Please read it thoroughly, it will save you money.
Processing Credit/Debit Cards or NetBanking payments online requires the use of a payment gateway, which is essentially a third-party provided software. It enables the buyer of goods or services to make instant payment and the seller of goods or services to get instant confirmation of payment so that the goods or services can be delivered without further waiting.
If the delivery of your goods or services requires instant online payment confirmation, it indeed is an efficient way to process transactions, no matter there is a cost to it. It may also be a necessity for your business model where transactions are initiated directly on your website by the consumer or buyer. Or you are operating something massive like a public utility service.
Societies or Associations, on the other hand, have to invoice their members for maintenance or other charges. Recurring invoicing in your System is already automated. Maintenance charge payment being a regular expense, members can set up the Society or Association as a payee in their bank accounts and pay in a few clicks – directly, without a middleman, which a gateway is. The simple, secure and efficient form of payment, at the least cost. The funds get credited to the Society or Association bank account in no time.
Your System is capable of direct downloading of bank transactions automatically into the accounts saving the labour of manual entries. Downloaded transactions eliminate manual data entry errors. While the built-in auto-categorization learns from you over time, in your System the payments do need to be assigned to the members, an advantage a payment gateway may have in auto assigning.
Payment gateway charges for using Credit/Debit Cards or NetBanking for online payment processing average around 2.0% – 2.5%, more or less. There would be setup fee and annual charge as well. Here is a typical calculation based on a median of 2.25%, feel free to calculate on a different rate:
- 100 members x Rs.5000 maintenance charge per member per month = Rs.5,00,000 x 12 months = Rs.60,00,000 annually.
- At 2.25% the gateway charges work out to Rs.1,35,000 per year or Rs.11,250 per month.
Now see the time that your staff member is going to spend per billing cycle in:
- Sending out invoices, totally automated – zero time.
- Assigning the downloaded payments to the members, receipts go out automatically – 30 seconds or so per member.
- If your billing cycle is quarterly, there is even lesser time spent overall. Some Societies/Associations bill only twice a year i.e. every six months.
- Our liberal estimate for a 100-member Society or Association is 2 hours per billing cycle.
Further, see what your staff member’s salary is, how much it works out to for 2-hour’s work per billing cycle. See how much you can save without compromising accuracy, speed, efficiency.
The advantage a payment gateway may have over direct payment method in your System is in auto assigning payments to members. This is the only benefit for which you will pay the gateway charges. See if it is value for money.
Besides, the funds for charges paid through cards may not be instantly credited to your account, the payment gateway holding the funds and then disbursing, say, weekly. Then again your staff member will need to reconcile, adding to the workload.
The payment gateway could be independent and may not even be integrated with the accounting system requiring you to re-enter the billing/payment data into the accounts, effectively making you do the same work twice.
A payment gateway is a necessity where instant confirmation of payment is required, e.g. buying an air ticket online, making a hotel reservation on the Web, ordering for goods on the Internet that would be shipped out immediately, or are digital goods for instant download. No such exigencies exist for paying maintenance charges.
Here is a point-by-point comparison between Coop Manager offered Invoicing System and an Automated Payment Gateway:
|Comparison Point||Coop Manager Offered Invoicing||Payment Gateway Linked Invoicing|
|Recurring Invoicing:||Automated||May or may not be automated|
|Assigning of Payments:||Manually assigned from auto downloaded bank transactions||Auto assigned|
|Sending Out Receipts:||Automated||Automated|
|Entering Invoices and Payments in Accounts:||Entered automatically in real time with each invoice and payment||Necessary to enter data individually or import periodically (daily, weekly etc), effectively making you do the invoicing and payments twice|
|Reconciliation Between Accounts and Payment Gateway:||Not required||Required, adds to workload|
|Time to get Payment Credited in Bank Account:||Immediate||Payment gateway holds funds for a period of time, in some cases up to 2 weeks|
|Additional Cost:||Zero, except for the negligible time your staff member spends in assigning payments||Significant amount towards payments in gateway commission, setup fee, annual charges|
|Access to Personal Ledger:||Not just personal ledger, members have reporting access to the entire accounting system||May or may not be available but definitely no access to society accounts|
We will, of course, be happy to integrate your invoicing and payment with a payment gateway. Please check with us for the applicable costs. Coop Manager is revenue neutral in either decision.