You Doubled Your Business During a Pandemic? Sorry to Hear That.

by Irwin Grossman

Article originally published in Small Business Today Magazine

A significant increase in business is commonly observed as a success – why wouldn’t it be? When monthly revenue increases, exceeding all expectations, it’s time to pop the champagne and celebrate the big win. In most cases, this is a tremendous achievement, especially for a business in its beginning stages.But in other situations, a substantial surge in revenue could mean trouble with the one entity least suspected – your credit card processor.

Card Payments and eCommerce: No Longer Just a Convenience
In 2018, it was reported that personal credit cards were the most common payment method in the United States, with debit cards following close behind. In addition to those findings, further studies suggest consumers spend up to 18% more when paying overtimewith a credit card, versus cash up front. In today’s market, cash is no longer king, and accepting credit card payments areessentialto running and sustaining a successful business. However, in order to accept credit payments, businesses need a credit card processor to manage and processthose transactions properly. In doing so, businesses are heavily monitored and need to follow a strict set of guidelines to ensure processors they are legitimate.

The First Red Flag: Big Revenue Swings…Even if They’re in Your Favor

It seems inane that a credit company would drop a business that grows their revenue by too much in a given month, but it’s surprisingly true. Each business is granted an agreed upon allotment of revenue expected for the company to generate through credit card transactions. Credit card processing experts recommend businesses meet that target number or slightly above it but proceed with caution; market volatility is not uncommon, and business models may change to accommodate and remain successful. Failure to inform the credit card processor of a significant yet legitimate spike in transaction revenuemay result in a company review,or the processor may drop the business completely.

Another Imperative Figure to Watch:Number of Transactions.

Dr. Rachel MK Headley, co-founder and CEO of Rose Group International; a successful management consulting company, learned this lesson the hard way.

“As anyone navigating a business through this global pandemic knows, the ability to adapt, pivot and rapidly adjust your business model to respond to market conditions is critical to success,” says Headley. “One of those responses involved taking on a few larger projects andspreading them out over a longer period of time than in years past. Typically, in a month’s statement period, my credit card transaction volume was anywhere from $1,000-$3,500 dollars, but with the new change, my transaction rate skyrocketed to almost $10,000 dollars. Needless to say, my credit card processor flagged the change in activity, and my business was immediately placed in review.”

Pick up the Phone Before the Champagne
To be safe, businesses should contact their credit card processors any time there’s a significant change that occurs in the business that may push the boundaries of the agreement pertaining to the above, as well as high ticket amounts and even conducting business internationally. The consequences of failing to provide such updates can be quite severe,such as prompt termination,orworse – placement on the Match List, a compilation of businesses who have failed to meet proper guidelines with past processors.

Avoid Getting Cut Off, While Successful or Not
There are a few recommendations businesses can abide by to avoid potential trouble with credit card processors as fluctuations occur:

The past year has been difficult for most and attempting to stay afloat through a global pandemic is exhaustive work in itself. The last thought on a business owner’s mind should be their credit card processing habits and if they are in line with the guidelines. Staying in communication is key to ensuring business runs smoothly.