There’s no denying that Peer-to-Peer Payment (P2P) apps like PayPal, Venmo, and Zelle are convenient. In fact, a recent survey by The Lending Tree found that a whopping 84 percent of consumers have used these cash apps to pay for goods and services. But while they can make purchases easy to carry out, there are some significant drawbacks for small business owners, including event planners and vendors.
“No two cash apps are built the same and have different requirements and processing fees,” explains Terrica Skaggs, a wedding educator at Terrica Inc. “For example, some require receipts and signatures for transactions which may not be feasible or adds another task to the workflow if handled outside of the event pro’s usual CRM software.”
And that’s just the beginning. Here are a few more reasons why cash apps could be bad for your business and why Aisle Planner's Wedpay is the best payment solution for you.
Although Venmo prohibits the use of its free personal payment platform for business purposes, some vendors might still accept payment from clients because it seemingly makes life easier for everyone. And the same goes for PayPal and Venmo, where clients will send money to vendors and planners through the “friend to friend” feature in an effort to avoid paying processing fees at the moment. But this can all cause major headaches when it’s time to do your taxes because, as Becca Tuttle wedding planner at Becca & Co. points out, you’ll wind up paying those fees anyway.
It’s also important to note that beginning in 2023, the IRS will be taxing all transactions over $600 and will be sending all P2P app users a 1099-K form each year that outlines every transaction that was made. It’s important to follow the rules to avoid being audited and hit with any fines.
Limited Access to Funds
According to Terrica, another negative to watch out for with cash apps is that some do not offer instant transfer, which means your money stays in the app until transferred, which can take up to three business days or cost an additional fee. There is also a risk factor in allowing your money to sit in a P2P app since balances aren’t insured by the FDIC. That means if a cash app goes out of business, your money is gone and there’s nothing you can do to get it back.
It’s integral that you keep track of incoming and outgoing payments, which can be difficult with cash apps that don’t allow you to send out invoices and keep tabs on individual client payments. “It gets complicated really fast,” notes Tuttle. “You don’t just want to have cash pile up and then make a lump-sum deposit without any notation of what that money is going towards.”
Fraud, Cybersecurity & Other Issues
The Lending Tree survey found that 15 percent of those on a P2P platform have been the victim of a scam, while nearly a quarter has sent money to the wrong person (that jumps to 42 percent among frequent users). And getting your money back isn’t so simple, with 23 percent admitting that they never got their funds returned after making the error.
How to Keep Your Business Safe
Spell out your payment options
Terrica recommends addressing payment options, as well as chargebacks, insufficient funds, and late payments, clear in your contract. “Never let a client dictate how your business is run or how it is paid,” she says.
Keep it strictly business
If you really want to utilize P2P apps due to client demand, then make sure you do it the right way by setting up accounts specifically for business owners. “PayPal for Business is a bit more professional because there is an invoice option,” says Tuttle. And make sure that any money that you transfer out of the app is sent into a business checking account so you’re not mixing your professional and personal funds.
Take Advantage of Wedpay
You can have the convenience of a cash app without any of the drawbacks with Aisle Planner’s Wedpay, a payment solution that is fully integrated with the Aisle Planner platform and tools. It allows you to set up and send a customized invoice in minutes, as well as easily organize, track, and manage a complete history of each invoice online. “There is a business processing fee, but you can simply build that into your costs,” explains Tuttle. “It’s really simple and professional, and it lines up easily for accounting purposes.” Paired with the AP Quote, Invoice, and Budget tools, Wedpay is the best payment solution for Aisle Planner pros - keeping your work professional, safe, and all in one place! Check out the benefits below:
- Accepts credit card payments from all major card labels and ACH.
- Competitive rates as low as 2.75% + $.20 on all credit card charges and 1% on all ACH payments.
- Payment security with Payment Card Industry Level 1 compliance.
- Seamless integration with your Aisle Planner invoicing and communications!
- Get paid faster with a 2-day rolling payout basis.
- Get automatic deposits to your bank account.
- Helps you deliver a consistent client experience through every step of your booking process!
Ready to get started? Log into your Aisle Planner account, head to the Banking tab in your Business Settings, and begin the application process.