Using Venmo & Paypal for Business Transactions

Using Venmo & Paypal for Business Transactions

Many small business owners are tempted to turn to money transfer services such as Paypal and Venmo which offer no-fee transaction options for sending money between people. However, these services come with terms and rules regulating their use.

Venmo and Paypal Friends and Family options are NOT to be used for business transactions: payments in exchange for goods and/or services. This is in direct violation of their terms of service and may get your account locked. These platforms are also a target for scammers and can trick honest sellers out of their money. Paypal does have a business payment option and this is acceptable to use in your business to accept payments.

Using these services also does not trigger the platforms to send out a 1099-K which is required by the IRS for companies accepting electronic card payments over a certain amount each year. Accepting electronic funds for payment does come with extra fees but it also provides the benefit of being able to receive payment faster. Check processing takes too much time for many small clients and you may experience a squeeze in cash flow from only accepting checks.

Other options to consider are providing a way for your customers to do an ACH transfer through your merchant account services platform. ACH transfers typically have a smaller transaction fee than credit or debit card payments.

Many small businesses also build the cost of credit card processing into their pricing to help offset the transaction fees. Many providers, such as Square, will also allow you to import and sync transactions with your Quickbooks Online account for easy recording of your deposits and fees.