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Education

The profit rules – Part 2

are calculated. The common way is to deduct card brand
fees and Schedule A expenses from all revenue collected
from a merchant. The remainder is the net revenue. The
earned percentage is based on the shared percentage on
the schedule.

Also, if your schedule shows monthly fees on two line
items, $5 for one expense and $2.50 for the other, the total
monthly cost is $7.50. If you charged a flat $17.50, your
profit would be $10. Often, the flat-fee profit is greater
than the two line item fees combined.

Always list extra costs such as chargebacks. However,
remember you can collect revenue for charges that occur
By Jeff Fortney during normal processing in many ways. And keep in
mind the importance of asking merchants what their
Signature Payments average ticket is.

n "The profit rules – Part 1," published March Take, for example, a merchant processing over $2,000,000
8, 2021, in issue 21:03:01, I discussed rules one who's interested in your services. You anticipate a floor
through three, which address ways to lower fees of 10 basis points and 10 cents. Then, you see from their
I without lowering profits by compensating in other statement they are at 20 basis points and 5 cents. They ask
areas. I also emphasized the wisdom of listing fees in the you to price at just 15 basis points.
correct statement fields. This article explains rules four
and five. Many agents might consider $3,000 revenue at 15 basis
Profit rule 4 points and make the deal. That would be logical if the
average ticket was $90 or $100. If so, your cost on your
Never waive or lower a fee that a merchant believes they schedule would be $0.03. The $3,000 wouldn't be accurate,
can control by their actions. but revenue would still be considerable. But what if the
ticket is $15 or $20? At a $20 average ticket, your expense
Let's say your chargeback fee is $25, and a merchant asks would be $3,000. You'd be processing for free.
you to lower it. Instead of accommodating what seems
like a minor request, ask whether the merchant has had If, however, you offered no basis points, just pass through,
chargeback issues. Most will have none or very few. Then and charged a flat seven cents, your gross return would
explain what the fee is for and why it's priced as it is. Once be $4,000. Yet on your schedule you may have a basis
informed, the merchant will likely no longer protest the point fee. For every 1 basis point, on a $20 ticket, the cost
fee. is only 2/10 of one cent. That would reduce your $4,000
to $3,800. If the ticket is $200, the opposite applies. Basis
In another example, if a merchant's minimum processing points take on greater impact: 17 basis points would result
fee is $25 a month and they process $10,000 or more in a return of $2,700 if you charge no transaction fee. Still
monthly, they won’t see it assessed unless you price them a good return.
very low. If the merchant is concerned about not reaching
their current processing level, review the rest of the Internally, you have an expense, but you can cover that and
rates if they were based on that processing volume. The maximize your return, while still providing a merchant
simplest way to avoid dropping this fee is to explain how a perceived good deal—if you price in accordance with
it is charged. It’s merely the minimum cost to do business. their average ticket.

Profit rule 5 Today's merchants can do the math and often spot impacts
to their bottom line. You must understand the math,
A fee collected by any other name is still revenue.
too. Factor in all fees and remember a fee by any other
name is still revenue.
This rule applies in internal and external areas. Internally,
it's about your residual revenue. Everyone's Schedule A Jeff Fortney is vice president ISO relations for Signature Payments. A
outlines fees. Some agents believe if they don't charge long-time payments industry executive and mentor, Jeff is focused on
a fee to cover a cost on the Schedule A, they will lose strengthening and developing partnerships and evaluating new busi-
money. This misconception comes from how residuals ness opportunities. He can be reached at 214-458-1379

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