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All about business payments you need to know

Updated on :  

08 min read

As a business owner, there are several things you need to take care of while setting up a business. Marketing, listing out your products or services, delivery, etc., may eat up your time. However, business owners often miss making an informed decision on setting up a vital channel for sending and receiving business payments for their entity.

Meaning of business payments

Business payments refer to the transfer of money, goods, or services to purchase a product or service. They are usually acceptable and pre-decided values between the seller and buyer, available in the invoice or contract.

Usually, an invoice or bill precedes a payment. However, the term also includes such business payments that an entity receives or sends before the delivery of products or services or before the issue of invoices such as advance receipts or advance payments.

There are two parties involved in business payments. A payer is the one who makes the payment, and a payee refers to the person receiving the payment. Payments can be of different modes: services, cash, cheque, bank transfers, debit card, credit card, mobile payment, UPI, etc. Certain modes also involve a transaction fee charged by the payment intermediary or facilitator, such as the bank, payment gateway, or merchant.

Importance of setting up a payments system for your business

A payment system refers to suitable channels and tools to manage the smooth flow of business payments and processing, whether or not integrated with the accounts receivable or payables of the entity.

The following points help business owners know why they should have business payment set up in the entity-

  • Having a system in place promotes faster payment processing for your business.
  • A payment system will also enable you to accept multiple payment options with ease.
  • Setting up a payment system ensures that fraud management is in place.
  • Ideal payment systems also have communication channels set up between the sellers and their buyers.
  • It ensures optimal management of cash and bank balances throughout the year.
  • It allows smooth management of accounts receivables and accounts payables.

How to set up business payment systems?

Follow the steps given below to establish a business payments system for your organisation-

  1. Obtain a tax identification number such as a PAN, TIN under the Income Tax Act, GSTIN under the GST Act, and IEC for import or export, as applicable.
  2. Ensure you open a bank account for your business and, if need be, an overdraft or cash credit facility to ensure smooth working capital flow for your business.
  3. Next, examine the possibility of setting up a merchant account to allow payments through debit cards and credit cards.
  4. If you run a retail business of any size, investing in a Point of sale (POS) card reader would be convenient.
  5. If you intend to increase the reach of your business, then setting up online business payment processing systems such as UPI, mobile payments, etc., would help. After that, you can make use of a dynamic QR code for accepting payments quickly and securely.
  6. Use apps such as ClearOne which also has a payments collection software to fast track your payment collections. You can easily track and accept invoice payments from your clients or buyers by creating one-click payment links.

Small business payment options

The best suited small business payment mode depends on several variables. As a business owner, you must note the scale of your transactions, the person handling the money, security, investment cost, and the accounting system in use.

Some of the popular payment modes suitable for small businesses are as follows-

  • Cash
  • Cheque
  • Credit card/debit card
  • Mobile payments such as UPI, wallets, Immediate Payment Service (IMPS), etc.
  • Online payments such as National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS), etc.

All Articles

  1. A sample acknowledgement letter helps acknowledge payments received from clients as advance payments, membership, loans, or school fees.
  2. Payment processing services ensure smooth payment transactions by mediating between different parties involved in the process.
  3. Invoices are commercial accounting documents used by businesses for requesting payments and keeping track of payments received.
  4. PaaS platforms enable businesses to stay relevant in the current payment landscape by offering scalability, expertise, technology, and security.
  5. After assessing all the methods, choosing the best online payment mode for international trade can help you capture a bigger market and increase profits.
  6. The National Electronic Funds Transfer (NEFT) is an electronic payment system that facilitates direct one-to-one payments across the country.
  7. Digital receipt, a functional proof of payment in the B2C segment, still lacks certain components needed for becoming relevant in the B2B context.
  8. Every mоnth, bаnks аnd finаnсiаl institutiоns рrоduсe bаnk stаtements tо рrоvide соnsumers with reсоrds оf their оverаll finаnсiаls.
  9. UРI is а greаt wаy tо send аnd reсeive mоney through online payment, esрeсiаlly if yоu're in а hurry оr dоn't hаve enоugh саsh оr сredit саrds оn yоu.
  10. Users оf mоbile internet bаnking саn eаsily trаnsfer online payments viа IMРS. It is а methоd viа whiсh а user саn send mоney tо а reсiрient right аwаy.
  11. RTGS is а quiсk interbаnk online payment methоd ассessible in Indiа thrоugh bаnking systems. Get the complete list of banks and limits
  12. If yоu run аn оnline business, yоu саn't аffоrd tо ignоre online payments. Yоu wаnt tо оffer yоur сustоmers the mоst seсure аnd соnvenient орtiоns.
  13. Online раyment for invoice is mоney exсhаnged fоr sale оf а service or product. It is а раrt оf the ассоunts раyаble рrосess аnd is аlsо knоwn аs bill раy.
  14. Раyment рrосessing is the аutоmаted exсhаnge оf funds thаt рrосesses сustоmer раyments аnd debits them frоm the merсhаnt's ассоunt.
  15. Reсeiрts аre legаl dосument serving аs рrооf оf а finаnсiаl trаnsасtiоn оr рurсhаse. They аre аlsо required аs рrооf оf сertаin exрenses fоr tаx рurроses.
  16. A bank statement is an important summarised document containing all transaction history details of a bank account recorded over a period.
  17. It is reсоmmended thаt yоu beсоme асquаinted with the sрeсifiсs оf the оnline раyment рrосess in оrder tо find the best раyment processing sоlutiоn fоr yоu.
  18. The cash flow from the operating activities section indicates how much money a company brings from regular business activities.
  19. Cash flow from investing indicates how much a company has spent on long term or non-current assets. Read on to know more about the term.
  20. Funds flоw stаtement exрlаins hоw а соmраny's wоrking сарitаl сhаnges and deрiсts the оutflоw аnd inflоw оf funds frоm various sоurсes.
  21. Cash flow vs Fund Flow - Cash flow only focuses on actual or notional cash, whereas fund flow focuses on everything that constitutes funds or net working capital.
  22. Cаsh flоw frоm finаnсing асtivities refers tо the inflоw аnd оutflоw оf саsh and сарitаl struсture trаnsасtiоns frоm the соmраny's finаnсing асtivities.
  23. Cash flow analysis can help you monitor your business’s incoming and outgoing cash. Know more about the procedure in this article.
  24. Small businesses usually accept cash раyments from their customers. Weighing the pros аnd cons саn аssist yоu in mаking the best deсisiоns fоr yоur соmраny.
  25. Online payment saves time, offers more security, takes cash out of the equation, making it a convenient mode of accepting payments for businesses.
  26. Online collections via NEFT, etc involves charges. Get the list of charges by top banks in India for online payment collections.
  27. NEFT when compared to RTGS and IMPS works differently. Know the key differences, limits for using the facility and know which is best to use.
  28. Acknowledgement letter is a formal letter used by businesses or individuals to confirm the receipt of documents or other items.
  29. Online Payments carry many risks, such as compromised data, fraud, etc., for your business and customers. Here are 5 measures to ensure safe online payment.
  30. Payment modes for online transaction refers to making transactions for paying goods or services via an electronic medium. Know more.
  31. Cash book contain the records of all transactions involving cash in a detailed manner. Know more about its accounting and legal aspect.
  32. Cheques for Payments are used as it is safe and secure with money transferred from the payer's account to the payees’ account. Know more.
  33. Online or offline payment mode? This question must have bothered you several times. Get answers to which mode works better for businesses.
  34. Bank statement is an important document required to get details of past transactions, get loans, track vendor payments, etc. Know how to apply.
  35. UPI transaction limit are set by NPCI. UPI is a digital payment system for instant digital fund transfer between two accounts. Know the list of limits.
  36. Vendor payments are commonly referred to as accounts payables. They represent the payments due to the business’s suppliers of goods and services.
  37. NEFT refers to the National Electronic Funds Transfer. It is a widely used mode of money transfer because of the availability of high transfer limits.
  38. SMS pay links are becoming progressively popular as an alternate mode of payment. They are a mode of accepting payments from a customer using SMS.
  39. Payment Link is an online mode of payment where the merchant creates a payment link online and then shares it with their customers. Know more.
  40. Receipts must be well organised and kept by every small business owner. This article explores how to effectively organise business receipts.
  41. Voucher types are of many, such as payment voucher, receipt voucher, journal voucher and supporting voucher. This article explain each type with entries
  42. Voucher is an internal document issued by the accounts payable department of an organisation on receipt of an invoice. Know more.
  43. Vendor Payments also called supplier payments, forms an integral part of accounts payable management. Know more about it through this article.
  44. Online payment is getting popular with every passing day. The article covers its importance from a business perspective and ways to achieve growth.
  45. Online payment can often involve challenges for small businesses and customers. But businesses must take certain precautions to avoid them.
  46. Online Payment is all the rage these days. It has become essential for business growth. The article provides various methods and its importance.