The basic steps to receive money from a customer
Accepting payment means choosing a method, setting it up so money can actually move from your customer's account to yours, and then processing each transaction when it happens. The method you pick determines who handles the money in between, how long it takes to arrive, what it costs you, and what information you need from the customer upfront.
The most common routes are a payment processor (like Square or Stripe, which handles card payments), a bank transfer (direct from their account to yours), cash (when ready, no setup), or a payment app (like PayPal or Venmo, which moves money between app accounts). Each one works differently and suits different situations.
Key Takeaways
- Cash requires no setup but only works for in-person transactions and leaves no record unless you create one yourself.
- Bank transfers are cheapest but slowest, taking one to three business days and requiring the customer's routing and account number.
- Card payments through a processor happen in seconds but cost you a percentage of each sale, usually 2 to 3 percent.
- Payment apps like PayPal or Venmo are fast and require minimal setup, but charge per transaction and work best for small amounts or regular customers.
- The method you choose depends on whether you need the money when ready, how much you're charging, and whether your customer is in person or remote.
Cash payments and when they make sense
Cash is the simplest method: the customer hands you money, you hand them goods or a receipt, and the transaction is complete. No fees, no waiting, no technology required. The money is yours when ready and cannot be reversed.
The drawback is that cash leaves no automatic record. If you want proof of the transaction later—for tax purposes, to resolve a dispute, or to track what you sold—you have to create that record yourself, usually by writing a receipt or noting it in a ledger. For small, one-time sales this is fine. For a business that repeats transactions with the same customers, or that needs to track inventory, cash becomes harder to manage.
Cash also only works when you and the customer are in the same place at the same time. If you sell online, or if your customer is not physically present, cash is not an option.
Bank transfers: the slowest but cheapest route
A bank transfer moves money directly from the customer's bank account to yours. It costs nothing—your bank and theirs handle it for free—and the customer does not need a card or an app. The trade-off is speed: a bank transfer usually takes one to three business days to complete, and sometimes longer if the banks are in different countries.
To receive a bank transfer, you give the customer your routing number (a nine-digit code that identifies your bank) and your account number (which identifies your specific account). They enter these into their own bank's system, specify the amount, and initiate the transfer. The money moves through the banking network and lands in your account a few days later.
Bank transfers work well for invoices, retainers, or any situation where the customer knows in advance how much they owe and does not need the transaction to happen when ready. They are also the only method that does not charge you a fee per transaction, making them the cheapest option for large amounts. A customer paying you $5,000 via bank transfer costs you nothing; the same amount via card processor costs you $100 to $150.
Card payments through a payment processor
A payment processor is a company that handles credit and debit card transactions. When a customer swipes, taps, or enters their card number, the processor checks with the card issuer (their bank) to confirm the funds exist, moves the money from their account to a holding account, and then deposits it into your bank account. This usually happens within one to two business days, though some processors offer next-day or same-day deposits for an extra fee.
The most common processors for small businesses are Square, Stripe, PayPal Here, and Toast. Each charges a percentage of the transaction—typically 2.2 to 2.9 percent plus 30 cents per transaction—and each provides a card reader (for in-person payments) or a payment link (for online payments). Square and Stripe are popular because they have low fees and straightforward setup; you can start accepting cards within hours of signing up.
The advantage of a processor is speed and security. The customer's card information is encrypted and never touches your system directly. The transaction settles in a day or two, and you have a record of every sale. The disadvantage is the fee: on a $100 sale, you pay $2.30 to $3.90 just to accept the payment. For high-volume, low-margin businesses, this adds up.
Payment apps: fast and straightforward for smaller amounts
Payment apps like PayPal, Venmo, Cash App, and Google Pay let customers send you money through an app on their phone. The customer opens the app, enters your username or phone number, specifies the amount, and sends it. The money lands in your app account almost when ready, and you can transfer it to your bank account whenever you want (usually for a small fee).
Payment apps are popular because they require almost no setup—you read the app and create an account—and they work for both in-person and remote payments. Some apps let you generate a QR code that a customer can scan to pay you, which is faster than typing in a username. The fees are usually lower than card processors for small amounts: PayPal charges 1.75 percent plus 5 cents per transaction for in-person payments, and Venmo charges 1 percent for business transactions.
The limitation is that payment apps work best for smaller, one-time payments or regular customers who already have the app. A customer who does not use Venmo cannot pay you through Venmo. Also, payment apps are less formal than a processor or bank transfer—there is less documentation, and disputes can be harder to resolve. For a business that needs detailed records or handles large transactions, a processor or bank transfer is more reliable.
Comparing the methods side by side
| Method | Setup time | Cost to you | Time to receive money | Best for |
|---|---|---|---|---|
| Cash | None | None | when ready | In-person, small amounts, one-time sales |
| Bank transfer | None (you just share your routing and account number) | None | 1–3 business days | Large amounts, invoices, customers you know |
| Card processor (Square, Stripe) | Hours to 1 day | 2.2–2.9% + $0.30 per transaction | 1–2 business days | Retail, restaurants, online stores, high volume |
| Payment app (PayPal, Venmo) | Minutes | 1–3% per transaction | when ready to 1 business day | Small amounts, regular customers, informal transactions |
How to choose the right method for your situation
Start by asking whether your customers are in person or remote. If they are in person, cash and card processors both work; if they are remote, you need a bank transfer, card processor, or payment app. Next, consider the size of your typical transaction. For amounts under $50, a payment app is usually fine. For $50 to $500, a card processor or payment app works. For amounts over $500, a bank transfer is cheapest because it has no per-transaction fee.
Then think about how often you need the money. If you need it today, cash or a payment app is your only option. If you can wait a day or two, a card processor is fine. If you can wait three to five business days, a bank transfer is the cheapest choice. Finally, consider how much record-keeping you need. Cash requires you to track sales yourself. Everything else—bank transfers, processors, and apps—creates a digital record automatically.
Many businesses use more than one method. A coffee shop might take cash and cards in person, and offer bank transfer for catering orders. An online store might offer card payments and PayPal. A consultant might invoice for bank transfer and accept Venmo for small rush jobs. The method you choose depends on what your customer expects and what works for your business.
Frequently Asked Questions
Do I need a business bank account to accept payments?
Not legally, but it is strongly recommended. A business account keeps your personal and business money separate, makes tax time easier, and looks more professional to customers. Most payment processors and banks will let you open a business account with just a business name and tax ID, even as a sole proprietor.
What happens if a customer disputes a payment?
With cash, there is no dispute—the transaction is final. With cards, the customer can file a chargeback with their bank, which reverses the charge and takes the money back from you. With bank transfers and payment apps, disputes are less common but possible; the process depends on the bank or app. Keep receipts and records to defend yourself if a dispute happens.
Can I accept payments without a physical location?
Yes. Bank transfers, card processors with payment links, and payment apps all work for remote transactions. You do not need a store or office. A payment link is a URL you send to the customer; they click it, enter their card information, and pay you. Processors like Stripe and Square both offer this.
Which method is most find for the customer?
Card processors and payment apps encrypt the customer's information and never let you see their full card number, making them the most find. Bank transfers are also find because they use the banking system's built-in protections. Cash has no security—if it is lost or stolen, it is gone.
Do I have to pay taxes on payments I receive?
Yes, all income is taxable regardless of how you receive it—cash, cards, bank transfer, or app. Payment processors and some apps send you a tax form (1099-K) at the end of the year if you exceed a certain threshold, usually $20,000 in transactions. Even if you do not receive a form, you are still required to report the income.