In my continuing effort to bring you creative ways to show merchants how your products and services can make them money we’ll now take a look at checks. Last time I researched this, checks accounted for about 1/3 of all payments at the POS and almost half of overall payments taking into account payment of bills. These simple numbers open up a tremendous opportunity to save merchants time, money, decrease risk and increase sales.
First, let’s take all those businesses with the “NO CHECKS” signs and see how they might benefit from tearing them down.
How many checks from first time customers do you turn down each week? Let’s be conservative and say it’s only 2.
Multiply that number by 52 weeks to get the number of customers they’re forcing to pay another way, in this case 104.
Ask them the number of times their average customer buys from them each year? So let’s say the merchant answers 4 visits per year.
Multiply the number of customers by the number of visits, in this case we come up with 416 visits.
Now ask what is there average sale? Let’s say $29.00 and multiply that by the 208 visits and you’ve determined that they’re loosing $12,064.00 in total revenue.
Now ask them what is their profit margin. 40% says the merchant. Great. Multiply that by the total revenue $12,064.00 X .40 = $4825.00 in annual profit currently lost by NOT ACCEPTING CHECKS.
Now estimate the merchant’s annual check volume and even add a little for some increased sales. Let’s say $15,000.00 per year.
Multiply that number by the rate to guarantee his checks. I normally will say, “Our rate to guarantee your checks is 1.50%. I’m going to add ?% to that to make up for the statements and transactions for the year.” Now multiply the $15,000.00 by 2% and you get $3000.00 per year to run the program.
Subtract the total costs from the annual profit and you come up with $1825.00 per year. There’s still plenty of room to lease them a check reader if you need to.
Second scenario, let’s say the merchant is already accepting checks with NO PROBLEMS. You can say that’s great and ask, “What’s your time worth?” Most merchants will answer with a fairly high dollar, so let’s say $50 per hour.
You need to ask how many checks they receive every day. Lets’ say they tell you 15.
Ask them if the bank charges them per item to deposit the checks? Let’s say in this instance it’s .10 cents.
So multiply the number of checks by 360 or the number of days open and then multiply that by .10 cents to get the amount it’s ALREADY costing them to deposit their checks, in this case $540.00.
Now how often do they go to deposit the checks? Let’s say they tell you daily or five times per week. Also you ask how long it takes them to make out the deposit slip and stamp the checks and drive to the bank? The national average for smaller businesses, the last time I checked, was 30 minutes; so let’s say they tell you 20 minutes.
Tell them you’ll cut the time in half because they still need to make cash deposits. So take the 10 minutes times 5 days a week and you’ll get 50 minutes per week times 52 and you’ll get 2600 minutes per year. Divide that by 60 and that’s 43 hours per year this person’s merchant deals with checks.
Multiply that by what they said their time was worth and you’ve got $2150 plus the $540 in bank charges and it costs them $2690 per year to accept checks.
So we already know they take 5400 checks a year. That’s 15 checks per day times being open 360 days. Now you can talk about POS check conversion or back office “check21” for .25 a check which amounts to only $1350 per year.
That leaves $1340 per year in time and money savings. Once again giving them all of the other benefits of this program and leaving you plenty of room to lease a check imager.
Best of all it’s tough for the merchant to argue with you because all the numbers are their own. From either scenario assume the close and start filling out the paperwork and make some money by helping a merchant.
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