One of the great benefits - and curses - of the 21st century is the "Auto-Payment" for goods and services. We use them to pay for all kinds of things. And we ask our clients to do the same.
The great advantage of auto-payments, of course, is that you don't forget a payment. And some services are only available with credit card or other auto-payment. The great disadvantage of auto-payments is that you can lose track of the total amount.
And the real major pain-in-the-neck disadvantage comes when your credit card expires. Or in these days of credit theft, we're seeing banks suspend credit cards for almost any suspicious activity. That's great for protecting your credit - unless it leads to missed payments for one or more auto-payments!
Here are a few tips to make your life easier.
The first thing you need to do is to create a spreadsheet of auto-payments for your business. See the example. It's also a good idea to track cards that are stored with online sites that allow you to make occasional payments. This is less important since you can change these on a whim. But if someone in your company makes payments for you, you need to make sure the correct card is stored online.
Assuming you've already got a number of auto-payments scheduled, the first chore is to log these. The best place to find a complete list of payments you've already approved is your bank statement. Here's what you do:
1) Dig out bank statements and credit card statements for the last four months.
2) Open Excel and create a new spreadsheet with columns for the day of the month, the name of the service, the amount, and the credit/debit card used.
3) Look through your statements and mark each item that is a recurring payment.
4) Enter the recurring payments on your Excel spreadsheet. Enter the day of week on the appropriate column. Then look ahead for the same payment for the next month, and the next, and the next. Because of weekends, some payments will move around a bit. On the spreadsheet, keep the date that occurs the earliest for each item. This will come in handy some day if you want to use this information to assist in tracking your cash flow.
5) Keep an eye out for payments that recur once every two or three months. There will be fewer of these, so you need to be careful not to miss one. Of course there might also be one or two that recur once every six or twelve months. It's probably not worth looking through a year's worth of statements to find them all. See #6.
6) Make it a habit to verify auto-payments as they occur. That way, you can add the once-per-year and twice-per-year items to your tracking sheet.
7) Note that some items vary from month to month. Be sure to note these. If you enter the highest occurrence over the four month period, you'll have a safe budget.
8) Total the entries at the bottom. It never hurts to know what you've committed yourself to every month!
As I alluded to above, there are certain hassles with relying on credit cards for auto-payments. The same is true with debit cards (ATM cards). You need to decide whether you'll use credit cards, debit cards, direct ACH payments, or a combination of these. (ACH stands for Automated Clearing House - a system that enables you to make payments directly from your bank account.) You are most likely using a combination of these.
Credit cards are a good choice if you don't want to keep track of whether or not you have enough cash in the account at a given time. Debit cards are a good choice if you want to work on a "cash" basis. When a debit card is charged, the money goes straight out of your account. ACH is a good choice if you like to work on a cash basis like a debit card but don't want to worry about expiration dates.
Here's a quick summary of the hassles you should account for:
1) The biggest hassle you have to deal with is the expiration date for each card. If you don't keep on top of this, you'll have a spate of rejected payments. You can avoid this by moving to ACH payments, which don't have an expiration date. You can also avoid this by changing the card online as soon as you receive a new card.
2) The other big hassle you'll have is when a card you're using is canceled or suspended due to suspicious activity. I've been a victim of this myself. Two summers ago, the card I carry when I travel was canceled twice within a month. My travel isn't unusual at all for me, but the bank wanted to protect me. In addition to being a hassle on the road, I had to go put a number of payments onto a new card before the next charge hit.
This is becoming more and more common as banks get more and more skittish about fraud.
If you want to use a credit or debit card and avoid having it canceled due to travel or other activities, you should get a card you only use for online recurring payments. This could be a credit card with just enough of a credit line to cover the recurring payments. Or it could be a debit card that is never used for anything else. That's what I use.
Maintenance
Once you have a spreadsheet, it should be maintained by whoever manages your finances regularly. That might be you, the office manager, the bookkeeper, etc. Make sure new recurring payments are added to the list and old ones are removed.
The true benefit of keeping this tracking sheet will come when you change cards, change banks, or need to take a look at your budget for planning purposes. So, of course, whenever you make such changes, you need to make sure to update the Excel spreadsheet.
I recommend you keep the spreadsheet in your public folder under the \operations\finance folder.
Comments welcome.
- - - - -
About this Series
SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.
Find out more about the series, and view the complete "table of contents" for SOP Friday at SmallBizThoughts.com.
- - - - -
Next topic: Do Not Exclude Yourself from the Rules
:-)
The great advantage of auto-payments, of course, is that you don't forget a payment. And some services are only available with credit card or other auto-payment. The great disadvantage of auto-payments is that you can lose track of the total amount.
And the real major pain-in-the-neck disadvantage comes when your credit card expires. Or in these days of credit theft, we're seeing banks suspend credit cards for almost any suspicious activity. That's great for protecting your credit - unless it leads to missed payments for one or more auto-payments!
Here are a few tips to make your life easier.
Tracking Auto-Payments
The first thing you need to do is to create a spreadsheet of auto-payments for your business. See the example. It's also a good idea to track cards that are stored with online sites that allow you to make occasional payments. This is less important since you can change these on a whim. But if someone in your company makes payments for you, you need to make sure the correct card is stored online.
Assuming you've already got a number of auto-payments scheduled, the first chore is to log these. The best place to find a complete list of payments you've already approved is your bank statement. Here's what you do:
1) Dig out bank statements and credit card statements for the last four months.
2) Open Excel and create a new spreadsheet with columns for the day of the month, the name of the service, the amount, and the credit/debit card used.
3) Look through your statements and mark each item that is a recurring payment.
4) Enter the recurring payments on your Excel spreadsheet. Enter the day of week on the appropriate column. Then look ahead for the same payment for the next month, and the next, and the next. Because of weekends, some payments will move around a bit. On the spreadsheet, keep the date that occurs the earliest for each item. This will come in handy some day if you want to use this information to assist in tracking your cash flow.
5) Keep an eye out for payments that recur once every two or three months. There will be fewer of these, so you need to be careful not to miss one. Of course there might also be one or two that recur once every six or twelve months. It's probably not worth looking through a year's worth of statements to find them all. See #6.
6) Make it a habit to verify auto-payments as they occur. That way, you can add the once-per-year and twice-per-year items to your tracking sheet.
7) Note that some items vary from month to month. Be sure to note these. If you enter the highest occurrence over the four month period, you'll have a safe budget.
8) Total the entries at the bottom. It never hurts to know what you've committed yourself to every month!
Minimizing Hassles with Auto-Payments
As I alluded to above, there are certain hassles with relying on credit cards for auto-payments. The same is true with debit cards (ATM cards). You need to decide whether you'll use credit cards, debit cards, direct ACH payments, or a combination of these. (ACH stands for Automated Clearing House - a system that enables you to make payments directly from your bank account.) You are most likely using a combination of these.
Credit cards are a good choice if you don't want to keep track of whether or not you have enough cash in the account at a given time. Debit cards are a good choice if you want to work on a "cash" basis. When a debit card is charged, the money goes straight out of your account. ACH is a good choice if you like to work on a cash basis like a debit card but don't want to worry about expiration dates.
Here's a quick summary of the hassles you should account for:
1) The biggest hassle you have to deal with is the expiration date for each card. If you don't keep on top of this, you'll have a spate of rejected payments. You can avoid this by moving to ACH payments, which don't have an expiration date. You can also avoid this by changing the card online as soon as you receive a new card.
2) The other big hassle you'll have is when a card you're using is canceled or suspended due to suspicious activity. I've been a victim of this myself. Two summers ago, the card I carry when I travel was canceled twice within a month. My travel isn't unusual at all for me, but the bank wanted to protect me. In addition to being a hassle on the road, I had to go put a number of payments onto a new card before the next charge hit.
This is becoming more and more common as banks get more and more skittish about fraud.
If you want to use a credit or debit card and avoid having it canceled due to travel or other activities, you should get a card you only use for online recurring payments. This could be a credit card with just enough of a credit line to cover the recurring payments. Or it could be a debit card that is never used for anything else. That's what I use.
Maintenance
Once you have a spreadsheet, it should be maintained by whoever manages your finances regularly. That might be you, the office manager, the bookkeeper, etc. Make sure new recurring payments are added to the list and old ones are removed.
The true benefit of keeping this tracking sheet will come when you change cards, change banks, or need to take a look at your budget for planning purposes. So, of course, whenever you make such changes, you need to make sure to update the Excel spreadsheet.
I recommend you keep the spreadsheet in your public folder under the \operations\finance folder.
Comments welcome.
- - - - -
About this Series
SOP Friday - or Standard Operating System Friday - is a series dedicated to helping small computer consulting firms develop the right processes and procedures to create a successful and profitable consulting business.
Find out more about the series, and view the complete "table of contents" for SOP Friday at SmallBizThoughts.com.
- - - - -
Next topic: Do Not Exclude Yourself from the Rules
:-)
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