Before closing for the night, the task of sending credit card info to a processor for remittance awaits.
To eliminate the drudgery, some operators have adopted single-batching – often set up automatically in POS systems – to run at the end of the day, or up to three times throughout the day. If you haven’t made the switch, saving time and money should get you to reconsider. Here’s why.
Save some steps
Switching to single-batch transactions was a game changer for 610 Magnolia in Louisville, Kentucky. For more than 30 years, General Manager Lindsey Ofcacek says the restaurant used an outdated card reader that proved to be a major headache and waste of time for servers.
“The card reader was in the attic, so our five servers would manually write down all the costs of the meals, pull out a calculator to add them up and then run up 12 stairs to the attic to get authorization and later process the final bill,” she says.
In August 2016, the restaurant shifted to iPads and Square, a credit card processing and POS system. The change streamlined service and lowered costs.
“We pay no annual fee and a 2.75 percent flat transaction fee. It’s a time saver for the servers who can process all transactions on the floor and not have to go up and down stairs,” says Ofcacek.
Pay to play
While batching is convenient, it’s not without its flaws. Mainly, problems may occur between the card authorization and the payment period if a transaction is not batched on the day the purchase was made. That said, most transactions usually go through without a hitch.
Processing rates can also vary. Square, for example, advertises a 2.75 percent flat rate on each swipe, dab or tap. But the service charges a 3.5 percent rate plus 15 cents per transaction when credit card numbers are manually keyed in—a slightly higher rate that’s applied to offset the risk of fraud or a lack of funds.
For restaurants on a wholesale or cost-plus pricing model—which is a more cost-effective option for mid- to high-volume restaurants—net effective rates range from 2.75 percent to below 2 percent depending on volume and customer demographics.
Restaurants pay three fees to accept payments by card, according to the National Restaurant Association. Besides processing fees, merchants pay interchange fees (adjusted every April and October) and assessments directly to the card brand.
Thanks to savvier processing, operators get the benefit of more than just streamlined accounting, says Raymond Siffel, managing partner for Calibr Merchant Solutions LLC.
“It’s already adding more value by providing critical data metrics that restaurants can use to improve their top and bottom lines,” he says.
Those data figures can include the number of dishes served, cost per item, and the most- and least-popular menu items. Additionally, most deposit setups are now on a gross monthly system, where the processor invoices the restaurant at the end of each month rather than the more archaic way of deducting fees from each transaction.
By charging on a gross monthly basis, restaurants can reconcile their payments with the transactions, more easily, which all adds up to more money in your pocket faster.
How It Works
Batch processing is part of a larger system that ensures restaurants get paid for a credit card transaction. Here’s how it works, according to Raymond Siffel.
1. When a credit or debit card is used in a POS system, it receives bank authorization that money is available and the card is in good standing.
2. At the end of the day, all credit card transactions are batched and sent to a processor.
3. The processor contacts each bank and requests payment, which is made to a Federal Reserve account of the restaurant’s bank.
4. The processor sends the batched funds to the Federal Reserve and marks them for deposit into the restaurant’s deposit account at its bank.
5. The restaurant’s bank sweeps the Federal Reserve account several times a day and collects whatever money is in the account. This usually occurs within 24 to 48 hours from the time of purchase and is credited to the restaurant’s account.