The End of Cash and Checks for Your Farm

 

If you haven’t noticed, the end of cash and checks has already come for many of your Buyers. Today, the convenience of credit cards is winning in every consumer sector.

It is no surprise that the Buyers of your Farm products expect the same level of convenience—to purchase food with the credit card of their choice. Whether they buy food for delivery, pickup, shipping, or simply place a deposit for items to be harvested at a later date—a credit card purchase is easier for the Buyer.

All the major retailers (Amazon, Best Buy, Target, Walmart) have trained your Buyers to purchase in advance of pickup or delivery with their preferred credit card. In fact, most Buyers enjoy the reward of “loyalty” programs with every purchase (e.g. airline miles, cash back, in-store credits).

Why would Farmers expect consumers to do something different when buying food from your Farm? Plain and simple: your Buyers expect the simplicity of self-service ordering using their preferred credit card while purchasing from your Farm.

Why are Credit Cards Winning with Consumers?

Let’s face it—going to the Bank or an ATM to get cash is inconvenient. It’s even more inconvenient to write a check, then balance your bank account for pending liabilities (checks) that have yet to clear. In today’s “convenience is king” climate, Buyers are time-constrained (or too lazy) to get cash from the Bank or to balance their checkbook. Using a credit card, however, is an accessible, easy option.

In addition to loyalty programs, credit cards afford your Buyers the opportunity to manage their own cash flow month-to-month—utilizing a credit card as a form of revolving credit. There are a number of tools, too, that can ingest all the data from credit card statements automatically, which afford consumers automated budgeting tools and data insights to their spending habits (e.g. Mint.com). For your Buyers, this requires no work for them individually to manage their money as they see fit.

Expanding your base of potential Buyers is the #1 reason your Farm should accept credit cards today. While your Farm may have survived to date by predominantly (or only) accepting cash and check, this will limit the scope of potential Buyers of your Farm products moving forward. The vast majority of consumers under the age of 40 simply do NOT carry a checkbook, or even write checks regularly. In fact, most consumers under the age of 30 do not even own a checkbook (or go to a bank monthly)—everything is done online.

If you want to access more potential Buyers, then you must accept credit cards.

Hair appointments, back-to-school shopping, food ordering—people want to use credit cards to pay for it all.

Hair appointments, back-to-school shopping, food ordering—people want to use credit cards to pay for it all.

Almost as important—by accepting credit cards, you are actually increasing the spending power of your Buyers. Many would like to buy your Farm products in bulk to secure a better price (e.g. a crate of fruits or vegetables, or a quarter-side of your livestock), but the upfront cash outlay is often “too much” for many Buyers to pay in cash. As a result, you are actually reducing your average order size and creating more work for your Farm to handle a greater volume of smaller orders, specialty cuts and individual items.

Paying Processing Fees v. Getting Paid Faster

Yes, when accepting credit cards there are processing fees associated with each transaction. Depending on the type of credit card (e.g. loyalty, reward or platinum cards), the processing rates can vary from 2.4% to 4.5% plus transaction fees. At Barn2Door, we take on the risk of your Buyers’ credit card and charge a flat 2.9% rate + $0.30 per transaction regardless of card type.

By accepting credit cards, however, your Farm is getting paid faster without the wait times times to collect, deposit and reconcile a check. At Barn2Door, our Farmers typically receive cash directly deposited into their bank account in 24-48 hours.

More importantly, the actual “cost” of credit card fees is often less than the actual cost of collecting, depositing and reconciling checks. Bank of America estimates the true cost of a check transaction is about $12. For the vast majority of all Farm product purchases, even the credit card fees would be less than the cost of accepting a check.

Now, here’s the fun part! The actual costs of your credit card fees can be passed on to your Buyers if they “voluntarily” opt-in to cover your processing fees. At Barn2Door, we released a  capability called “Buyer Covers Fees.” At checkout your Buyers can elect to pay the cost of processing their credit card. It is a simple concept, but even modest adoption can result in huge savings for your Farm.

What About Bank-to-Bank Payments?

Yes, the use of an electronic bank-to-bank payments—often referred to as automated clearing house (ACH) payments—is another option, which is lower cost than accepting credit cards. And, yes, at Barn2Door we afford Farmers this capability at a flat rate of 1% per ACH payment.

While direct bank-to-bank payments are commonplace in other countries, the complexities of the US banking system (with thousands of banks) has made this practice virtually non-existent among consumers (few retailers even accept ACH payments). Your Farm wholesale accounts, however, may be more inclined to use this form of payment, too.

A big reason ACH payments are not common in the US is due to security and liability. With your ABA routing number and Check account numbers, virtually anyone can deduct money directly from your bank account without any authorization! This is why checks are actually the most insecure form of payment—because your banking details are freely available on the bottom of every check.

Favor your cash by using credit cards to protect yourself against fraudulent transactions.

Favor your cash by using credit cards to protect yourself against fraudulent transactions.

While your liability for fraudulent use of your credit card is limited to $50, the liability for debit transactions is $500. Fraudulent bank-to-bank transactions can deplete your account, are more difficult to recover from, and can have significant downstream impacts on your cash flow and day-to-day activities.

Note: businesses continue to use ACH payments, but insulate themselves by using “sweep” accounts to limit their losses and negative impacts. This is far beyond normal consumer behavior. As such, ACH payments are uncommon.

Credit Cards are the New Normal for Farm Payments

As more and more consumers expect convenient, self-service ordering and easy cash-flow and budget management, credit cards are the “new normal” when it comes to payments for your Farm products.

In addition to delighting your customers, accepting credit cards also affords your Farm the opportunity to get paid faster, expand the spending power of your Buyers, and may actually save you time and work by increasing your average order size.

Get Started Today

If your Farm wants to begin accepting credit cards, or if you would like to learn more about Barn2Door’s “Buyer Covers Fees” capabilities, we would be delighted to speak with you.

Request a Demo with a Barn2Door Farm Account Executives and let’s discuss how we can help your Farm save time and increase orders.