Payment Processing: A Complete Guide for Canadian Businesses

Table of Contents

• What Is Payment Processing?
• Why Is Payment Processing Important?
• How Does Payment Processing Work?
• Payment Processing Best Practices
• What to Look for When Acquiring a Payment Processing Tool
  
  

Key Takeaways

• Payment processing is essential for any business accepting digital payments, involving multiple components like payment gateways and processors.
• Various payment methods are available, such as credit cards, ACH payments, and EFT payments, each with different processing times.
• Best practices for payment processing include using secure gateways, minimizing fees, and automating reconciliation to reduce errors.
• When selecting a payment processing tool, consider cost, security, and integration with your existing accounting software.
• Paystand offers a robust payment processing solution that can help you reduce credit card fees, automate AR, and avoid surcharges.

What Is Payment Processing?

Payment processing refers to the steps required to complete a transaction between a buyer and a seller. It involves authorizing, capturing, and settling payments, which can be made using credit cards, debit cards, EFT, or digital wallets. A network of banks, payment gateways, processors, and card networks manages the entire process.

For businesses in Canada, efficient payment processing is crucial for ensuring smooth operations, increasing customer satisfaction, and maintaining profitability.

Why Is Payment Processing Important?

Payment processing is essential because it helps businesses securely and quickly handle transactions, building trust and satisfaction with customers. It streamlines financial tasks, cutting down on errors and boosting efficiency. Plus, it ensures businesses can scale smoothly, managing higher transaction volumes while keeping everything secure and running efficiently.

Effective payment processing allows businesses to:

1. Accept multiple payment types (e.g., credit cards, ACH, EFT).
2. Ensure secure transactions, protecting both the business and its customers.
3. Improve cash flow by speeding up the time it takes to receive funds.
4. Reduce the cost of transactions through automation and selecting low-cost options like and EFT payments.

How Does Payment Processing Work?

The payment process follows these steps:

1. Authorization: The customer’s payment information is sent from the gateway to the processor for approval.
2. Authentication: The bank verifies that the customer has sufficient funds or credit.
3. Clearing: Once approved, the transaction is recorded, and the funds are earmarked for transfer.
4. Settlement: The funds are transferred from the customer’s bank to the merchant’s account, completing the transaction.

What are the Components of Payment Processing?

The key components of payment processing include:

1. Payment gateway: The interface between a merchant and a customer's bank, authorizing or declining transactions.
2. Payment processor: The company responsible for managing the transaction and ensuring it is completed smoothly.
3. Merchant account: A specialized bank account that holds funds from transactions before they are settled into a business’s primary account.
4. Payment networks: Systems like Visa or Mastercard that facilitate the transfer of payment information between banks.

Payment Processing Best Practices

• Use a Secure Payment Gateway: Ensure PCI compliance to protect sensitive customer information.
• Automate AR: Tools like Paystand automate accounts receivable, streamlining the payment process and reducing errors.
• Minimize Fees: Consider EFT payments, which generally cost less than credit card processing.
• Reduce Credit Card Processing Fees: Look for a processor that offers transparent, low fees or allows you to shift costs to the payer.
  

What to Look for When Acquiring a Payment Processing Tool

When choosing a payment processing solution, keep these factors in mind:

1. Integration: Does it integrate with your accounting software (e.g., Sage, Microsoft Dynamics)?
2. Security: Look for PCI compliance and advanced fraud protection features.
3. Fees: Compare transaction fees and other costs like chargeback fees.
4. Automation: Choose a tool to automate payment reconciliation and reduce manual tasks.
5. Scalability: Ensure the solution can grow with your business and support multiple currencies if needed.

Make Canadian Payment Processing Easy with Paystand

Simplify your payment processing with Paystand. Our platform automates AR, reduces transaction fees, and helps Canadian businesses avoid surcharges. With Paystand, you can accept multiple payment methods, including EFT, and credit cards, all while keeping costs down.

Ready to streamline your payments? Learn more about Paystand’s Canadian offerings.