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If you have a small business or even run a website on Ebay, then a merchant account may give you the ability to process credit cards and debit cards, which gives you the convenience of never having to turn away a paying customer because you can’t process their payment. There are many companies that offer merchant accounts for businesses. Below is some information on what it actually is and how you can sign up with a provider.

Why every small business needs a Merchant Account

A merchant account is essential for any company that needs to process credit or debit card payments. Not anyone can open a merchant account – only legitimate business organizations with suitable qualifications can open a merchant account. Because society is quickly moving to a cashless monetary system, you are leaving sales and income on the table if you don’t have the ability to process debit cards and credit cards for your small business – especially if you do business online!

Where to get a Merchant Account

Small business owners can get a merchant account from independent sales organizations (ISO), or member service providers (MSP), and merchant banks. Merchant banks are different than your standard investment bank because they make investments in small businesses with their own capital. ISO’s and MSP’s are licensed and accredited brokers of credit card services which maintain contracts with banks to process and handle credit card and debit card transactions. These independent companies provide various services to vendors including debit and credit card processing equipment, product sales & client service, settlement management, paper storage and other essential business services. North American Bancard for example, is a company that provides all these services.

Before selecting your merchant account provider you should confirm the independent sales organization’s credentials. A qualified ISO must be accredited and sponsored by a verified financial institution and all affiliations must be declares on all legal documents. One tip is to verify the ISO you choose is sponsored by an FDIC insured financial institution.

Businesses should also compare costs between the various merchant account providers before making their selection. But be sure to compare apples to apples and take equipment rental or purchase prices into consideration. For example some merchant account providers, such as North American Bancard, offer businesses free equipment, service and support, in addition to guaranteeing the lowest processing rates.

Processing Payments with a Merchant Account

The proliferation of online services and payment options has changed the merchant processing landscape in recent years, allowing merchants and businesses to accept credit and debit card payments online. Some merchant account providers offer online payment processing, but you find it better to go through a dedicated e-commerce site that specializes in these services.

Even with the increase in online shopping, the vast majority of payments are still accepted via a credit card terminal, similar to those you would see in a store like Wal-Mart, or your local grocery store. Credit card terminals permit clerks to slide the credit and debit cards through the terminal to read and process the transaction. Some of the more advanced credit card terminals can process gift cards, allow cashiers to manually enter credit card numbers or expiration dates, and even verify and process checks. The information is then securely transferred to the merchant bank or third party vendor via a secure phone or Internet connection.

In addition to processing credit and debit cards more quickly, credit card terminals offer less expensive rates for processing transactions and are safer for customers and businesses alike, because they reduce the need to keep credit card numbers on site and diminish the threat of credit card number theft and identity theft.

Who Needs a Merchant Account?

Almost any business could benefit from utilizing a merchant account. Whether your company is a fortune 500 company or a two person family based business, if you process credit cards or debit cards, or would benefits from accepting these forms of payments, then you can benefit from using a merchant account. Since many people no longer carry much cash, accepting credit and debit cards can be more convenient, safer, and quicker than having someone write a check, and it’s certainly better than missing out on a sale!

Cash flow statements are extremely useful for a business to get a complete picture of all money coming into the business and all money going out of your business during a specific period of time. When organizing your small business finances, you should create a cash flow statement annually at a minimum, but businesses of all sizes benefit from creating cash flow statements on a monthly or quarterly basis.

A common misunderstanding of cash flow statements is that it will show the same number as the “net income” from the Profit and Loss Statement. This is not the case, because your net income on the P&L will show non-cash information, like depreciation and physical assets, and because net income is calculated from net sales – not actual cash payments.

How to Create a Business Cash Flow Statement

What Cash Flow Statements Are Used For

Business owners can rely on cash flow statements as the guideline for creating their budget. It will show you where your income has been generated and where the money went.

If applying for a business loan, a lender will ask for a cash flow statement to analyze your ability to repay the loan.

If your business is publicly traded, you are required to create cash flow statements and follow the Generally Accepted Accounting Principles (GAAP).

How to Create Your Cash Flow Statement

There are three sections in a cash flow statement which can show the net change of cash coming in and out of your business during a specific period of time:

Operating Activities
Investing Activities
Financing Activities

Find your beginning cash balance – how much money do you have in the bank and in hand at the start of the month or period you’re creating a cash flow statement for? For example, if your business has $1400 in the bank and $600 in petty cash, you’re starting cash balance is $2,000.

How much money came into the business – include all income to the business from sales and other business activities; including payment for old debts. If you brought in $5,000 in sales and $350 from old debts people owed to you, your total cash in for the period is $5,350.

How much money went out of your business – include all expenses and purchases. You’ll probably have salaries, rent, utilities, supplies, loans, taxes, etc. If you spent $3000 in salaries, $500 for rent, and $220 for office supplies your total cash out would be $3720.

Calculate the cash flow – subtract the total amount of your cash out from your total amount of cash into the business for the period you are analyzing. In our example, you would subtract $3,720 from $5,350 for a net change of $1,630. If you have a negative number from this calculation, your business is operating at a negative cash flow and is in trouble.

Find your ending cash balance – add the net change you just found when calculating the cash flow to the beginning cash balance to get your ending cash balance. In this example, it would be $3,630. This becomes your beginning cash balance for the next period.