There are a lot of important decisions to make when it comes to accounts receivable (AR) in the restaurant distribution industry. Not only do you need to define your payment terms and set up a streamlined invoicing system, but you also need to choose which payment methods you’ll allow your restaurant customers to pay with. 

While it may seem straightforward, offering the right payment options can make a measurable difference in your days sales outstanding (DSO). It can even be the difference between getting paid and not getting paid at all! 

In this blog, we’ll explore the usual suspects for payment methods for restaurant suppliers: credit, EFTs, and cash. and help you decide which options would be most beneficial to your food distribution business.

Why you should accept credit card payments for your food supplier business

Credit card payments are a reliable payment method for ensuring you get paid on time and at all. 

With credit cards, you can operate on a “pull system”. On an agreed-upon date, otherwise known as your payment term (e.g. Net30), you can automatically charge your customer’s card. No action is required on the customer’s side, and you can even automate this with the right accounts receivable automation system, like Notch. Not only does this make it easier for you, but it also simplifies operations on your customers’ side, too.

Finally, credit card payments can be helpful to your customers because no actual money is leaving their bank account when the charge occurs. This gives restaurants more ability to manage their cash flow. With tight margins in the restaurant industry, this can be important. Bonus, it helps you be a better partner to your customers.

What are the cons to credit card payments for food supplier companies?

Sometimes credit card payments don’t go through. It could be because they’ve expired, your customer hit their limit, or another reason. If this happens, the payment will not process, which could create an added step for your AR team. However, a good AR platform will automatically try the payment again several times over the next few days.

And finally, credit cards do require a processing fee and are one of the most expensive payment types to process. It’s important to find the right credit card processing partner who will offer you a competitive rate. However, by streamlining AR in your business and automating credit card payments, you could also benefit from labor cost savings and productivity gains, so your team can focus on higher-value activities for your business. 

The pros and cons of Electronic Funds Transfer (EFT) payments for your food distribution business

Another type of digital payment is an electronic funds transfer (EFT). Think of EFTs as the exchanging of cash in the digital world. EFTs are becoming one of the leading forms of payment because not only can you use the “pull method” to ensure you get paid on time, but they are generally quite affordable–more so than receiving credit card payments.

Another benefit of EFTs is that they are directly deposited into your bank account once received. You don’t need to cash a cheque or go to the bank to deposit cash. 

What are the cons of accepting EFTs?

The main con of accepting EFTs is the time to process payment. In some cases, it can take anywhere between three to five business days for the payment to land in your account.

What’s the difference between ACH and EFTs?

Automated Clearing House (ACH) and Electronic Funds Transfer (EFT) are often used interchangeably, but there’s a key difference between the two. EFT (Electronic Funds Transfers) is the backbone of the Canadian payment industry. An ACH (Automated Clearing House) payment is a US bank transfer payment method regulated by NACHA. EFTs may take in some cases 3-5 business days whereas in the US, Same-Day ACH processing is available.

The pros and cons of accepting cash at your food distributor business

Cash is a way businesses have been relying on getting paid for years. And even if it served well in the past, it’s not a recommended method of payment in this day-and-age. 

The cons of accepting cash payments

  1. Collecting cash payments is a manual, labor-intensive process. There’s no room for automation. It requires a human to go in into your AP system and reconcile each payment. Then, they need to take it to the bank.
  2. There’s no opportunity to “pull” the payment from the customer directly. You’re completely dependent on when and if the customer settles their invoice.
  3. You can’t keep a payment method on hand in case something happens operationally, like if the restaurant’s accounts payable (AP) clerk goes on leave, and you can’t receive your payment for an extended amount of time.
  4. Your customers don’t benefit from an automated, streamlined system and also have to operate in a very manual way. 

The importance of bringing payments online for restaurant suppliers

Now that you know the pros and cons of each payment method, we’ll leave you with some food for thought.

One theme you’ll notice throughout this article is that bringing payments online is not only preferred, it’s considered a best-practice in the industry today. The best restaurant suppliers process payments online. If you want to scale your business, streamline your finance operations, and provide a superior experience for your customers, online payments are the way to go.

We know this can be a big shift for companies who are still operating on a cash and cheque basis. And we’re here to help. The right tool can make all the difference when transitioning from offline payments to online. 

Notch integrates directly with many of the best ERP and accounting systems. Book a demo today to explore how simple automating accounts receivable can be.