The Nevada Small Business Development Center and the National Association of Women Business Owners joined forces May 6 for a small-business workshop on cash flow and credit card processing.

Becky Takeda, chief executive and owner of Merchants Billing Services Inc. in Las Vegas, said small-business owners should consider accepting credit cards and debit cards to increase their sales.

"Business will increase an average of 25 percent in sales by taking credit cards, debit cards," she said. "Those that are not taking them need to consider that. Americans are very credit connected."

The lowest-risk and least-expensive credit card option is to accept credit payments when the card is present and swiped on a credit card reader, Takeda said, adding that the cost is about 1.7 to 1.8 percent of gross sales.

When a card number is hand entered, it is more risky and costs the merchant up to 5 percent more per transaction, she said.

Before small-business owners jump into credit card transactions, there are a variety of things to consider such as multiple fees and varying services.

For example, a credit card terminal can be purchased online for about $400 or rented for about $50 per month from a bank, Takeda said.

She said the credit card processor could add software to the terminal at no charge to the small-business owner if it is purchased elsewhere.

Also, Takeda suggested looking for credit card processors who offer online retrieval and charge-back reporting, which can save costs in the long run. A retrieval inquiry means a customer has inquired about the charge and it's up to the business owner to supply the paperwork to the cardholder's bank. Each inquiry costs between $5 and $13. If the information is not provided in a timely manner, the business owner could incur a charge-back fee of between $35 and $50 to return the money to the cardholder.

She said business owners should also know that debit card transactions that require customers to use their personal identification numbers cost the small-business owner less per transaction; often less than 1 percent.

Another financial consideration is that some Visa-backed cards now charge merchants 0.5 percent more per transaction because they are tied to cardholder reward programs.

"You'll pay half a percent more when you take those cards and you won't know that," Takeda said. "That is why it is so important to look at your monthly statement."

Credit card processors typically charge a monthly statement and maintenance fee that ranges from $5 to $20.

Each time a batch of credit card transactions is transmitted to the processor, there can be a fee of 50 cents per batch, but it is best to send all transactions at least once a day, Takeda said.

Other fees that may be incurred include a minimum monthly fee, an early termination contract fee and a fee for going over the average sales per transaction number that was on the small-business owner's application, Takeda said.

"The processor charges fees because it makes sure the money is in your account the next day, but the money may still have to be returned six months later if a customer disputes the charge," she said.

Cash flow

The other key topic presented during the seminar is that businesses need to have cash flow to be successful.

Business owners need to regularly review their balance sheets and profit and loss statements to understand their cash flow, which is the amount of money that comes in and out of a business, Hank Pinto, program manager for the Nevada Disadvantaged Business Enterprise Program.

The balance sheet tells what the businesses own and what they owe, he said.

The profit and loss statement explains how revenue is generated and the costs associated with generating that income, Nevada Small Business Development Center adviser Janis Stevenson said.

Businesses should subtract their expenses from their income to get their gross profit. That total is what is used to pay the administrative and operating expenses such as payroll, utilities, advertising, supplies and licenses, Stevenson said. The final total is the net profit and is what is used to determine if a company can pay a loan, she said.

When businesses have multiple divisions in their companies, they should keep their balance sheets and profit and loss statements separate so they know where the money is being generated and spent, she said.

Businesses can increase their cash flow when owners make a capital investment in their companies (they should make sure it is documented so the Internal Revenue Service doesn't tax it as income), when they receive most of the customer money that's due to them (accounts receivable), when they decrease their inventory, when they have more outstanding bills (accounts payable) and through depreciation of vehicles, computers and office equipment that are owned and amortization of nontangible items such as a lease or insurance policy.

Business owners do not have to be accountants, but they need to understand their business financials.

"You have to understand enough about accounting to know what the professional should be doing," Stevenson said, adding that bookkeepers generate reports based on what owners provide them while accountants offer consulting.

Business owners can have less cash flow when they pay their bills, have sold their goods or services, but have not collected the money on them and when they increase their inventories and purchase additional equipment, she said, adding that business owners should pay for things by check whenever possible so there is a paper trail.

Business owners should compare their financials over multiple years and to other businesses that are similar to theirs in terms of what they are spending and earning, Stevenson said.

Web sites that offer comparison tools to see if a business is within industry guidelines are rmahq.com, bizstats.com and strategy4u.com, Stevenson said.

Michelle Swafford covers health care and small business for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached by e-mail at swafford@lasvegassun.com or at (702) 259-2326.