Payments are a critical issue for small businesses, according to a new nationwide study of small business payment preferences conducted by Boston-based consulting group Dove Consulting, a division of Hitachi Consulting. The research was sponsored by CheckFree, Discover, First Data Corporation, and NEACH.
Conducted in October and November 2006, the 2006/2007 Study of Small Business Payment Preferences included detailed survey responses from 952 small businesses across industries with annual revenues under $5 million. Among all of the participants, the study found that small businesses receive an average of 259 customer payments each month across all sales channels and that checks and cash represent the majority of these receipts. Checks account for 40 percent of customer payments to small businesses, while cash accounts for 25 percent, credit cards account for 16 percent and PayPal accounts for nine percent. The receipt of PayPal payments was driven by small businesses that sell over the Internet.
Payments are an important issue for small businesses, and 59 percent of them turn to outside sources for help in managing their payments acceptance, most commonly accountants, business colleagues, financial institutions and payments processors.
“There is clearly an opportunity for financial institutions and payment processors to deepen customer relationships and offer specific services for the small business sector,” said Laura Fuller, a director with Dove Consulting and the manager of the study.
Across all small businesses, cash and checks are the most widely accepted tender type ? 88 percent of all small businesses report that they accept both cash and checks. This was followed by credit cards and signature debit cards, with 54 percent of small businesses reporting that they accept these tender types.
The Study also investigated the options small businesses use to pay bills and expenses and found usage patterns similar to consumers ? there is no one form of payment most preferred; they use a mix of different payment options. Survey results indicate that business checks and credit cards are the most predominant form of payment ? more than 50 percent of small businesses use these payment instruments.
The most preferred methods of payment differed by type of business expense. Checks are the most preferred form of payment used by small businesses for many common business expenses, including rent/commercial mortgage, utilities, business services, equipment leases and inventory. Credit cards are used more frequently for travel and entertainment expenses, fuel purchases, and office supplies.
Nearly a quarter of all small businesses surveyed reported using a debit card to make payments for their business. However, debit only accounts for five percent of small business payments; cash, checks, credit cards, online bill payment and PayPal were all more widely used.
About the 2006/2007 Study of Small Business Payment Preferences
The 2006/2007 Study of Small Business Payment Preferences is the inaugural edition of this bi-annual study from Dove Consulting, a division of Hitachi Consulting. The study provides insights into small business behavior and preferences for both making and receiving payments. Data for the 2006/2007 Study was collected through a national Web and phone survey of small businesses in the United States with revenues under $5 million. The survey was conducted in October and November, 2006. A total of 952 completed surveys were received, and the data set is representative of the small business population.
About Dove Consulting
Dove Consulting, a division of Hitachi Consulting, specializes in strategy and organization consulting for banks, payment networks and processors, broadband companies and consumer goods companies. Dove’s Financial Services practice is a leader in payments, retail banking, distribution and customer strategies, having worked for eight of the top 10 banks in the United States. Dove’s consulting work is supported by an ongoing commitment to payment industry research, including consumer and small business payment preferences, ATM deployment, and card issuer risk. For more information, visit www.doveconsulting.com or call 617-482-2100.
About Hitachi Consulting
As Hitachi, Ltd.’s (NYSE:HIT) global consulting company, with operations in the US, Europe and Asia, Hitachi Consulting is a recognized leader in delivering proven business and IT solutions to Global 2000 companies across many industries. We leverage decades of business process, vertical industry, and leading-edge technology experience to understand each company’s unique business needs. From business strategy development through application deployment, our consultants are committed to helping clients quickly realize measurable business value and achieve sustainable ROI.
Hitachi Consulting’s client base includes nearly 35% of the Fortune 100 and 25% of the Global 100 as well as many leading mid-market companies. We offer a client-focused, collaborative approach and transfer knowledge throughout each engagement. For more information, call 1-877-664-0010 or visit www.hitachiconsulting.com.
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Hitachi, Ltd. (NYSE:HIT)(TOKYO:6501), headquartered in Tokyo, Japan, is a leading global electronics company, with approximately 356,000 employees worldwide. Fiscal 2005 (ended March 31, 2006) consolidated sales totaled 9,464 billion yen ($80.9 billion). The company offers a wide range of systems, products and services in market sectors including information systems, electronic devices, power and industrial systems, consumer products, materials and financial services. For more information on Hitachi, please visit the company’s Web site at http://www.hitachi.com.