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STUDY: Payments play critical role in small biz
March 26, 2007
BOSTON - Payments are a critical issue for small businesses, according to a new study of small-business payment preferences conducted by Boston-based consulting group Dove Consulting, a division of Hitachi Consulting. The research was sponsored by CheckFree, Discover, First Data Corp. and NEACH.
Conducted in October and November 2006, the study includes survey responses from 952 small businesses across industries with annual revenues less than $5 million. The study found that small businesses receive an average of 259 customer payments each month across all sales channels - checks and cash represent the majority of those receipts.
Checks account for 40 percent of customer payments to small businesses, while cash accounts for 25 percent, credit cards account for 16 percent, and PayPal accounts for 9 percent. The receipt of PayPal payments was driven by small businesses that sell over the Internet.
Payments are an important issue for small businesses, and 59 percent of them turn to outside sources for help in managing their payments acceptance.
"There is clearly an opportunity for financial institutions and payment processors to deepen customer relationships and offer specific services for the small business sector," said Laura Fuller, a director with Dove Consulting and the manager of the study.
Across all small businesses, cash and checks are the most widely accepted tender type - 88 percent of all small businesses report that they accept both cash and checks. That was followed by credit cards and signature debit cards, with 54 percent of small businesses reporting that they accept those tender types.
The study also found that nearly a quarter of all small businesses surveyed reported using debit cards to make payments for their business. But debit only accounts for 5 percent of small-business payments; cash, checks, credit cards, online bill payment and PayPal were all more widely used.
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