How Payment Processing Works for Contractors 

Your customers are incredible. You love what you do. 

But at the end of the day, you need cash to keep going. You need a consistent flow of money coming in to run your business sustainably. 

Chasing delayed checks, lost invoices, and late payments is more than just a headache. It steals time and resources from other tasks, like improving your customer service and growing your business. 

The solution? A solid payment processing system. 

In this article, we’ll show you how payment processing works for contractors. We’ll explain what it is and how it unfolds. 

We’ll also share some top tips for picking a payment processor and explore the benefits it can offer. 

Finally, we’ll give you some steps you can take today to get started with payment processing. 

What Is Payment Processing? 

At its core, payment processing is how you get paid for your work. It’s the system that handles transactions between you and your customers. 

Let’s break it down step-by-step. 

Step 1: The Customer Makes a Payment 

The process starts when a customer wants to pay you. 

They can use cash, a credit card, a debit card, or even online payment methods. This is called the point of sale. 

Step 2: Payment Information Is Sent 

Once the customer decides how to pay, their payment information is sent to your payment processor. 

Step 3: Payment Information Is Authorized 

The payment processor checks with the customer’s bank or card issuer. 

They make sure there are enough funds and that the payment is not fraudulent. This step is called authorization. 

Step 4: Payments Are Approved or Declined 

The customer’s bank or card issuer approves or declines the payment: 

• If approved, the money is reserved for you. 
• If declined, the customer will need to try another payment method. 

Step 5: Funds Are Transferred 

If the payment is approved, the funds are transferred to your account. This can take a few days, depending on the payment method. 

Step 6: Payment Is Confirmed 

You will receive a confirmation that the payment is complete. This lets you know that the transaction was successful, and the money is on its way to you. 

RELATED ARTICLE: What Is Payment Processing? 

How Payment Processing Works for Contractors

You now know how payment processing works. But how does this apply to your day-to-day operations? What does it mean for you as a contractor? 

Here are four important elements you need to know: 

Technology 

First, you will need technology like Service Fusion to process payments. 

These software tools help you manage invoices, payments, and customer information in one place. It acts as a single source of truth, which helps mitigate the risk of errors. 

The right technology will make requesting and accepting payments easier for you and your clients. 

FROM ONE OF OUR PARTNERS: The Future of Online Payments: What You Need to Know 

Accepted Payment Methods 

Next, you will need to decide on the payment methods you accept. These might depend on the technology you use. 

Payment methods include: 

• Cash: Traditional but may be less secure 
• Checks: Useful for larger payments 
• Credit and debit cards: Convenient for customers 
• Online payments: Through PayPal or similar services 
• Bank transfers: Secure and direct  
• ACH (automated clearing house) payments: Electronic transfers between bank accounts with lower transaction fees 

It’s a good idea to offer multiple payment options. Some clients might prefer cash. Others might use online payment portals. 

Cater to a whole range of needs and preferences. That way, you can increase the likelihood of getting paid on time, every time. 

Processing Time 

Then, there’s processing time. This is the time it takes for a payment to be sent, authorized, approved or declined, and transferred. 

Different payment methods have different processing times: 

• Cash: Immediate 
• Checks: May take a few days or weeks to clear 
• Credit and debit cards: Usually processed within 24 hours 
• Online payments: Can be immediate or take 1-2 business days 
• Bank transfers: Typically take 1-3 business days 
• ACH payments: Processed within 1-3 business days 

Receiving and Organizing Payments 

Finally, you’ll need to consider how you will receive payments. 

Generally, the money will be transferred into your business bank account. Make sure it accepts funds from different payment methods. 

You might also turn on notifications so you know when money comes into your account. 

Lastly, think about setting time aside to reconcile your accounts. This means checking whether the money in your bank matches the invoices paid. 

If you find a discrepancy, you can follow up quickly. This helps keep your cash flow healthy and your clients happy. 

How to Choose a Payment Processor 

A payment processor is a company that handles transactions between your business and your customers. It’s like the intermediary. 

Payment processors play an important role in business operations. It’s worth doing your research, reading reviews, and finding a company that meets your needs. 

The wrong processor can slow down your payments. They can also charge high fees that eat into your profits. 

The right processor, in contrast, can ensure you get your money fast. They can protect your data and save you time and money. 

How do you know which payment processor is right for you? Here are our top tips: 

Review the Pricing Model 

Payment processors use different pricing models. Make sure you understand what you’re signing up for. 

First, check the per-transaction fees. Some processors charge a percentage, while others charge a flat fee. 

Then, look at the monthly service fees. These will add up over time. 

Read up on any setup costs too. Some processors charge a one-time fee to open your account and set you up. 

Finally, be aware of hidden fees. Check the fine print so you aren’t caught off guard. 

Consider the Software and Hardware Offered 

Tech is key to an efficient payment processing system, so check out the software and hardware on offer. 

Answer these four questions: 

• Do you need a point-of-sale system, like a physical card reader? If so, make sure the processor can supply you with one. 
• Do you need mobile payments? If, like most contractors, you work on-site, mobile payments are a must-have. 
• Does the processor’s software integrate with your current systems? It should work well with your accounting software, for example. 
• Is the software and hardware easy to use? Intuitive technology can save you time and reduce mistakes. 

Evaluate Contract Lengths 

Your payment processor should grow and evolve alongside your business. To make sure of this, evaluate the length of the contracts on offer. 

If flexibility is important to you, look for a processor that offers month-to-month options. Otherwise, find out if you can save by opting for a long-term contract. 

Ask about a potential trial period too. You can use this time to test the service before you commit. 

Finally, be aware of any fees if you decide to cancel the contract early. 

Assess the Customer Support 

Five-star customer support can turn a challenge into an opportunity. So, make sure you pay attention to the processor’s support options. 

Here are some things to look for: 

• Make sure customer support is available when you need it. 24/7 support is ideal. 
• Check how quickly they respond to issues. Fast response times can save you a lot of trouble and help to keep your customers satisfied. 
• Look at customer reviews to gauge the quality of support. Positive reviews are a promising sign. 

Find Out About Security Features 

When it comes to payments, you must abide by certain laws. These protect you, your business, and your clients from fraud and other malicious activity. 

So, ensure the processor uses encryption to protect payment data. See if they offer fraud detection and prevention tools. 

And lastly, make sure they comply with industry standards like PCI DSS (Payment Card Industry Data Security Standard). 

Benefits of Using Payment Processing for Contractors 

Finding a payment processor might seem like a lot of work. But with the right partner in your corner, you gain access to benefits that can change your business for the better. 

Here are just some of the advantages of using payment processing for contractors: 

Faster Payments 

Plain and simple. A payment processor helps you get paid faster. 

Traditional methods like checks can take days or even weeks to clear. And that’s without delays or errors. 

By offering alternative methods like online payments, you can access funds immediately or in a matter of hours. 

What does this do for your contracting business? It makes your cash flow more predictable. You can rest easy knowing you have the money you need to pay your bills and buy supplies. 

For example, say you complete a job on Monday. The customer pays via credit card. You might have the money in your account by Tuesday or Wednesday. 

This short timeframe can help you meet your financial obligations. It’s particularly helpful during busy seasons when expenses are higher. 

Increased Security 

In 2023, 80% of US organizations experienced payments fraud. Payment processors offer better security compared to other methods. 

They use advanced encryption methods to protect sensitive information during transactions. 

Plus, payment processors offer fraud detection. These alert you to suspicious activity. You can take action before the damage is done. 

For you, this means less worry. For your customers, they have total peace of mind knowing their information is safe. 

More Convenience for Customers 

Customers appreciate convenience. Seven in 10 will even pay more for a convenient experience. 

You can capitalize on this insight by offering multiple payment methods. That way, your clients can pay in a way that works best for them. 

This can speed up the payment process too. Customers are more likely to pay fast when it’s quick, easy, and familiar. 

Happier customers mean more repeat business. It can also mean more positive reviews and word-of-mouth referrals. It’s the gift that just keeps giving. 

Better Record-Keeping 

Payment processors automatically keep detailed records of all transactions. This makes accounting much easier and more accurate. 

You can quickly see how much money you received, from whom, and for which services. This is especially helpful during tax season. 

For example, you can download a comprehensive report of all your payments for the year in just a few clicks. This eliminates the need for manual tracking. 

It also helps you follow up on outstanding invoices. 

Finally, accurate records allow you to identify trends in your business. You can see peak times and favorite payment methods. 

Professional Appearance 

Clients might think twice about working with a contractor that only accepts cash. Using a payment processor can make your business look more professional. 

Customers appreciate a smooth and modern payment experience. It shows that you are organized, trustworthy, and up-to-date with current technology. 

When you present a polished invoice with multiple payment options, you win customer trust and confidence. They might be more willing to hire you. 

A professional payment system also allows you to send friendly automated payment reminders. You can avoid those awkward conversations about unpaid bills. This can help maintain positive relationships with your customers. 

Less Wasted Time 

Manual invoicing and payment tracking can take up a lot of your time. A payment processor automates these tasks. 

You can send invoices, receive payments, and keep records with minimal effort. This frees up your time to focus on other important parts of your business. 

Let’s say you currently spend three hours a week chasing down payments and updating your records. With a payment processor, you can reallocate that time to marketing. 

This helps you attract and convert new customers. You grow your business while reducing the risk of human error. It’s a win-win. 

Improved Cash Flow Management 

With faster payments and better record-keeping, you can manage your cash flow. 

Knowing when payments will arrive helps you plan your expenses and budget. You can pay your bills on time, which means no more late fees. 

You can keep on top of your inventory without worrying about cash shortages. You might even be able to take advantage of early payment discounts from suppliers. 

RELATED ARTICLE: How Field Service Companies Can Improve Cashflow with Digital Payments 

Adding Payment Processing: Where to Start 

Here are some tips to help you start with payment processing today: 

• Come up with a budget. Crunch the numbers and figure out how much you’d like to spend on your payment processor. Stick to your budget. 
• Choose a reliable payment processor. Look for a company with good reviews, fair fees, and strong customer support. Make sure they offer all the features you need. 
• Set up multiple payment options. Give customers the choice to pay by credit card, debit card, or online methods. Outline these options clearly on your invoices. 
• Invest in hardware and software. Get a mobile card reader if you collect payments on-site. You might also need a point-of-sale system. 
• Integrate your payment process. Sync your payment processor with your accounting software to make sure your records are accurate.