Trying to Maximize Holiday Profits? A New Survey Reports on the Challenges SMBs Like Yours Face. The most common pain point among SMB owners at year's end? Twenty-one percent said late payments.

By Tina Hsiao

Opinions expressed by Entrepreneur contributors are their own.


The increased business that the holiday season offers is critical for many small- and medium-sized businesses (SMBs). Unfortunately, their high expectations can fall short due to late or fraudulent payments for their products and services, a new study confirms.

Related: 9 Things to Look for in a Payment Gateway

During the holidays, the majority of U.S.-based SMBs experience at least one significant challenge when it comes to getting paid, reports the study, conducted by my company, WePay in partnership with independent research firm Survata. Such challenges can affect a company's business.

The survey, completed in November, asked more than 500 U.S.-based small business owners and operators about the fraud and challenges connected to their cash flow. Here's a look at the numbers the study revealed:

  • Business owners and operators surveyed reported that 20 percent of their annual revenue is earned between Thanksgiving and the end of the calendar year.
  • Businesses that sell goods rather than services revealed earning more (28 percent) of their annual revenue during this time frame, putting their profits at even greater risk when it comes to payment issues.
  • While SMB owners said that their highest percentage of revenue comes toward year's end, 70 percent also reported at least one severe business challenge at this time. The most commonly cited pain point? Twenty-one percent said late payments seriously impacted their businesses

Just as notable a humbug factor is the issue of fraud. Forty-four percent of surveyed SMBs rated the severity of the impact of fraud as very high. Additionally, 40 percent who reported dealing with chargebacks (a fraudulent or disputed transaction that results in a financial institution requiring the SMB to cover the loss) reported the impact as very severe. (Respondents rated chargeback impact as being at least "9," on a scale of 1 to 10, 10 being most severe.)

The reported median amount lost to fraud in the past year was $925, and 22 percent of those reporting fraud losses noted losses of $5,000 or more.

Not just a holiday issue. Not surprisingly, the survey revealed that late payments, fraud and chargebacks can impact SMBs throughout the year, not just at its end. For example, almost two-thirds of those surveyed said that at least 10 percent of their customers did not pay in accordance with their payment terms.

Late payments are also eating into the productivity of SMBs, the surveyed companies said, with 59 percent noting that they follow up with their customers on late payments at least twice, on average.

What can entrepreneurs do to ward off these kinds of payment issues?

Here are four tips to help streamline the process:

1. Integrate the right software to help receive payments more quickly: Software with integrated payments, like Freshbooks, Ecwid and Buildertrend, can make it much easier for clients to pay you immediately. Previous research has revealed that most SMBs report a lower incidence of cash-flow management issues when their business-management software platform or app is used to process customer payments.

Related: Why Payment Processors Suspend Their Legitimate-but-High Risk Merchants

GoFundMe, the do-it-yourself fundraising platform that helps people raise money for products and causes, integrated to allow new users to start accepting payments instantly. As a result, the business immediately realized a double-digit improvement in its new user sign-on conversion.

2. Offer a variety of payment methods: Consider accepting debit, credit, ACH and other payment types. Giving customers more options of how to pay will likely open the door to being paid more quickly and increase customer conversion. Another example: Infusionsoft eliminated multi-system chaos for its small business customers by allowing them to accept payments for services seamlessly through its platform.

3. Reward early payments and discourage late payments: Saving money is always an incentive. Capitalize on this idea by offering a discount to customers who pay early or providing a point system to gain rewards. And if the early bird approach doesn't promote action, charging late payment fees may be what encourages more prompt payment behavior. FreshBooks, accounting software in the cloud for self-employed professionals and their teams, found in its research that being clear in the language about payment terms helps businesses get paid faster.

Related: What to Do With Bad Debts On Your Books

4. Develop a chargeback protocol to identify suspicious activity that could be the precursor to a chargeback: Businesses should focus on having the most secure payment processing system possible that includes address verification, two-step authorization, credit card security code request, and other features that might trigger an alert that there is suspicious activity. After all, if a credit card is stolen and charges are put on the card and the original owner then disputes those charges, there will be a chargeback. However, if fraud is blocked from occurring in the first place, then chargebacks are eliminated.

Wavy Line
Tina Hsiao

Vice President of Risk Chargeback Operations, WePay

Tina Hsiao is vice president of Risk and Chargeback Operations at WePay, company that helps online platforms provide integrated-payments processing without friction or fraud. She is also a Harvard Business School MBA who spent more than 10 years in Intuit’s small business division.

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