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Getting Ready For Tax Season:  Use A Merchant Consultant To Add Value To Your Business

Getting Ready for Tax Season:  Use a Merchant Consultant to Add Value to Your Business

As merchants and their business advisors get ready to analyze the books from this past year, merchants should consider consulting with a merchant processing expert who can provide real value.

  • Every merchant should know her effective rate every month.
  • Merchants should carefully weigh whether to surcharge.
  • EPNA, as a certified merchant consultant, can bring value to every business.

The merchant processing industry is a complex and confusing one, and every merchant can benefit from consulting with a trusted expert.

Every merchant should know her effective rate every month. 

If a merchant knows just one data point about her merchant processing costs, it should be her effective rate.  Every merchant who accepts debit, credit, business or purchasing cards needs to know how to calculate her effective rate and how to ensure that her effective rate is competitive.

To know the effective rate, the merchant needs to do two calculations.  First, determine the total processing-related fees that she pays.  The fees can be a confusing jumble of terms and they can be laid out in a dizzying number of ways. Some processors charge “membership” fees, separate and apart from the fees disclosed on the monthly statement. Other processors advertise “no hidden fees,” yet their flat-rate pricing has layers of fine print.  Still others disclose their fees in separate statements covering overlapping time periods, with the apparent intent to make it impossible for the merchant to compare apples to apples.

One way for a merchant to calculate the processing-related fees is for the merchant to gather all the relevant statements and to subtract the amount deposited into her bank account from the processed dollar volume.  Once the merchant knows the total processing-related fees, it is easy to learn the effective rate: simply divide the total monthly processing-related fees by the total monthly processed dollar volume.


Processed Dollar Volume $100,000.00 Processing-Related Fees $3,225.00
Amount Deposited $ 96,775.00  Processed Dollar Volume %  $100,000.00
Processing-Related Fees $3,225.00 Effective Rate 3.225%

The above calculations are, perhaps surprisingly, from a merchant who signed up for a popular flat-rate pricing plan which advertised the teaser rate of “2.6% plus 10 cents and no hidden fees.”  The merchant thought her true effective rate would be much closer to the advertised 2.6%.  And, if all her transactions had been in person, her effective rate would have been close at 2.8%, after adding the 2.6% percentage fee to the 10 cents per-transaction fee.  But because the merchant accepted some keyed transactions and some e-commerce transactions, the effective rate jumped to 3.225%.  Over the course of a year, that 0.425% difference in the effective rate will exceed $5,000.  This discrepancy should cause any merchant to question whether she is on the best plan for her to have a competitive effective rate.

Merchants should carefully weigh whether to surcharge.

Two truths are presumably universal by this point.  First, a merchant must accept card payments in order to be competitive.  Second, a merchant hates paying processing-related fees!  So, the much talked-about question has become: should a merchant consider surcharging their customers in order to defray most or all of the processing-related fees?

Surcharging occurs when the merchant charges an additional percentage of the transaction in order to defray most or all of the processing-related fees.  A merchant can surcharge when the customer pays by credit card in a face-to-face transaction and when the merchant offers an alternative means of accepting payment such as debit card, prepaid card, or cash.  In order to surcharge, the merchant must adhere to the credit card associations’ rules and state consumer protection laws which address such topics as signage, terminal and receipt displays, and returns.

With that backdrop, each merchant needs to consider carefully whether her customer base is likely to accept the surcharge.  In general, surcharging finds the best acceptance in the service industries and in B2B transactions.  The local salon must evaluate its own customer base, and its conclusion may be quite different from the big box store down the street.

Essentially, just because a merchant can surcharge does not mean she should.  Almost two-thirds of consumers consider the processing-related fees to be an inherent cost for the merchant to do business, much like a merchant’s utility cost.  Those same consumers state they likely would spend less or even go elsewhere if they were faced with a surcharge.

EPNA, as a certified merchant consultant, can bring value to every business.

EPNA is a trusted resource for all merchants and their business advisors.  As seen from these two points alone, the merchant processing space is detailed, dynamic, confusing, and costly.  EPNA is a WBE-certified business consultant, specifically recognized in the areas of merchant processing, point of sale, and general business consulting.  EPNA has decades of knowledge and experience in the merchant processing industry.

The key areas where EPNA can add significant value are ensuring that the merchant is paying a competitive effective rate and in advising the merchant on relevant products and services.

To ensure a competitive effective rate, EPNA can decipher the data that is, often by design, too buried for a merchant to make heads-or-tails of the actual costs.  EPNA will glean the types of cards the merchant typically accepts, calculate the average ticket, determine how much of the merchant’s acceptance is swiped or dipped, key-entered, ecommerce, or e-invoice, where interchange savings may be available, and other key historical information.  From there, EPNA can select the plan options to provide the merchant with the best effective rate, whether that be through interchange-plus pricing, through flat-rate pricing, or otherwise.

EPNA also can educate the merchant about available services, products, and technology; as well as industry trends. Many industry topics can be complex and intimidating, and EPNA can break down the information and outline the options so that the merchant can develop her roadmap. Whether it be deciding to surcharge, how to upgrade to a POS with inventory management, or when to start a loyalty program, EPNA’s experience and resources will benefit any merchant.

About EPNA

In addition to consulting, EPNA is an independent merchant processor which works with merchants in all industries and provides the ability to accept electronic (credit, debit, mobile) payments through a variety of cutting-edge and customized solutions. EPNA provides transparent pricing, fast funding, 24/7/365 friendly customer service, and no contract requirements. Email us at [email protected] to learn more or contact us at 847-859-6002 to learn more.

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