If you’ve finally made the decision to turn your ecommerce sales side job into a full-time business, you may be wondering what you can do to ensure you remain financially solvent during the first few precarious months. One of the most important components of your financial model will be the way you process your payments.
Even if you’ve already been using a specific payment processor for your sales, you may want to explore your options to ensure you’re making your new business as efficient as possible. Read on to learn more about the role ecommerce merchant accounts can serve when it comes to helping you more easily predict your day-to-day cash flow.
How can your selection of an ecommerce merchant account improve your business’s cash flow?
An ecommerce merchant account is essentially an arrangement between you, your customer, and a credit card company. In exchange for a “swipe fee” of a certain percent of each transaction, the credit card issuer can set up an ecommerce merchant account to hold payments for you. This allows your customer to enjoy instant approval of each transaction (and you to have near-instant access to the sale funds) while the credit card issuer takes time to process the payment and settle up with each account.
When a customer pays via credit or debit card, your payment processor will send this payment request to the credit card company; while it’s pending approval, the funds can be deposited into your ecommerce merchant account for use or withdrawal. The terms and time limits associated with this account can vary widely based on factors ranging from your credit score to the amount you’re paying in swipe fees.
The terms of this arrangement can have a significant impact on your cash flow in both positive and negative ways. If your merchant account puts a hold of a few days on these funds, you may find yourself constantly scrambling to stay ahead of your bills while waiting for payments to clear. On the other hand, merchant accounts that give you instant or near-instant access to funds pending approval can ensure you’re able to replenish your inventory as soon as a sale is made.
What should you consider when choosing an ecommerce merchant account?
When selecting among available ecommerce merchant accounts, you’ll want to take a few unique factors into consideration. The “right” choice for your business will largely depend on your business model, as well as the amount in sales you’ll need to generate to stay ahead of your business and personal expenses.
In some cases, you may benefit from an ecommerce merchant account that sets a multi-day hold on incoming transactions as a sort of “forced” savings. In other cases, you may be able to afford only a limited amount of inventory, making it crucial to withdraw cash as soon as it’s deposited.
Raymond Bilger 
Daryl Green 
Conrad Armer