Episode 42: Why Your Payment App Might Be Hurting Your Business

  📍 Welcome to CreativeMind Smart Money, the podcast where creativity and business smarts collide. I’m your host, Samantha Eck, bookkeeper, business coach, and your go to guide for building the creative business of your dreams. Whether it’s mastering your money, streamlining your systems, or growing your business, I’m here to share insights that empower you to thrive.

Plus, I’ll be bringing in industry experts to dive into all aspects of entrepreneurship, so you can turn your passion into profit without losing your creative spark. Let’s get started

You are listening to the Creative Minds Smart Money Podcast. And today’s topic, as always is very exciting because I’m always excited about all things finance. I did wanna take a moment to pause and let you guys know we have some amazing stuff coming from profit and loss. Deep dives to, I know I mentioned last week, wine A and then we have some amazing guests.

That are coming onto the show that I think we’ll be able to provide some really valuable insights and information, as well as some more conversational interviews and things like that. And I’m just so excited for you guys to see what’s coming this year and what I have in store for this podcast. But as always, if you guys are interested in hearing a but a specific topic or you know someone that would be super valuable to have on the podcast, please check the description box for that form and fill it out so that we can get them on the show.

Let’s dive into today’s topic, which is all about payment processing apps. Now, I think we’ve kind of touched on these a little bit before. We’ve talked about different ways of getting paid and pricing and merchant fees. We’ve talked about all kinds of things, and I have so many different resources from my YouTube to my Instagram, to my threads, to my LinkedIn about a lot of these topics.

But if you are here and you’re like, Samantha, I just dig your podcast and I’m here to listen to your voice, then let’s get into these payment apps, the pros, the cons, the hidden fees, best practices, because when we talked about 10 90 nines a couple weeks ago, we really analyzed what. You owe for 10 90 nines and why?

Specifically, we don’t use certain apps, and I really wanna talk about a few of them because they’re very popular in the online service provider space or even the product based space. And some of these can actually really hard your business because they’re so hard to track. Especially if you’re someone who’s like, I’m not ready for a bookkeeper.

I want to do this on my own. A lot of these can cause a lot of chaos. So I wanna be, again, that resource and that lifeline for you when it comes to these and give you some really key insights. First of all, I wanna state plain and clear payment apps make it super easy to get paid, but there are certain ones that are beneficial for your business and are not, because there are MA apps that are actually made for business.

Ones like Stripe, square, HoneyBook, things like that, that are actually purposefully designed for business are 110% fine. But today I really want to touch on the ones that are not designed. For business and can actually cause you a lot of stress and a lot of worrying. So those specifically are PayPal, Venmo, Zelle, cash App, apple Pay, Samsung Pay, whatever those are.

Now, I’m not saying you can’t utilize those because if you can pay through Cash App, apple Pay, Google Pay, I think a lot of those payment processors now allow you to pay with those methods. And that gets hard because it gets hard for me to say that it’s okay to use those. Because a lot of the times when you’re utilizing those, it’s utilizing those from the personal sense and not necessarily from the business sense.

So first of all, yes. The pros of using those apps is that they’re convenient, they’re easy to use, and you might already be familiar with them, especially if you’re someone who venmos your family money all the time and you just kind of pass it off to them. It might feel really easy for you to utilize that in business there is.

Of course a Venmo business account. But what I found a lot of the times when I start working with clients is that they’re not utilizing a Venmo bus business account. They’re using their personal account, which can cause a lot of issues because when you’re using that personal Venmo, it’s not charging you the fees.

And you might be like, oh, hey, that’s great. I don’t need fees. But you are technically illegally. Selling services on a personal platform, and it’s not meant for that. It’s not made for that, and you’re not supposed to, because the IRS can’t track that, and it can also create kind of like a red flag for them.

So things like that as well as PayPal. Now, I will admit PayPal is made for business, but I don’t recommend it at all. PayPal might seem super easy. It might seem really straightforward, but it can cause a lot of issues, and PayPal is not friendly to track at all in any sort of sense with your. QuickBooks, especially some of the ones I’ve seen, because a lot of the times people are transferring money in and out.

They sometimes spend money from their personal account for PayPal because when you’re logged into PayPal, you’re just kind of logged in and you don’t realize that you’re in your business account and then all of a sudden you spend money. So. PayPal again, is one of those where I’m like, I don’t think you should use it at all.

If someone’s paying you through PayPal, that’s fine. I really don’t think you should be utilizing it for expenses and things like that because, and that gets messy really, really fast, especially if you’re someone who also uses PayPal. On the personal side, I think Zelle is one of those special exceptions because with Zelle it.

You can actually set it up to send from your business bank account, and it’s still gonna reflect in your business bank account. The only problem I see with Zelle is a lot of the time people aren’t detailed enough. So there’s actually a note section in Zelle in a memo where you can put exactly what it’s for, but usually people will just send money.

So my suggestion is if you are going to use Zelle for your business, which you absolutely, absolutely can, there’s no fees. I would highly suggest that you actually utilize the memo feature and put what it’s for.

Now, of course, again, a lot of people pay contractors through Venmo, things like that.

I, I’m not sure if you are aware of this, but there are payroll processing apps that you can use to pay contractors. I know that that adds a cost. To your plate, but a lot of times it’s actually better to use something like Gusto or Patriot or whatever it is to pay a contractor rather than Venmo or something else like that, because it’s a lot easier to track, and it makes it a lot easier to get their information as well.

So of course when we’re talking about the pros, there’s a lot of pros. Again, like I said, because you, it’s just easy to use and understand. But I think there’s a lot of cons as well. There’s a lack of protection, when it comes to tax season. There’s a lot of headaches and transaction limits, but there’s also just a lot of like.

Difficulty with tracking things. PayPal in QuickBooks is notoriously a nightmare for bookkeepers because you have so many different things going on, and PayPal doesn’t allow for like bookkeeper specific. Access. You have to like, you can do that, but then it like it locks you out if you use the same email.

It’s very confusing because I actually used PayPal for one client and they use my like main email. I’ve started to use that like plus feature that you can use for Gmail, but they use my main email and. It got confused with my own personal PayPal, and it just caused a whole bunch of issues, but not the point.

It can just get really messy because you have so many different things coming from so many different places, which is why I say specifically, if you’re gonna use it for payment processing only, like you’re going to receive payments, that’s 110% fine. But if you’re going to use it to also buy expenses, it can become such a nightmare to track.

Now, of course, when we think about all these cons, we also want to think about certain things such as processing fees, which are universal. And I think we’ve talked about them before. But if we haven’t and you guys want to hear more about merchant fees, please let me know. I’m happy to expand on them and expound on why they’re important and essential.

But processing fees are a big thing because anytime you use PayPal for business, Venmo for business or I don’t know if Cash App even has a business account, but PayPal and Venmo are the biggest ones. They have processing fees. Those processing fees are a part of business. They’re not so, and a lot of states will actually, it’s illegal to do some sort of like surcharging to recoup those fees.

Where I am in Texas, it is actually illegal, so you can’t surcharge. Now there’s certain like ways around that, especially if you build it into your pricing or if your payment processor kind of like just makes them pay the, the. Credit card fee. It really depends, but there’s a also a huge risk of chargebacks.

Both PayPal and Venmo have chargebacks that more often than not, side with the customer side rather than the buyer side. Now, I know you can have a lot of protections around that and everything that you can fight back against it, but you’re more at risk with using things like that than you are. Using like an actual full blown payment processor for processor.

For example, with HoneyBook, you already have your contract, you already have everything like that. Now, I have heard nightmares about HoneyBook before where people have gotten their money taken, but same thing with Stripe and everything like that. But I think it’s more difficult to get money back on platforms like PayPal and Venmo, where they’re more likely to side with the consumer than they are to side with the seller.

And then of course you have your potential tax implications. If you’re using personal versions of PayPal or Venmo, it can just be a huge tax implication because it’s not getting recorded properly. And now your income is kind of just like, or being sent to a personal account and then send into your business account.

And you want everything to be official. You want everything to be as clear as possible, so. If you are going to use them and you’re like, Samantha, I really do. Just like, I love PayPal. I just wanna use PayPal. I get it. I know I just broke my ass, but I, I a hundred percent get it. I understand that that’s something that’s really easy for you to use.

If you’re going to use any of these, I really do suggest Zelle over anything because like I said, it’s really easy to track. It can come right out of your business account. You can add that memo. But if you’re gonna use PayPal and Venmo, please use the business versions of them. Please don’t use personal versions.

I would not suggest Cash App at all. I would not suggest Apple Pay or Samsung Pay or any sort of app like that. If it does not come directly from your debit card, I really wouldn’t suggest it. But of course, if you really, really wanna use PayPal or Venmo, please use the business versions and please only use them for business.

I will suggest as well that if you use Venmo, both personally and for business, that you. Don’t transfer personal money out through Venmo. You put your money into your business account from Venmo, and then you transfer it to your personal account because the tracking for that can just get so chaotic. And so confusing for you or even your bookkeeper if you have a bunch of things going on in the background of Venmo.

’cause I’ve seen it a couple times now where people both have a bus business, Venmo and a personal Venmo, and they transfer from their business Venmo straight to their personal account and it can just cause so much chaos. I would prefer you use something like QuickBooks or Square or Stripe or HoneyBook or whatever it is that has an invoicing software built in and doesn’t have these kinds of like just random payments that come from places, but absolutely, if you really have to, I would prefer you use the business accounts of PayPal and Venmo, of course, with the very professional payment system.

It gives you really good ease of use to get those payments right into your business bank account. And they’re really bookkeeping friendly, so like Stripe square, HoneyBook, things like that are really bookkeeping friendly and really easy to find fees. When you start doing Venmo and PayPal and things like that, it can just cause a lot of stress.

I. In pain, and I think I’ve mentioned this before with Square, but I would never, ever, ever get any of their banking products getting any of their banking products, whether that’s a checking savings account or something like that. Especially the savings account can mess up your books huge because they can become such a huge source of stress.

It’s not easy to track all that when you have a bunch of stuff transferring or auto transfers with savings and things like that. It can become a nightmare very, very fast. And this is not me saying, oh, make it easy for me to do your books or make it easy for any other bookkeeper to do your books. This is me saying that if you are someone who is like, I’m committed to doing my own books and I wanna make it as easy as possible on myself, I wanna make sure that you’re aware of all of the issues that these certain apps can cause you.

📍 So payment apps, again, aren’t bad, but they’re not really a replacement for proper financial systems. If you’re like, I really want like a good proper system, then you need to look at those other ones that I mentioned. I want you to just evaluate your current payment methods and see if you can really, if they align with your long-term business goals, but also if you can cut some of them out.

I know it might seem easy for someone to just be like, oh, hey, just Venmo me for this or pay me this way. If you can cut those out, I promise you, you’ll save yourself so much heartbreak and so much heartache trying to figure things out at tax time. Then if you were to get to the end of the tax season and now you have to go through and sift through all of your Venmo transactions to find out what was actually business.

If you found this episode useful, please remember to subscribe, leave a review, and share with a fellow business owner. As always, I hope you have an amazing rest of your week, and we will see you next week. Farewell fellow Travelers.