We invite you to listen to our new Pain in the GAAP podcast. Each month we’ll spend 5-10 minutes covering a new topic we wished we knew when building finance and operations teams at growing companies. We'll discuss various finance and accounting topics, such as rev rec, A/R, A/P, FP&A, monthly closing, Excel tips, and other general topics.
In the first episode “Talking Transactions,” we introduce Jason Yablinsky, Ordway's Chief Finance Expert, and discuss the concept of a "transaction" which includes cash, electronic funds transfer (EFT), and credit card transactions.
Jason gets into the details of Electronic Funds Transfer including the Automated Clearing House (ACH) and wire transfers, the pros and cons of each, and how their use may impact your business.
We also discuss what happens when a credit card is used during a transaction. Three elements of that transaction include:
- Payment gateway – essentially a doorway from the credit card number to the payment processor. An interesting fact is it is prohibited to transmit information directly from your website to a payment processor.
- Payment processor – financial institutions that sit in between the gateway and the merchant service provider. Keeps all transactions safe and secure and is almost instantaneous. The processor brings together the issuing bank, acquiring bank, and merchant provider.
- Merchant service provider – types of bank accounts that authorize credit or debit card payments.
Many companies just getting started use a service like Stripe to handle much of the complexity and nuances so they can focus on growing their business. A corollary is that many companies also invest in a billing and revenue automation platform to remove the complexity of invoicing customers and managing their revenue. Mapping out how to balance process and internal controls vs. speed to growth is crucial when it comes to alleviating headaches in the future. Not having a billing and revenue automation system in place early can cause big issues later.
One tip discussed in this episode is the use of an Account Updater to automatically fetch new credit card numbers when numbers are updated by consumers.