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Every way of being paid costs a percentage, a delay, an hour or a risk — how to compare them on all four, and how to move a share of what arrives out of reach before it is spent.
Paper packet. Every task here also exists on screen, where it is checked automatically; answers written on paper are not assessed by Nydus. When you are back at a device, enter your answers there.
You will work out what a way of being paid costs a business — the share a processor keeps, the days before the money is spendable, the handling in hours, the way it can fail — and compare methods on all four counts rather than on the fee alone. You will also set aside a share of what arrives, and find the takings that share needs to cover the bills.
You keep a daily record, so you know what was sold, when, and how each sale was paid. This lesson asks the next question of those sales: when does each become money you can spend, and what did getting there cost? It also shows how to move a share of every arrival out of reach, so that money already owed is never spent by accident.
| Term | What it means |
|---|---|
| Processor | A company that moves card or wallet payments to your account and keeps a share. |
| Fee | The share a processor keeps; its percentage is a term of your own contract. |
| Cleared money | Money that has arrived and can be spent. |
| Settlement time | The days between the sale and the money being spendable. |
| Reversal | A payment taken back after it has landed, such as a card chargeback. |
| Handling cost | The hours spent counting, banking, matching or chasing a payment, at the owner's costing rate. |
| Set-aside | A share of every arrival moved to an account that is not spent from, to cover bills and tax. |
The sale happens at the counter; the money happens when you can spend it. The way you were paid sits between, and every way costs something — in four kinds:
Only the first prints itself on a statement, which is why owners compare on it and wonder why the fee-free method is exhausting. An invoice keeps none of the price and is the dearest row here: a month of waiting, an hour of chasing, everything if it never comes. Every percentage here is a business's own contract terms, not a rate any law sets.
Another way: steps
To read any way of being paid:
Another way: table
Five methods, at one workshop's own contract terms.
| Method | Kept | Days | Your hours | How it loses everything |
|---|---|---|---|---|
| Cash | none | 0 | counting | theft, a miscount |
| Card | 2% | 2 | none | a later reversal |
| Wallet | 1.5% | 1 | checking | a faked screenshot |
| Transfer | none | 3 | matching | it comes when they like |
| Invoice | none | 30 | chasing | it never comes |
Three keep none of the price. Not one is free.
Read the fee from your own contract. Processors charge different percentages, sometimes plus a fixed amount per transaction, and the rate on an advert is not necessarily yours. Take it from a recent statement: the fees divided by the card takings.
Work the fee out on the price. The percentage applies to what the customer paid, not to the profit. Two percent of a 400-dollar sale is 8 dollars, whether the sale made 200 or 20.
Count the days. Note how long each method takes to become spendable: cash at once, cards in a day or two, transfers when the customer sends them, invoices at the end of their terms or later.
Cost the handling in hours. Time spent counting cash, matching transfers to invoices or chasing late payers is labor. Turn it into money at the owner's costing rate, and it can be compared with the fee.
Name the risk. For each method, say how the whole amount could be lost.
Check the comparison by putting the four costs side by side for a typical week, in dollars where you can: fees, the value of the hours, and an estimate of what the risks cost on average. The method that looks cheapest on the fee line is often not the cheapest on the page, and the page is the honest comparison.
Some of the account is already owed — to suppliers, to the landlord, and as whatever tax the trading will owe. So move a share of every arrival somewhere you do not spend from:
$$\text{set aside} = \text{takings} \times \text{your share}$$
It runs on takings, not profit. Turned around: bills of 160 need takings above 640. The share is the owner's own decision.
Taxes, permits, registration and the records a business must keep are set where the business trades, and they differ from one place to the next and from one year to the next. So this teaches the reasoning — what a figure is for, and how to work it out — with any rate or threshold given to you in the question as a number to use. The rate that applies to you is a thing to look up with the authority where you trade, and to check again each year.
Most small businesses end up taking several methods, and the useful question is not which one is cheapest but which mix costs least for the customers we actually have. A market stall whose customers carry little cash loses sales without cards; a tradesperson whose customers are businesses may do best with transfers and short invoice terms; a café with a line may choose cards and wallets to keep the line moving, because a slow cash transaction costs a sale at the back of the line.
Three practical habits help. Ask for payment at the point of delivery wherever the trade allows it; every day of delay is money owed rather than money held. Make the method you prefer the easiest one — a card reader on the counter, bank details printed on every invoice, a clear due date. Review the mix twice a year from the daily record: what share of takings came by each method, what the fees came to, and how much is still owed. Those three figures are enough to see whether the mix is quietly costing more than it should.
The cheapest way to change what being paid costs is often to change when it happens. A deposit taken at booking moves part of the money to before the work, which removes most of the delay and most of the risk on that part: a customer who has paid a deposit rarely fails to turn up, and if they do, the business keeps something for the slot it held.
Deposits suit work that is booked ahead and takes capacity that cannot be resold at short notice — a commission, a catering order, a deep clean, a course of lessons. A common pattern is a quarter to a half at booking and the rest on completion. The deposit should be written into the offer, so it reads as part of how the business works rather than as distrust of one customer.
For regular customers the same idea becomes payment in advance: a month of cleans paid on the first, a term's lessons paid at the start. Each moves money from owed to held without touching the price, and the daily record should show deposits as money received for work not yet done — not as sales — so that the month's takings are not overstated when the deposit lands and understated when the work is finished.
An owner reviewing payment methods should ask of every kind of sale: could part of this be paid before the work starts? Where the answer is yes, a deposit usually costs nothing and removes the most expensive risk on the list. Where the answer is no, shorter terms and a prompt, polite reminder do much of the same work at almost no cost to anyone.
A self-employed plumber invoices every job with 30-day terms. Over a year he invoices 62,000 dollars. Reviewing his records, he finds that on average he is paid 41 days after the job, that he spends about three hours a week sending invoices, matching transfers and phoning late payers, and that two customers never paid at all: 1,150 dollars written off.
At his costing rate of 45 an hour, the three hours a week of chasing cost about 45 × 3 × 48 = 6,480 a year. With the bad debts, the invoice method — which keeps none of the price — costs him roughly 7,600 a year, over 12 percent of what he invoices. His line of credit, needed because he is always waiting for about 7,000 dollars of unpaid work, costs another 500 in interest.
He buys a card reader and asks domestic customers to pay when the job is finished; business clients still get invoices, now on 14-day terms. The next year, about 70 percent of his takings arrive on the day, at a card fee of 1.75 percent — around 760 dollars — and his chasing falls to under an hour a week. The fee line on his statements went up; what being paid cost him went down by several thousand dollars.
Large retailers measure the cost of handling cash — counting, security, transport and losses — and many find it comparable to or higher than card fees per dollar taken. That is part of why so many shops now encourage card and phone payments, even though those methods carry a visible fee and cash does not.
Reading the fee as the whole cost. It is one of four. The method with no fee can be the one costing a day a month and an unpaid invoice a quarter.
Treating cash as free. No fee, plenty of cost: counting, banking, the risk of a miscount, the sales lost to people carrying none.
Working the fee out on the profit. It is a percentage of what the customer paid.
Treating a made sale as money. An invoice raised is not cash, and a business can be sold out and unable to pay its supplier.
Assuming a landed payment is settled. A card payment can be reversed weeks later; a picture of a transfer is not a transfer.
The cheapest method is always best. A method that costs a little more but brings the money days sooner, or wins a customer who would not otherwise buy, can be worth its fee.
Find the card fee at her contract's 2 percent.
$600 \times 0.02 = 12$
The fee is visible, and small.
Find what lands and when.
$600 - 12 = 588 \text{ in two days}$
Spendable almost at once.
Write the invoice on thirty-day terms.
$\text{kept } 0; \ 600 \text{ in thirty days, if paid}$
It looks better on the fee line.
Cost twenty minutes of chasing at her rate of 27.
$\tfrac{1}{3} \times 27 = 9$
The handling cost of the invoice.
Compare on all four.
$\text{card: } 12, 2 \text{ days}; \ \text{invoice: } 9 \text{ plus a month and a risk}$
The 12-dollar method is the cheaper one once time and risk are counted.
Write the takings, all in cash.
$\text{takings} = 480; \ \text{fee} = 0$
The fee line reads zero.
Cost forty minutes of counting and banking at her rate of 18.
$\tfrac{40}{60} \times 18 = 12$
The handling job, in her own hours.
Find what a card fee would have been at 2 percent.
$480 \times 0.02 = 9.60$
Less than the handling.
Count the sales lost to customers with no cash: three at 25.
$3 \times 25 = 75$
The cost that leaves no record.
Set a quarter of the takings aside.
$480 \div 4 = 120$
Moved before any of it is spent.
Find what is left to trade on.
$480 - 120 = 360$
The spendable part of the day.
Write the month's takings by method.
$\text{card } 3000, \ \text{cash } 800, \ \text{invoices } 1200$
Taken from the daily record.
Find the card fees at 2 percent.
$3000 \times 0.02 = 60$
The only cost that prints on a statement.
Cost the cash handling: 2 hours at 28.
$2 \times 28 = 56$
Counting and banking, in hours.
Cost the invoice chasing: 3 hours at 28.
$3 \times 28 = 84$
Matching transfers and sending reminders.
Add the invoice he expects never to collect: 1 in 40 of 1200.
$1200 \div 40 = 30$
The risk, as an average cost.
Find each method's cost per 100 dollars taken.
$\text{card } 2.00, \ \text{cash } 7.00, \ \text{invoice } 9.50$
The fee-free methods are the dear ones here.
Decide what to change.
$\text{card reader for business clients; 14-day terms}$
The mix, not the fee, was the thing to fix.
Find what the processor keeps.
$800 \times 0.02 = 16$
A percentage of the price.
Find what lands and the quarter to set aside.
$800 - 16 = 784; \quad 784 \div 4 = 196$
The set-aside is a share of what arrived.
Find what is left to trade on.
Four ways of being paid, and four things that can go wrong. Match each method to its own risk.
| It can be stolen or miscounted, and it leaves no record of itself | A payment can be reversed weeks later by the cardholder's bank | A screenshot of a transfer is not a transfer | The sale is made, the work is done and the money may never come | |
|---|---|---|---|---|
| Cash in the hand | ||||
| A card tapped on the reader | ||||
| A phone wallet transfer | ||||
| An invoice on thirty-day terms |
Complete the worked solution: a job is paid by card at $1000$ dollars. The business's processor keeps 2 percent, and the owner moves a quarter of everything that lands into a set-aside account. How much is left to trade on?
Find the processor's fee.
$1000 \times 0.02 =$ f
A percentage of the price.
Find what lands.
$1000 - (\text{fee}) =$ l
The fee is kept before the money arrives.
Find the quarter to set aside.
$(\text{landed}) \div 4 =$ s
Moved before any of it is spent.
Find what is left to trade on.
$(\text{landed}) - (\text{set aside}) =$ t
The spendable part of the sale.
Check the parts add back to the price.
$(\text{fee}) + (\text{set aside}) + (\text{left}) = 1000$
Every dollar of the price is accounted for.
Northside Repairs did $77$ jobs last week, every one of them charged at $300$ dollars. Of those, $30$ were paid by card, and under the contract this shop has with its processor the processor keeps $2$ percent of every card payment. How many dollars did the processor keep last week?
Answer:
Cash costs a business nothing in fees. A card, on the terms one workshop has agreed with its processor, costs two percent of the sale. So why would that workshop keep taking cards?
Monica spends $90$ minutes after each market counting, banding and banking her cash. She costs her own time at $28$ dollars an hour. How many dollars does handling the cash cost her after each market?
Answer:
Maya's Ceramics sells one commissioned dinner set for $600$ dollars, and will take the money any of five ways. Under the contract this workshop signed with its own card processor, the processor keeps $2$ percent of a card payment and $1.5$ percent of a phone wallet transfer, and nothing at all of the other three — those percentages are the terms of this business's own arrangement, and another workshop with another processor would be quoting different ones. Fill in what the processor keeps on this $600$ dollar sale by each method. The last column is given.
| What the processor keeps, dollars | Days until the money can be spent | |
|---|---|---|
| Cash in the hand | 0 | |
| A card tapped on the reader | 2 | |
| A phone wallet transfer | 1 | |
| A bank transfer arranged by the customer | 3 | |
| An invoice on thirty-day terms | 30 |
A barber has made himself a rule: a quarter of every week's takings goes straight into a second account, and that quarter has to carry both the bills and whatever tax the business will owe. The bills come to $128$ dollars a week. A cut is $25$ dollars and the chair can fit at most $23$ of them into a week. For which weekly takings does the quarter pay the bills and still leave something toward the tax, while staying inside what the chair can take?
This task has no paper form; do it on a device.
Lesson test: one question per skill, one attempt each, no hints. Your answers are checked when you submit.
Maya's Ceramics sells one commissioned dinner set for $600$ dollars, and will take the money any of five ways. Under the contract this workshop signed with its own card processor, the processor keeps $2$ percent of a card payment and $1.5$ percent of a phone wallet transfer, and nothing at all of the other three — those percentages are the terms of this business's own arrangement, and another workshop with another processor would be quoting different ones. Fill in what the processor keeps on this $600$ dollar sale by each method. The last column is given.
| What the processor keeps, dollars | Days until the money can be spent | |
|---|---|---|
| Cash in the hand | 0 | |
| A card tapped on the reader | 2 | |
| A phone wallet transfer | 1 | |
| A bank transfer arranged by the customer | 3 | |
| An invoice on thirty-day terms | 30 |
You can say what a card, a wallet, a transfer, cash and an invoice each cost, in fees, in days, in hours and in risk, and work out a percentage fee on a sale from the terms a business has agreed. Tell someone why the way of being paid that keeps none of the price can be the most expensive one you have. Next: putting a month's trading into three lines and two subtractions.
15. Your turn: an 800 dollar job, paid by card at 2 percent, with a quarter set aside, step 3
$784 - 196 = 588$
The 196 is spoken for.