4 articles Small Business

As the owner of a 12-person small business, I’ve been on the lookout for a no-fee or low-fee Canadian credit card solution that enables me to conveniently issue employee cards for both CAD and USD purchases. I want to eliminate the need for employees to have to use personal cards (and then have them wait to get reimbursed), and cut down on sharing company cards. Float and Caary caught my attention, and I’ve tried them both.

What they do

Float and Caary have many similarities. They’re both no-fee business cards, and you can issue both physical and virtual cards to employees. You can customize the spending limits and even expiry dates (especially handy for a one-off purchase) per card.

Here’s a Float virtual card:

Here’s a Caary virtual card:

At the moment, neither card can be added to Apple Pay or Google Wallet.

They offer receipt capture, accounting software integration, and other expense management features.

Rewards and (lack of) insurance

Float gives you 1% cash back on all purchases, and Caary gives you 1.5% cash back on all purchases. Neither card has traditional benefits that you might find on credit cards, such as travel or mobile device insurance.

Forex spending

Until very recently, they both waived foreign currency exchange fees (which are typically 2.5%). When Float announced USD cards (that you can pay off using Canadian-based USD bank accounts), they added a 1.5% foreign currency exchange fee on their CAD cards. Caary still does not have a foreign currency exchange fee.

One is a prepaid card

Float and Caary’s cards are both issued by Peoples Trust – in Float’s case, it’s a Visa and in Caary’s case, it’s a Mastercard. However, the Float card is a prepaid card, so you need to preload money from your bank account. Caary’s card is a credit card whose balance you have to pay off every month.

Application and setup process

Both application processes are conducted entirely online. I found Float’s application process to be a bit more involved and a bit longer, as I had to submit several corporate documents and documents about co-owners. This took a few days of back and forth. With Caary, after submitting the application and connecting my bank account, I was approved in a few hours. Float appears to do more to inspect your company, whereas Caary appears to be more concerned about your bank account balance and history.

With Float, your total spending limit depends on how much money you preload. With Caary, your total spending limit is fixed, like a standard credit card.

Creating cards and using their online interfaces in general is very easy. This is impressive fintech.

Float will automatically mail its physical cards to Canada or the US. Caary only mails its physical cards within Canada.

Both Float and Caary have very quick email support – I got a response within a couple of hours – and Float also has online chat support.

Company profile

Looking at the companies’ history and founders, Float has more of a tech background, whereas Caary has more of a traditional finance background. Float also has a slicker website and admin panel interface, as well as a bigger social media following and fancier marketing.

Both are worth trying

At first, I tried Float. It was going smoothly and I was ready to recommend it to others! But only a few weeks after I had started using Float, they announced the introduction of their USD cards and the resulting 1.5% foreign exchange fee on their CAD cards. This is probably a net benefit for many companies, but I didn’t want the complexity of having to manage multiple card balances. That’s what drove me to try Caary instead, and it has functioned exactly as advertised so far. It is also attractive that Caary is a traditional credit card, because then I don’t have to manage the prepaid balance.

Both Float and Caary provide promising spending card solutions that solve some real small business needs, and I can say from experience that they are worth considering.

In a previous article, I reviewed some electronic options for paying your suppliers. One major disadvantage with most electronic payment options like wires and Interac e-Transfers is that they are not fully integrated into other software (such as a company’s bookkeeping software). Another disadvantage is that these options require a business owner to really trust someone to have full banking access, or to perform all the payment tasks herself. This translates to more administrative work, as opposed to running the actual business.

In today’s world of fintech, these disadvantages can be easily overcome. In this article, I (as a professional accountant) describe two popular options I have used to increase the efficiency of the accounts payable cycle: Plooto and RBC PayEdge. Plooto is an independent fintech startup which has been operating since 2015. RBC PayEdge used to be called WayPay Inc. It was also a startup but was acquired by Royal Bank of Canada (RBC) in mid-2019. The app’s functionality has not changed.

A better workflow

Both Plooto and RBC PayEdge are services that act as intermediaries between your books, your bank, and your recipient, and allow you to process payments in a secure and flexible way. The steps are roughly as follows:

1. Supplier invoice arrives.
2. Invoice is entered into the accounting system.
   1. This can be done manually by yourself or your bookkeeper. Or better yet, automate!
3. Accounting system syncs with payment service.
   1. This is optional.
4. Outstanding payables reviewed and submitted for review.
   1. Can be done by you or your bookkeeper.
5. Payment service sends email to reviewer to notify them of pending payment.
   1. This is optional.
6. Reviewer submits payment for processing.
7. Payment service sends emails to both sender and recipient.
   1. When payment is approved, and also when it’s deposited in the recipient’s bank, so two emails in total for each person.
8. Payment service syncs with accounting software to mark payment as complete.
   1. This is optional

Side note: You might ask, what about the accounts receivable cycle? That’s a bit different and I will touch on it later on.

Getting started

Set up: Connection to your bank

If you’ve ever used PayPal, you will be familiar with the process of connecting your bank account to an outside service. Plooto and RBC PayEdge both verify your identity (note, it must be a business) and there are procedures to follow to connect your bank account. The process takes several business days. There can be separate forms to fill out for domestic and foreign currency transactions.

Here is an image of the RBC PayEdge bank accounts view:

Set up: Connection to your accounting software

Both solutions connect to popular cloud accounting software. I’ve had success with both QuickBooks Online (QBO) and Xero. As soon as a new invoice appears in QBO, it syncs with Plooto or RBC PayEdge, including attachments (such as a PDF copy of the invoice). When the payment clears, QBO is updated automatically.

Integration greatly reduces the chance of human error (data entry mistakes), and saves time.

Here is what a tax instalment payment looks like on the QBO banking page:

Tiers of approval

For most of my clients, I do not have payment approval rights. This means I can set up a payment and submit it, but my client makes the final approval. My client receives a notification via email and can approve the payment electronically from anywhere in the world as long as there is internet access.

For a larger operation, you can set up multiple approvers (similar to “dual signature” on cheques), and approval limits (“Manager James can approve up to $5,000 per payment”).

You need the recipient’s bank information

But, you only need it once. When a new invoice arrives, I send an email to the vendor on behalf of my client asking for a void cheque. I then enter the bank information into Plooto or RBC PayEdge. Clearly in this case there is trust between my client and myself, as this is sensitive information. Alternatively, a client can restrict staff to not be able to enter or adjust bank information.

Here is an example of the supplier setup screen from RBC PayEdge:

Here is the equivalent screen with Plooto:

Once you have set up your suppliers, and started to enter your payables, you’ll start to see a good overview similar to this example Plooto dashboard:

You have to be a little bit patient

We’re used to Interac e-Transfers and wires that move funds quickly. However, in this case, both services take 3-4 business days to deposit the payment into the recipient’s bank account. This has more to do with banking regulations than Plooto or RBC PayEdge’s abilities. To expedite the process by a day or so, you can move funds ahead of time into a virtual wallet (that is, a pre-funded balance).

Record keeping

If there are any issues in the payment, or if the vendor can’t find it, records are easily accessible. If you have trouble, Plooto and RBC PayEdge could be more responsive in terms of customer service than a big bank.

Auto-schedule and deferral of payment

It’s possible to post-date a payment, or set up a regularly recurring payment, such as monthly rent.

Comparing Plooto and RBC PayEdge

Cost

At the moment, RBC PayEdge charges $1 per domestic payment (slightly higher for Canada Revenue Agency remittances). A foreign wire is $16. There are options for a flat monthly charge as well.

Plooto charges a monthly fee of $25 which covers 10 domestic transactions and one foreign payment. Starting with the 11th transaction, each domestic payment is $0.50.

Foreign exchange is competitive as well (that is, the fees are lower than a major bank), but it’s always good to check with your bank to see if you can get a better rate. You might still be better off using a service dedicated to foreign exchange and foreign payments, such as Wise (formerly TransferWise) or OFX.

You also have to consider any charges on your bank’s side. Payments made through RBC PayEdge and Plooto should be considered “pre-authorized transfers” that most banks don’t charge extra for, or are counted as standard transactions within your bank’s monthly plan limits.

Ownership

As mentioned above, RBC PayEdge is owned by RBC. This makes it an easier sell with clients. The downside is that it’s no longer a nimble startup. Fee structure and other functionality could change based the parent company’s goals.
Last I spoke with Plooto, it intended to remain independent.

What’s it like to “deal” with them

In general, I found both companies fairly easy to communicate with. I found Plooto to be quicker to respond, though.
In terms of integration and the various menus, Plooto wins. For example, accounting software integration is automatic in Plooto whereas RBC PayEdge requires that you click to “sync” and then wait. For foreign wires, Plooto requires less recipient information to be entered (i.e., foreign bank account information), whereas RBC PayEdge requires more (full foreign bank address, full foreign recipient address). RBC PayEdge data entry screens are also trickier in some cases.

Extras

RBC PayEdge does not at the moment have accounts receivable functionality. Plooto does. There are some factors to consider, including your relationship with your customers and getting pre-authorized payment agreements.

Conclusion

I am so glad I implemented one of the above systems for each of my clients. The pandemic has been tough and I can’t imagine what it would have been like if on top of everything we also had to deal with paper payments and cheques. The transition to working remotely has been quite seamless for all the clients who were willing to move to the cloud and adopt new technology.

I highly recommend that you try out the above solutions.

About the author

I am a Chartered Professional Accountant working somewhere in Canada. I provide controllership, training, and consulting services to small and medium sized businesses. I also work with non-profit organizations. I write only about my experiences in the business world and I am not selling or advertising any company or service, including my own. Audrey Silva is my pen name.

Previously, I discussed the disadvantages of using physical means of payment — specifically, cheques — for paying your small business’s suppliers and vendors. In this article, I will review some electronic alternatives to cheques.

Electronic payment options for small businesses

There are quite a few options that all offer advantages over cheques.

Pre-Authorized Debit (PAD)

If you have a vendor that bills on a regular basis and you have a good business relationship, the easiest long-term option for you would be to sign a Pre-Authorized Debit (PAD) agreement. It does take some initial setup, since you need to provide them with your bank information (often with a void cheque) and they will withdraw funds when a bill is due. This can work well with a credit card company or a utility provider. Smaller providers, such as a bookkeeper, can also bill this way. There will be no charge to you, and there is no need for active involvement on your part (or your bookkeeper), since the payee initiates the withdrawal.

Credit card payments

Some of your suppliers or vendors probably accept credit card payments. This can be convenient for both parties, and in some cases the vendor might regularly auto-charge your card. There are fees on the receiving end, which means this is not a widely accepted method of payment, especially for your smaller suppliers and vendors.

Online bill payment

Some companies pay banks to include them in a list of online payees. To pay a bill, you need to first set up the payee through your online banking interface by searching for the payee and entering your account number. Then to transfer the funds you need to enter the amount. There will be no charge to you, but this option does require active involvement on your part. The payment is processed by the next business day, although it might take a few days for your payee to recognize it as received.

Interac e-Transfer

The vast majority of Canadians have heard of Interac e-Transfers. To set up a payee, you simply need to enter their email address. To send funds, you need to enter the amount and likely create a password which the payee enters as they accept the funds. Some payees have configured automatic deposit, so that they don’t have to enter a password — the funds are deposited in their account as soon as you initiate the payment.

There may be a charge to you, depending on your banking arrangement. One of my clients that uses e-Transfers pays $1.50 per payment. Other clients pay nothing, as it’s included in their banking plan. This option requires active involvement on your part. Payment is processed the same day, provided that the payee accepts the payment.

Electronic Fund Transfers (EFT)

Electronic Funds Transfers (EFTs) are a lesser known arrangement for small businesses, and are usually included in a higher tier banking plan. They’re roughly equivalent to Automatic Clearing House (ACH) payments in the USA.

An EFT requires you to know both the recipient’s bank details. You might need to request a void cheque and enter the information yourself. Then the process is similar to an Interac e-Transfer, except there is no need to create a password, and the funds are automatically deposited without requiring any acceptance on the payee’s part. This payment process does require active involvement on your part. Funds are usually transferred overnight.

You can speak to your bank to see what options are available, and the associated fees. One of my clients that uses this method pays $0.85 per transfer.

Wires and alternatives for international payments

Wires are a reliable method to send funds, especially internationally. You would need quite a bit of information, especially for international wires, such as IBAN / SWIFT numbers and the recipient’s bank address. Wires are also expensive. They can cost anywhere from $15 to $70, with additional fees on the recipient’s end, and that’s not counting any potential foreign exchange costs.

A wire is fairly quick (can be completed overnight) and does require active involvement on your part. However, if there is foreign currency exchange involved, consider using a third-party service such as Wise (formerly TransferWise) or OFX, where you can save a significant amount not just on the wire transfer fee, but also on the foreign exchange fee and spread.

What to consider when evaluating the options

The electronic options above are all quite reliable and are less prone to fraud and error as compared to cheques. As long as you enter all information correctly, the recipient will receive the funds relatively quickly. You also have more control over the process, since you don’t need anyone to print cheques and mail them.

There are still limitations and other factors to consider when evaluating your electronic payment options. As well, your suppliers or vendors might all prefer different methods of payment. Sadly, there is no silver bullet in comparison to cheques.

Dollar limits

Online bill payments, Interac e-Transfers, and EFTs can all be subject to bank limits. I have some clients who have a daily $3,000 maximum for cash outflows. Maximums can often be increased if you speak with your bank.

Domestic vs. international

Your payment method may be limited only to domestic transactions, whereas you’d have to use a different method for international payments.

Data entry and detail

Do you have a lot of time for manual administrative work? You have to make sure all information such as email addresses and bank account numbers are entered correctly. And each time you process a payment you have to enter it yourself, unless you allow a bookkeeper or assistant full access to the bank account, which brings us to the next consideration.

Tiers of approval

Not all business owners want to give employees full access to the company’s online bank account. A lot of business owners continue using physical cheques simply because it allows a segregation of duties: a bookkeeper prepares cheques and does all the admin work, the owner signs, and the bookkeeper then mails the cheques. The above electronic payment options do not generally allow for tiers of approval, except in cases of specialized banking arrangements (for a fee, of course).

Troubleshooting on the payee’s side

Most people want to receive money, right? Well, I would answer “yes”, but not everyone is so good at actually getting this accomplished. Take an Interac e-Transfer for example: some of my clients (and their vendors) routinely neglect to check their emails, or maybe the email goes to spam, or maybe they gave the wrong email address to begin with. I’m not saying they are all scatterbrained. It’s just that not everyone is particularly detail oriented and maybe they are too busy to look at some things.

Now, you can say that if a payee misses a payment email, or deposits it but forgets about it, it’s fully their problem. I agree. But how much time do you want to spend resolving disputes and checking old emails to prove your innocence?

Inability to auto-schedule or defer

Unlike a post-dated cheque, not all of the above methods allow you to schedule multiple payments in advance or defer a payment to a later date. This means you can sometimes only process payment when you are available.

Time and cost

The transfer of funds itself, when fully electronic, should not be costly. However, some are more costly than others, and cost is almost measured in terms of your time.

Record keeping

Every business owner needs accurate reports to know how the company is doing. For example, what are the remaining unpaid bills and when are they due? Let’s say you had a change of staff or you got super busy and now you’re behind on your bookkeeping. How will you sort out who was paid and when and for what? You may have to spend time checking old bank statements and sorting through old emails.

It’s clear that for even a moderate transaction volume, the above electronic payment options may not give you a useful “paper trail”.

And what about updating the actual books? Well, you need to manually mark each bill as paid on the proper date. There is definitely an administrative burden.

Is there still a better way?

When it comes to these payment options, like most things in life, there are pros and cons. It can be tricky to manage multiple payment options while managing your small business as well, nevermind the challenges in receiving payments from your clients!

In my next article, I will review two payment systems available in Canada and that I’ve used, Plooto and RBC PayEdge (formerly WayPay), which attempt to address some of the challenges with electronic payments.

About the author

I am a Chartered Professional Accountant working somewhere in Canada. I provide controllership, training, and consulting services to small and medium sized businesses. I also work with non-profit organizations. I write only about my experiences in the business world and I am not selling or advertising any company or service, including my own. Audrey Silva is my pen name.

Many of us Canadians stubbornly cling to cheques: we write cheques, we receive cheques, we deposit cheques. It’s time to stop. They’re expensive, insecure, and inefficient.

The status quo is comfortable

Many businesses know that it’s important to find ways to optimize operations and decrease costs. Studies show a significant decrease in business costs resulting from the switch from cheques to electronic forms of payment.

Unfortunately, change can be a big hurdle. As a Chartered Professional Accountant, sometimes when I make a recommendation to a client, such as moving to a different type of payment, I have to convince not just the owner of a business, but in the case of a larger entity or a charitable organization, I have to speak to several people on the board of directors, most of whom are quite reluctant to consider something new.

If you’re a cautious person, especially when it comes to payment processing, you’re not alone.

But don’t get stuck in the past

I was once speaking to a potential client. This client’s bookkeeper had been with her for a couple of decades, but the bookkeeper was about to retire.

As we spoke, she revealed to me that she does not trust technology and in fact she refuses to even use online banking. No matter how much I tried to explain that the only one in charge of her account is herself, she still preferred going to the branch for each transaction, often daily. She explained that the branch was close to home and she didn’t mind.

I did not take on this client. I just felt it would be too difficult to justify my rate in such an inefficient operation. If your business gets stuck in the past, you’ll have significantly fewer choices in terms of qualified people you can hire.

Cheques are not secure

Have you run into any of the following scenarios yet?

• The bank makes a mistake and allows a fraudulent cheque to be processed.
• The cheque does not reach the correct destination in the mail.
• The recipient makes an error, such as misplacing the cheque.

On the more innocent side, a vendor can deposit a cheque but later forget, or they can make a mistake when reconciling bank statements, and then complain that they didn’t receive payment. Depending on how much time has elapsed, it can take time and resources to resolve the situation — as a busy business owner, what do you want to focus your time on?

Some more sinister things happen too, such as cases of actual fraud. Maybe it hasn’t happened to you, but it’s not as rare as you think. Below are two examples from my own experience.

A client issued a cheque and it cleared. No issue on our side. However, a while later the vendor complained about not receiving payment. It turns out they never received the cheque in the mail. It’s not very difficult for a fraudster to intercept mail and deposit it in a similarly named company, which is likely what happened based on the bank investigation that followed. The investigation took several weeks.

Another client had a cheque clear… but it wasn’t a cheque my client ever issued. Based on the investigation, it looked like the fraudster engaged in some photocopy magic and created a whole bunch of fake cheques with different account numbers and made deposits in various banks to see if anything cleared. In fact, when we saw a copy of the cheque it didn’t even have my client’s name on it.

The good news: because the second client had fully transitioned to using electronic payments, as soon as we logged in to online banking, the cheque was so noticeable it was practically yelling at us to do something. We immediately contacted the bank and got the funds back. The next day, the same thing happened! Clearly the fraudster caught on that ours was a real bank account. We again got the funds back, and unfortunately had to close this account. Transitioning bank accounts was relatively smooth because we had no cheques in transit.

The hard costs of cheques

A new business cheque book can cost anywhere from $100 to $300. A company with multiple bank accounts (such as CAD and USD), or a company that needs its logo on cheques, will sometimes spend more. Let’s say each paper cheque costs $1. I am not including the cost of mistakes or void cheques.

Then, if it’s impossible to hand someone a cheque in person, it needs to be mailed. Let’s say that’s $1 in postage. So, at a minimum, a company spends $2 just to get a cheque out the door.

As we know, banks charge fees. Some banks charge a fee for each cheque that clears. If you want to avoid this you might have to maintain a minimum balance or change to a different fee tier. And what about correcting for errors? A stop payment can easily cost $10 each. Each cheque can end up costing $3-$4.

Paper paper everywhere

If a business is organized, the owner takes the cheque stub, staples it to the original invoice, and neatly files it. Or maybe in your company, you pay someone else to do it. Some companies have very few payments, so it’s not a big deal. But some have a lot.

How much paper do you store in your office or in a storage space? How easy is it to find later? Is your paper secure and protected? Could the time and money managing paper be spent better elsewhere?

The physical can tie you down

As I write this at the beginning of summer 2020, when Canada is experiencing various shut downs related to COVID-19, I sometimes wonder about that potential client that visits her bank branch every day. I can only hope that her business is able to operate and that she’s safe.

How are you managing your business during the pandemic? Do you physically go to your office or bank? Does the bookkeeper drop off a stack of cheques for you to sign on your porch, in a plastic bag to protect them from the elements?

You’re not all in the office anymore

Imagine this: a charity needs to pay a supplier. The bookkeeper issues a cheque. Each cheque requires signatures from any two of the signatories on the board. They all live in completely different parts of the city.

Usually, an employee (or sometimes, a volunteer) has to get to each signatory and then bring the cheques back for mailing. Or maybe the charity requires that you come in to sign cheques on location. Even during normal times, this can be a bit of a pain.

Now, imagine you’re a signatory on the board and there is a pandemic. You are worried because you have an immuno-compromised family member. But you need to sign those cheques immediately because the charity is in financial trouble and it’s organizing an emergency online fundraiser and the web developer wants to be paid right now or else it won’t happen.

There are alternatives!

I hope I have convinced you that it’s time to start looking at other options. You probably know of, or have even used, some forms of electronic payment. But how can they be used by your business in an efficient manner?

There are many alternatives to cheques, including Interac e-Transfers, EFT/ACH, wires, and companies that specialize in accounts payable payment processing. In subsequent articles, I will explain these in more detail!

About the author

I am a Chartered Professional Accountant working somewhere in Canada. I provide controllership, training, and consulting services to small and medium sized businesses. I also work with non-profit organizations. I write only about my experiences in the business world and I am not selling or advertising any company or service, including my own. Audrey Silva is my pen name.