swipe or tap their card on a card reader after completing a job. Card payments can also be made directly on your website.
The Pros
- Relatively low costs
- Instant transactions
- Automated documentation
- Globally recognized
- Great source of customer data
The Cons
- High risk of fraud
- Stringent compliance requirements
- Require third-party payment processing service
- 100% tech dependent
RELATED ARTICLE: Accepting Credit Card Payments as a Home Service Contractor
Digital Payments
“Digital payments” is a catch-all term for all payments done over a digital channel. Such payments are made using digital wallets or platforms such as PayPal, Venmo, Stripe, Google Pay, Apple Pay—the list goes on. These platforms enable customers to pay using virtual cards, digital tokens, and smartphones.
Digital payments have already surpassed traditional payments in the US and are quickly catching up to cards.
The Pros
- Instant payment
- Easy to track, record, and automate
- Quick and easy to set up
- Flexible payment options
The Cons
- 100% dependent on tech
- Most payments are peer-to-peer
- Transaction fees may be high
Electronic Funds Transfers
With Automated Clearing House (ACH) and wire transfers, the customer makes direct payments from their bank to your bank account. These payment methods fit right between checks and card payments. One, they are ideal for payments too large to charge on a card. Two, they are way faster and more convenient than checks.
The Pros
- Highly secure
- Wire transfers are processed in real-time
- Easy to automate and track
- Great for recurring billing
The Cons
- ACH transfers may take up to three days to complete
- Not all banks support ACH and wire payments
- Some banks may limit electronic transactions
FROM ONE OF OUR PARTNERS: Best Ways to Use Electronic Payment Systems
The Importance of Offering Multiple Payment Methods
Nowadays, there are so many ways to pay for goods and services that the choice often comes down to personal preferences. While most customers prefer to pay using cards, some choose cash, check, direct transfer, or even mobile payments.
Research shows that 77% of customers will abandon a purchase if their preferred payment option is missing. Yet, only 16% of small businesses offer more than three payment options. Clearly, that is a missed opportunity to cater to customers’ needs and make more sales.
More to the point, here’s how offering multiple payment options could benefit your contracting business:
More leads turning into jobs
Limited payment options can be a deal-breaker in contracting jobs. Many homeowners will not hesitate to take their business elsewhere if you don’t offer the payment method they prefer.
On the other hand, multiple payment options make it easier for customers to pay. And that’s one of the things you need to turn leads into paying jobs—frictionless payments. Offering multiple payment options can boost your revenue by nearly 30%.
Improved customer experience
Payment is part and parcel of the customer journey and the customer experience. And for contractors, the customer journey doesn’t end with payment. You want that customer to offer you more home improvement jobs and say good things about your brand.
If your lack of payment flexibility spoils a customer’s experience, they probably won’t be coming back.
Wider market scope
Accepting as many forms of payment as possible exposes your brand to a larger and more diverse audience. You can accept cash and checks from clients who prefer traditional payment methods while attracting the younger demographic with modern digital payment solutions.
Having more payment options can suddenly make your contracting service appealing to more people.
Sharper competitive edge
From what we’ve learned so far, customers will consider payment support when choosing where to buy goods or services. So offering more payment options can actually be a unique selling point for your contracting business.
RELATED ARTICLE: The 4 Best Payment Options for Contractors
Setting Up a Seamless Payment System for Your Contractor Business
As much as you’d like to accept multiple payment options, not every payment system may work for your contractor business.
So, what makes a good payment system for a small business? For starters, ensure every payment method you choose ticks the following boxes:
- Easy to bill, pay, and record transactions
- Secure against data loss, theft, and fraud
- Relevant to the target audience
- Low-cost transactions
- Seamless integration with your existing financial systems
- Useful business perks
- 24/7 availability and reliability
- Quick and accessible user support
Taking cash and check payments is pretty straightforward. Digital and card payments are less so. It involves partnering with payment processors; getting specialized devices, apps, APIs, or plugins; and synchronizing various digital systems.
This all sounds worryingly technical. But the complexity comes down to the payment service provider you choose. Some invested in simplifying payment integration, even when working with multiple systems.
Setting up a payment system might seem daunting at first, but it’s really not that hard. Here’s a quick step-by-step guide on how to accept payments as a small business:
Step 1: Understand Your Payment Needs
What exactly are you looking for in a payment system? As a home improvement business, you probably want a system that’s not only simple, fast, and secure but also practical enough to accommodate your transaction volume and frequency—one that can handle payments for both small and big projects.
Payments should also align with your business model and customer journey. For example, do your customers pay upfront, after the job is complete, or in periodic installments?
Step 2: Find Out How Your Customers Want to Pay
Do some research to find out how your customers actually want to pay. Check out how other contractors in your area get paid and learn from that. Also, you could ask your customers directly; they’ll probably be happy to share their payment preferences.
Then, come up with a list of the ideal payment solutions. The list should include customer suggestions and your own ideas. Narrow down to somewhere between four and six options.
Step 3: Choose a Good Payment Service Provider
Next, find a payment service provider to bring those payment solutions to life. This is a third-party partner who will help you set up and integrate the various payment solutions.
Choose a service provider who supports your payment choices. They should also have the following qualities:
- Excellent customer service and support
- Reasonable pricing
- Additional tools such as payment analytics, recurring billing, mobile payments, automated invoicing, reporting, etc.
- Security and compliance guarantees
- Honest and transparent
Step 4: Create a Payment Page on Your Website
Set up a payment page on your contracting website. The payment service provider will help you import the necessary certificates, APIs, and plugins to build the page.
It’s important to give your customers the option to pay for contracting services online. It’s completely self-service, and it makes your business look professional and trustworthy.
Step 5: Install the Necessary Equipment and Resources
You may also need additional payment facilities besides the payment page. Keep in mind that not all your customers will visit your site just to make a payment. For instance, you’ll need a card reader or capable smartphone to accept mobile payments.
Step 6: Fine-Tune Your Payment Options
At this stage, you’ll have already integrated the payment systems and run them for a while. Conduct regular payment audits to see how well each payment option is doing. Also, encourage customer feedback regarding the payment experience.
Find out which payment options are the most and least preferred. You should expect the preferences to shift over time, indicating changes in customer behavior. This should give you valuable insights into understanding and improving the overall customer experience.
Security Considerations When Accepting Payments
Cybersecurity is a valid concern when accepting digital and card payments. Payment gateways are prime targets for cybercriminals since they harbor sensitive personal and banking information.
A single data breach can expose all your customers’ payment details, including credit card numbers, full names, and addresses. In the wrong hands, this information can be used to commit identity theft and financial fraud.
For example, in June 2024, Slim CD, a payment gateway, fell victim to such an attack. An “unauthorized actor” managed to gain access to the company’s system. The attack is believed to have exposed 1.7 million credit card records.
Losing or exposing customer payment data could cost you dearly. Firstly, it wouldn’t be a good look for your brand. You’ll lose trust with customers and a lot of potential future business in the process. Secondly, there may be hefty financial losses, which IBM reckons can reach $173 million per exposed type of record. Thirdly, you may be liable to crippling legal action.
You simply can’t afford to gamble with payment security. Below are the key measures you should take to secure your customers’ payment data:
- Conduct a thorough risk assessment.
- Comply with PCI DSS rules.
- Implement robust data security measures such as encryption and access control.
- Develop solid security policies and procedures.
- Hire or consult with a reputable third-party cybersecurity provider.
- Partner with a security-conscious payment processor.
- Create an incident response plan.
- Keep monitoring and updating your security protocols.
FROM ONE OF OUR PARTNERS: 6 Tips for Proper Handling of Credit Card Information
6 Best Practices for Invoicing and Payment Collection
As you consider the best payment methods for your unique business, make sure you’re abiding by these best practices for invoicing and collecting payments:
- Automate billing to ensure invoices are sent on time.
- Send out detailed and accurate invoices to avoid payment disputes.
- Set clear payment guidelines and terms.
- Incentivize early payment and penalize late payers.
- Follow up on unpaid invoices, reminding customers to pay.
- Make paying invoices as easy as possible.