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All about business payments you need to know

Updated on: May 18th, 2022


3 min read

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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.

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

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