Skip to content

The ultimate guide to small business payment processing

Learn everything you need to know about payment processing, specifically for service-based independent businesses. Find out how to accept payments online, select the right processor, and get set up. 

Woman payment processing on her phone

Whether you run a small business entirely online or in-person, you will need a way to securely collect and process payments from your clients. Many business owners think that accepting cash and checks is the best way to go–you don’t have to set anything up, and you can accept payment faster. Right? Not necessarily. These days, your clients accept secure online payment options, which enable them to pay you quickly. 

If you haven’t already set up a process for collecting payments, now is a great time to explore your options for online payment processing. With this guide, you can learn everything about what it means to accept online payments and how to get started. 

Jump to:

What is small business payment processing?

Quickly and accurately processing client payments has a positive effect on any independent business’s cash flow. To do so, you need online payment processing. As long as it accepts payments, any business can use an online payment company to process its client’s invoice payments. This is easy and convenient for both the business and the client. 

Whether you provide your services in person or online, you can securely process your clients’ payments by using online payment processing software. Secure Sockets Layer (SSL) encryption and other security measures, such as compliance with the Payment Card Industry Data Security Standard, will ensure that payments are processed in a secure manner. That way, your clients’ payments are sure to transfer properly and with minimal risk. 

Once you have a payment processor, clients can pay their invoices quickly and easily using your online payment portal. From the point of view of your client, using this online payment portal is practical because they can pay their bill however they prefer (credit card or ACH transfer) and can view their due payments from one place. An online payment portal also enables clients to make their payments on the go, wherever they may be, from their mobile devices. 

How does online payment processing work?

If you allow multiple online payment options, your clients will appreciate the flexibility and the option to pay your invoices more quickly. Here’s how payment processing works for both credit card payments and ACH transfers. 

Credit card processing

Credit card processing is essential for small businesses, as many consumers prefer to use cards to pay for their products and services. Our survey, courtesy of a partnership with Visa, found that 80% of respondents prefer to pay for their services with a credit card. To ensure you’re meeting expectations, it makes sense to accept credit cards. 


80% of clients prefer to pay for their services with a credit card.

An online portal requires accounts from both the client who wants to pay for services on the portal as well as the merchant. If you’re using an online payment processor like HoneyBook, the payment gateway and merchant account are already integrated. All you would need is an account with HoneyBook to start accepting payments from clients. 

ACH transfers

Automatic Clearing House (ACH) transfers, also referred to as electronic funds transfers (EFTs), are similar to paper check payments except that the transaction is completed electronically. The fees for ACH transfers are typically a flat fee of $0.20 to $1.50 or a percentage fee of up to 1.5%, making ACH payment processing an inexpensive payment option compared to some credit cards. 

This is how ACH transfers work:

  1. The client will input their bank account number and their bank’s routing number, authorizing a payment transfer. 
  2. The deposit will be batched with other ACH payments to go through the ACH network.
  3. An ACH operator will receive and sort the deposits, then make the funds available to your bank.
  4. Once the funds are received, your bank will send confirmation to the originating bank that the transfer was successful.

An ACH transfer is more secure than credit card processing because the payment first passes through a clearing house that is bound by regulations governing the confidentiality and security of account numbers. In contrast, credit card payments are added to the client’s line of credit and are subject to a later due date with interest charges on balances due.

Online payment portals

An online payment processing company can generate an online payment portal, which allows clients to quickly and easily pay their invoices. From your client’s point of view, using an online payment portal is beneficial because they can pay their bill however they like and can track the status of their payment. 

If you accept a range of online payment options, your clients can pay your invoices more quickly, which can help your cash flow. 

Clients are commonly charged a transaction fee when their payment is processed in exchange for securely facilitating payments and granting access to the payment platform. Payment portal rates for merchants are typically between 1.4% and 3.5% per transaction, with monthly fees for some of the portals.

In the process of online payment:

  1. Both the client and the merchant sign up for accounts on the online portal website.
  2. When clients use a debit card to make a purchase, money is transferred instantly from the client’s account to the business’s account. 
  3. When a client uses a credit card to make a payment, the payment is issued by the credit card company’s bank.
  4. The payment processing company verifies the credit card, and the issuing bank approves the transaction. 
  5. EFT/ACH transfers are also an option.
  6. The client gets a receipt from the payment portal after the payment goes through.

Examples of online payment processors

When choosing a payment platform, consider your goals and priorities, which may include budgeting for fees, good customer service, or conveniences like managing multiple parts of your clientflow in the software.

1. HoneyBook

HoneyBook is a payment portal, invoicing tool, and clientflow platform. With this payment processing and clientflow management system, you can write and send legally compliant contracts and accept multiple forms of payment, including credit cards and ACH transfers.

Create and send invoices that you can also edit and manage on the go via the HoneyBook app. You can also set your HoneyBook invoices to specific payment schedules and methods, including recurring invoices and automatic payments. HoneyBook also offers some of the most competitive payment fees in the industry, helping you keep your expenses low. Along with payment processing, your entire booking process can be handled on HoneyBook.

If you use a hands-off booking process, HoneyBook’s unique and interactive files can help you streamline everything. Simply combine your invoicing and payment processing with other actions, like contract signing or scheduling. Your client will receive a single file with booking actions on each page, allowing them to move forward with you when they’re ready. 

2. Payline Data

Payline Data is a payment processor for businesses of all sizes from startups to established Fortune 500 companies. The software integrates with Quickbooks for easy accounting and invoice tracking. Pricing is based on the type of service, such as in-person swipes or online stores. Payments can be accepted by way of the Payline mobile app.

Benefits of using Payline Data include mobile app integration, a low monthly fee, and built-in fraud protection.

3. Stripe

Stripe is a payment processor designed specifically for online businesses so they can easily accept payment for online purchases. When you set up an account with Stripe, you are provided with tools to customize your payment processes. APIs, meanwhile, can allow you to create on-demand marketplaces, subscription services, one-click checkouts, and crowd-funding platforms.

Benefits include support for numerous currencies and pay-as-you-go pricing. One drawback, though, is that to be able to fully take advantage of the platform’s APIs, you would have to hire a developer who can code in languages such as Java, PHP, and Python. 

4. Square

Square is a payment processor for businesses of all sizes that specializes in in-person point-of-sale payments taken with payment processing hardware. Square boasts over 2,000,000 active sellers using its point-of-sale system.

Benefits of using Square include the lack of a fixed monthly cost. However, Square may not be the best option for small businesses that don’t offer their services in person, such as business coaches, online consultants, or marketing experts who don’t necessarily need a point-of-sale payment system. 

5. PayPal

PayPal is a payment processing platform that has handled payments between individuals and businesses for over 25 years. With PayPal, you can send customized online invoices to clients with their email addresses linked to their PayPal accounts. The benefits of using PayPal include the ease of using this trusted and long-established platform.

6. Clover

Clover is a payment processor geared more toward accepting payments at a brick-and-mortar location rather than purely online stores and online entrepreneurs. Hardware prices range from $49 to $1,799. The monthly fee is $79 for annual transactions up to $250,000. The transaction fees are 2.3% to 3.5% + $0.10 per transaction. 

Your business may require a point-of-sale system (POS) for accepting payments from clients for your professional services. If that is the case, Clover, with its point-of-sale hardware and credit card processing services, may be an option for you. 

7. Dharma Merchant Services

Dharma Merchant Services is a credit card processing option for companies that process at least $10,000 in credit card transactions per month. They specialize in servicing retailers and businesses that require point-of-sale systems that sell their services and accept payments in person. 

The monthly fee is $25 and hardware prices range from $149 to $1,999. Discount pricing is available for merchants that process at least $100,000 in transactions per month or 5,000 transactions per month. 

8. Recurly

Recurly is a payment processor for small businesses specifically designed for online businesses. Types of independent businesses that could use Recurly include online businesses that sell subscriptions, entrepreneurs who sell products online, streamers, and online publishers.

Recurly accepts over 10 different payment methods, including credit cards, Apple Pay, Google Pay, and others, and includes over 20 payment gateways. Recurly charges a fee per transaction of 1.25% + %0.10.

Pro tip

Though we didn’t mention it in this list, many business owners are tempted to use Venmo for business transactions. If you’re looking for a more robust and professional experience, however, you’ll want to find a system that includes more features and isn’t built for peer-to-peer money transfers.

Payment processor fees

Refer to the following chart for a rundown of each of the above payment processor’s fees.

Payment processorMonthly feeTransaction fees
HoneyBook$19 for Starter plan
$39 for Essentials plan
$79 for Premium plan
2.9% + $.25 for credit cards
1.5% for ACH
Payline Data$10 for online payments
$20 for in-person payments
Interchange plus 0.4% + $0.10 for in-person transactions
Interchange plus 0.75% + $0.20 for online transactions
$0.25 per ACH transaction
Pricing varies by card type for manually keyed transactions
Stripe$0 for standard
$2 for Stripe Express
2.7% + $0.05 for in-person transactions
2.9% + $0.30 for online transactions
3.4% + $0.30 for keyed transactions
3.9% + $0.30 for currency conversion or international cards
0.80%, capped at $5 for ACH transfers
Square$02.7% for swiped transactions
3.5% + $0.15 for keyed transactions
2.9% + $0.30 for online transactions
1%, with a $1 minimum per ACH transfer
PayPal$0 for standard service
$5 for Payments Advanced
$30 for Payments Pro
2.29% + $0.09 for card-present or QR payments through PayPal Zettle
2.99% + $0.49 for credit card and debit card payments
2.89% + $0.49 for online card payments through Payments Advanced or Payments Pro
3.49% + $0.49 for digital payments
1.9% to 3.5% and a fixed fee of 5 to 49 cents for ACH payments
Clover$792.3% to 3.5% + $0.10
Dharma Merchant Services$25Interchange plus 0.15% + $0.08 for in-person transactions
Interchange plus 0.20% + $0.11 for online transactions
Interchange plus 0.25% + $0.08 for in-person American Express transactions
Interchange plus 0.30% + $0.11 for online American Express transactions
Recurly$0 for the first 12 months1.25% + $0.10

Pro tip

When choosing a payment portal that’s right for your business, consider one that combines multiple parts of clientflow, such as contracts and invoicing for convenience for clients and yourself. 

Steps to get started accepting payments online

As one way to begin accepting payments on an online payment portal, follow these steps:

  1. Select a payment portal and add your business bank account details.
  2. Let your clients know that you are now accepting payments through the payment portal.
  3. Invoice your clients and provide them a link to the payment processor where they can pay the invoice.
  4. Make sure payments are processed smoothly.

Payment processing best practices

Consider the following best practices to ensure faster payments, smooth payment processing, fewer chargebacks, and the optimal experience for your clients. 

Multiple forms of payment

Considering that many clients prefer to use cards to pay for their goods and services, businesses must accept credit and debit cards. Offering the ability to pay with major credit cards can attract more clients. Not accepting such a convenient way to pay for services, on the other hand, risks alienating potential clients. 

At the same time, you can still offer your clients as many ways to pay as possible, including cash, especially if you operate offline or in a brick-and-mortar setting. Having multiple payment methods can attract more business, keeps clients happy because of the convenience, and keeps clients loyal to your business. 

Recurring payments

Recurring payments, also known as automatic payments or auto-pay, are payments that clients can pay their bills regularly, such as once per month, on a set day each billing period. This can be a convenient and easy way for clients to pay their bills.

Examples of times when recurring payments make sense are:

  • Regular cleaning services
  • Ongoing consulting
  • Monthly retainer fee payments

Payment reminders

Your clients lead busy lives and may accidentally miss payments. It can be difficult to know how to remind someone to pay you. Sending out payment reminders is a good way to let your clients know that an upcoming payment is due or that a missed payment is overdue. 

Use the following steps to remind a client to pay you:

  1. Make sure your invoices are complete, including overdue balances and due dates.
  2. Schedule payment reminder emails that include details of how to pay and the consequences of nonpayment, such as late fees.
  3. Send automated and personalized reminders. 
  4. Offer multiple payment options.
  5. Try a phone call to politely remind your client to pay.
  6. Refer to your contract details, including the clause on late payment penalties.

Save time with automated payment reminders.

Stop manually emailing every client when it’s time to pay.

Try HoneyBook’s automated payment reminders so can get paid on time, every time.

Fraud and chargeback prevention

Recognizing the risks of chargebacks and other potentially expensive disputes is a crucial component of accepting payments from clients. Your business strategy probably already includes dispute resolution, so you should have a plan in place for how to handle disagreements when they occur, including disagreements over payments, prices, the delivery of goods, or the provision of satisfactory services.

Follow these actions to avoid chargebacks:

  • Build trust with your clients by meeting with them and learning about their needs.
  • Use only solid, legally binding contracts that have dispute and cancellation clauses to safeguard your company.
  • Recognize who will make the payment.
  • Keep in touch, especially if there is a disagreement.
  • Provide evidence of your services, such as pictures from an event, reviews, client satisfaction surveys, and digital messages.

Use an online payment portal

Using one of the online payment portals, such as the ones outlined in the sections above, can be convenient for you and your clients. Payments can be processed securely and safely, with your client’s credit card and banking data encrypted for privacy and theft prevention. 

Client information is also verified to prevent fraud and lessen the risk of chargebacks. Payment portals accept multiple forms of payment as well, making them a great option for both you and your clients to process payments online.

Invoicing and payment processing on one platform

If you use online payment software with multiple benefits, you can improve several of your business processes. With a platform like HoneyBook, for example, you won’t have to send PDF invoices, and you also won’t have to make them go to another website to pay their bills.

With HoneyBook, you can easily manage all parts of your clientflow, including contracts, proposals, and scheduling. It is also a secure payment gateway that enables your clients to view and pay their invoices in one place. 

On HoneyBook, you can:

  • Send legally compliant contracts.
  • Receive notification once clients sign the contract.
  • Use invoice templates, and permit clients to pay them online.
  • Get notified when clients pay invoices.
  • Accept a variety of payment methods, such as debit card transactions and ACH transfers.
  • Establish auto-pay for ongoing retainer fees or recurring services.
  • Send payment reminders for upcoming payments or late payments.

Try HoneyBook‘s payment processing software

Customize your process for getting paid, whether you want to connect it to your scheduling, intake process, and or contract.

Related posts