Did you know that approximately 10 percent of all credit card and checking payments from your customers will not be honored by their credit card companies and banks? At any given time, everyday issues such as insufficient funds, credit limit overages, address changes, name changes, and lost, stolen and expired cards present situations in which a payment—regardless of size—might not go through. Management of these administrative items presents myriad problems for salon owners looking to recoup money owed to them. Over time, these simple administrative issues can amount to significant lost revenue.
In today’s economy, busy salon owners cannot afford to abandon any revenue opportunity, let alone sizeable amounts of recurring revenue (such as membership dues). Smart salon owners know that they will not be successful if they do not have a way to recover and manage lost revenue, but most simply do not have the time or the expertise to do so effectively. Fortunately, in the tanning industry, processing revenue through electronic funds transfers is a great way for salon owners to ensure they get their money quickly, reliably and accurately.
EFT Basics
What is an EFT? EFTs are widely accepted in membership-based organizations as a cost-effective alternative to manually processing payments from clients. EFT automates the transfer of money from one bank account directly into another without any paper money changing hands or credit cards being presented at time of sale.
How does EFT work? For those who wish to pay through their banking account, transactions are processed through the Automated Clearinghouse Network (ACH). This is the secure, reliable and highly efficient system that connects all U.S.-based financial institutions. For those wishing to pay by credit card, approvals are granted through credit-card brands such as VISA, MasterCard, American Express and Discover, and the interchange (the relationships and processes between the cardholder, the card-issuing bank, the merchant, the acquiring bank, and the Credit Card Association). From there, the funds flow to the merchant’s bank (or the salon’s bank in this case). Both processes generally result in these funds being deposited within two banking days.
Why is EFT useful to salon owners? For salon owners, EFT provides convenient and reliable means of electronically processing payments, which allows for increased and predictable cash flow month after month. EFT also mitigates the risk of late, lost or stolen payments from clients, and because many banks deposit EFT payments more quickly than other forms of credit, salon owners will have faster access to those funds.
“EFT also significantly reduces the cost and aggravation of managing the manual work required to accept and process recurring payments via channels such as cash, checks and face-to-face credit-card transactions,” says Craig Fine, vice president of Conexion Tan, a company specializing in salon billing solutions. “Plus, account information needs to be recorded only one time—instead of each time a payment is processed.”
For those salon owners who are environmentally conscious, EFT reduces the demand for paper.
For a salon’s client base, EFT provides an easy and convenient way for them to pay for their salon memberships. In addition, EFT reduces the potential for fraud associated with lost, stolen or altered checks, credit cards and cash. Additionally, no changes can be made to an EFT unless the client specifically authorizes it.
How does a salon owner get started with EFT? “There are many different options for EFT processing, but the best way for salon owners to get started with EFT is to find a company that specializes in this kind of service for the tanning industry,” Fine says.
Whether brand-new to EFTs or wanting to check out additional options, salon owners should look for established businesses with solid client-centric reputation and competitive rates. Other questions to ask when shopping for an EFT processor include:
Can the provider connect to your current salon management software?
- If so, how complicated is the setup process, and what is required of you?
- How long has the company been processing EFTs?
- What is the company’s record of customer service?
- Is the provider PCI-compliant?
- What data-security measures does the company have in place to protect salon clients’ money and information?
