Business owners always strive to improve their business operations and reduce costs. And if your business regularly deals with credit cards for collecting money, you cannot afford not to monitor your merchant processing fees. Your merchant processor charges you every time you accept card payment. It takes a bite out of your total profits.
So you should always read the merchant statement that’s issued to you every month. Or, you can hire auditors to look into the statements and help you ensure everything is up to the mark. Visit platforms like https://www.costanalysts.com/services/merchant-processing-auditing/ for more information on credit card processing audits. In this article, learn the top benefits of merchant processing audits for businesses.
Understand the Merchant Statement
To be able to accept credit card payments, you need to partner up with merchant service providers. They will process the credit card on your behalf, authenticate the transaction, collect money from the card user’s account, and deposit it into your business account — taking a fee in the middle. So they act as a middleman.
The merchant will send you statements towards the end of every month detailing the amount processed and fees. But reading a merchant statement isn’t easy.
First, you need to understand the terminologies. Then identify the pricing model and distinguish between two costs: base rate and markup. While wholesale fees are fixed, markup fees go up and down.
The pricing models are interchange-plus, subscription, tiered, and flat-rate. You need to distinguish between the models and figure out if you’re being charged correctly.
If that sounds complicated, that’s because it is complicated. Auditors will help you break down the statement and, more importantly, figure out if you’re being charged more.
Inspect Interchange Rates for Accuracy
One of the important things to check in the merchant statement is the interchange rates. Every card network has set its own rates. It depends on a lot of other aspects. Some of the factors which affect interchange rates are:
- Type of credit card user (whether debit, credit, or rewards)
- Mode of payment (whether chip, swap, or wireless)
- Type of business
- Batch settlement paid date
It’s worth mentioning American Express charges separate merchant fees, which are often higher.
These fees pay for the handling cost, bad debit cost, and frauds. And these keep changing from time to time. Auditors look at these charges and determine if you overpaid at certain months.
Get Better Merchant Alternatives
An audit will reveal whether you’re paying the right fees on credit card transactions or are being overcharged. In case you’re being overcharged, you would need to either change the terms with your existing merchant or get onboard with a new one.
Since auditors audit dozens of merchant accounts every day, they are better informed on which merchant processors offer the best rates. They will also suggest room for improvement with your existing processor. After a thorough discussion, you should either make the switch or change terms.
Without an audit, you won’t necessarily know if there are better options out there.
Get Your Questions Answered
Most businesses, especially the mid-sized and small ones, aren’t very knowledgeable on merchant fees. There’s a lot that goes behind the scenes. When working with an audit, it is your chance to get answers to your questions. You can learn about the following questions:
- How much of a profit do merchant processors make? And what’s the amount in my case?
- On what fees can I have control over and I can reduce?
- Am I paying excessive fees to accept credit cards?
- Are my competitors paying the same fees at the same rates?
- Can I reduce fees without switching processors?
Merchant account audit isn’t an expensive undertaking either. The auditors make money only when they can reduce your rates. Thus, you should get the audit done every few months.