When starting your own business, there are many departments that you need to prioritize in the beginning. One such department is the accounting department, which manages your finances through the use of accounting principles.

There are many reasons why setting up an accounting department is important for your company, but the main reason is that it can keep your financial records in an organized fashion. Furthermore, by using various accounting principles, it can make sure that all of the financial records are accurate and updated, ensuring financial safety and efficiency.

Let us discuss this in a bit more detail, taking a look at the importance of accounting, and exploring the five accounting general principles as well.

Basic Accounting: Why Is It Important?

Before understanding the five important principles of accounting, lets first take a look at accounting and why it is an important part of any company. By definition, accounting is a term that is used to explain the process which involves strengthening the financial position of the company, and also ensuring financial transparency and responsibility.

The main purpose of an accounting department is to keep a record of any transactions that they make, the cash flow, and generate profit and loss reports based on the financial information.

In addition to solidifying the finances of a company, the account is also important due to other benefits that it brings to the table:

·       Records All Business Transactions

One of the most important reasons why accounting is essential for every company is because it is through these processes that the company is capable of keeping a systematic record of the company’s finances.

Having access to updated financial records at all times can help companies when comparing their current situation with that of the previous years, allowing them to evaluate their financial position.

·       Helps in Decision Making for the Management

One of the greatest benefits of having a capable accounting department is that the accumulated financial information greatly helps in the decision-making process.

The management team needs accounting in order to make any important decision, mainly due to the fact that accurate financial information can help them evaluate their position when it comes to capital, allowing them to make a well-informed decision.

·       They Meet Legal Requirements

Tax authorities such as the Internal Revenue Service, also known as the IRS, require accurate financial statements in order to properly evaluate the net income and total revenue of the company.

This is done to ensure the legality of the inflow and outflow of capital that is involved with the organization, and this is where accounting comes in.

It is the job of the accounting department to ensure that all of the financial documents are constantly updated and reach the IRS in order to ensure the legality of all the transactions that have occurred within the company.

Basics of Accounting Principles and the Five Types

Information is key in building a trusting relationship with both your clients and your stakeholders as well.

The best way to do that is to keep a record of all of the financial exchanges that have taken place within the company, and the best way to do that is to adopt the basic principles of accounting.

Although there are many regulations and different requirements when it comes to the preparation and organization of the financial statements that are comprised of all the transactions that have taken place in a company, they follow the same accounting principles.

Let us take a look into these five cornerstones of financial development and accounting and understand them in a bit more detail.

The Accrual Principle

When shipping goods to a customer, an exception that may arise may be that the product may be sent in one accounting period, but the customer might have sent you the payment in the next accounting period.

The Accrual accounting principle takes a look at this situation and helps understand when a sale in this particular situation should be recorded in the books.

According to this principle, it is advisable to you recognize the income at the time it is earned regardless of the time you receive it, after which you should recognize the expenses at the time you incur them.

When doing so, the time duration does not hold any importance, and you can recognize the incurring expense at any point in time.

When dealing with financial statements in accordance with the Accrual principle, transaction recognition is closely related to when the business activities take place and not the time at which the money is exchanged.

The Matching Principle

Another key principle that is part of basic accounting is the matching principle, and it normally explores the situation involving the time when a company buys a piece of equipment in one quarter and then uses it for the upcoming quarters.

When facing such a situation, this principle looks at the expenditure that takes place and the time that it should take place.

The main function of the matching principle is to make sure that the company revenue is aligned with the expenses that have taken place.

This means that the company should be able to recognize the expenses around the same time as when they are earning the revenues for them and vice versa.

This is done primarily because recognizing the expenses at the same time can help the organization evenly divide the cost of the equipment over the span of the increasing number of quarters they have used it for.

The Historic Cost Principle

Most of the functionality that is concerned with accounting ties closely to past events. This is partly why comparison and consistency are such important aspects, and in order to ensure that the financial records remain consistent, this principle is taken into account.

Before understanding the historic cost principle, let us first understand what the term “historic cost” exactly means, as it is important to ascertain the purpose behind this key principle.

By definition, the historic cost of a transaction means the real value of the involved resource, such as any cash or liability that is related to the exchange.

The main requirement for a company to implement this principle into its accounting regulation is to record any transaction that takes place at its historic cost.

How it works is that if the resource involved in the exchange goes through an increase in value due to some internal or external factors, it does not affect its value in the official financial records unless allowed by the accounting standards.

This principle and the overall concept behind historic cost are essential, mainly in the case of property.

This is because the real estate market is a volatile one, and if organizations did not follow the concept of historic costs when recording the value of their assets, it could greatly impair future comparisons to evaluate the overall financial situation.

Conservatism Principle

There are times when a company is already aware that an event is about to occur that will incur massive costs for the company. The principle deals with this manner of potential expenditure, and whether it will be recognized in the records.

There are a number of different ways to record such transactions, meaning that there is a possibility that different accountants make a decision that is distinct from each other, and this is where the conservatism principle comes in.

In accordance with this accounting principle, accountants are required to adopt an approach that results in the lowest possible net income, or the utilization of the lowest net assets, when engaging with any merchant services.

Furthermore, accountants should also keep all anticipated costs into account and recognize only the gains that are projected to occur and when they occur.

Principle of Substance Over Form

What makes this different from the other accounting principles is that it requires your company to record the economic value of the transaction and the events as well, rather than just their legal form.

There may be a possibility that the lease can be very brief, lasting for only a few months. In this case, the statement should show the entirety of the expenses paid by the company without having the need to list any asset.

However, if the piece of equipment has been leased for a considerable amount of time, the resulting exchange is similar to a sale and loan in terms of economic value because of the fact that the lease covers the majority of the life of the asset.

When dealing with such a situation, the regulations and laws in accounting dictate that the lease should be treated as a purchase that is done by your company and viewed as a debt that is owed to the individual who has leased the equipment.

Conclusion

The main reason why many accountants and teams integrate the use of proper principles is due to the fact that they offer staff members and management a very easy-to-follow and streamlined path that is tailor-made for different situations. Having strong accounting principles in place in your organization can help you maintain a clean understanding of what your current financial situation is, and help you make accurate decisions based on where you need to go.

Data is said to be the new oil. As a result, businesses collect data and commoditize it for various use cases. As data has begun to proliferate in abundance with the advent of the latest mobile technology, such as smartphones and tablets, businesses collect data to the tune of quintillions of bytes generated by billions of consumers worldwide. Data is always waiting to be collected, warehoused, cleansed, organized, analyzed, visualized, and used for a more refined targeting of each smartphone owner.

Some of the most successful publicly listed IT businesses have made a business model of collecting and commoditizing consumer data. In this article, we dive deep into what types of businesses collect data, why they do it, what is it used for, and how do businesses collect data. In this article we will explore the numerous data privacy regulations businesses must adhere to when collecting data and what rights and powers consumers have to protect their data.

Different types of data: How do businesses collect data?

There is a treasure trove of online data generated by consumers. As businesses collect data, they are increasingly hungry to extract as much of that consumer-generated data as possible and analyze it. As a result, companies are building sophisticated tools such as algorithms and combining that with the advent of big data and artificial intelligence to curate highly customized marketing catered to consumers’ preferences. This phenomenon led to the Harvard Business Review publishing an article calling a data scientist the “Sexiest Job of the 21st Century[MF1] .” And that was a decade ago! Today businesses collect data that fall into four main areas. These include:

Personal data – This is any information that includes data that can personally identify an individual and non-personally identifiable data. Data that can personally identify an individual can include gender, address, phone number, social security number, date of birth, etc. Data that fall into non-personally identifying data have web tracking technology that gathers internet search and browser history, IP address that identifies the consumers’ location, and information about the device, such as the type of laptop, tablet, or smartphone used.

Data on user engagement – this category of data collected is the details of how customers use and interact with a company’s various platforms, such as its website, smartphone apps, social media channels, email outreach, customer support portals, and paid advertising.

Behavioral Analytics – data collected to build a behavioral profile of consumers include how often customers shop, the purchases they’ve made, how often and in what ways they use certain products, what pages of a website they often browse, and how long they remain on that page. Detailed qualitative data is also collected that track the movement of a mouse on a laptop/desktop or the scrolling of the page and eyeball tracker on mobile webpage visits.

Attitudinal study of consumers – this data set builds a profile on consumers’ perception of a business’s brand, their favorability and overall customer satisfaction scoring, how desirably a customer views a business’s products and how the company fits into the consumers’ purchasing habits, and criterion.

Why do businesses collect data?

There are many reasons why businesses collect data of consumers. Some of these include:

Customer experience – behavioral data on the customer truly does impact business strategy. If the data suggests that certain business strategies on products or the sourcing of specific supply chains do not fit well with consumer preferences and timelines, those areas of operations and product mix are modified for a better fit for the customer.

Targeted marketing – Businesses can better target their audience based on the likes and preferences data collected on consumers. Analyzing consumer data and better understanding the contexts and consumer journeys that drive spending allow businesses to target only those customers who prefer to engage with that business.

To build a more clear profile of the customer – Some businesses already have a certain amount of data about their customers. They look to add additional layers of that data about the customer to have a more wholesome profile of the customer for a better customer experience and safety precautions. A perfect example of this may be a bank app looking to supplement biometric data about its customers to protect the customer account better so that only that person is accessing the data regardless of location or device used. 

Pure profit motivation – not all data collection efforts are well-intentioned. Some data collectors are in it only for the money. A new industry known as data brokers is collecting and compiling large, vast amounts of data, often without the customers’ knowledge or consent, simply to sell it for a profit.

How is data collected by businesses?

There is a myriad of ways businesses collect data about customers. Some businesses ask their customers for the data directly. Others gather that information indirectly on consumers that may be existing or potential customers. Many companies simply append supplementary data onto their own data sets to enhance consumer profiles.

For starters, businesses build their database on customers when they signup for their services. That profile is expanded as the customer uses the company’s products, visits other products on their website, follows and comments on the company’s social media sites, and calls in or chats about any inquiries or complaints.

This data is enhanced by other information collected, such as the type of device used to access the website, and inferences are made regarding how and when the customer accesses and uses their product. Additional insight is driven by the type of conversations the customer had with the company’s various departments, such as when did the customer talk to the support team, was the customer ever routed to the sales team, or if there has ever been a request for product enhancements shared by the client.

What data privacy regulations must businesses adhere to when collecting data?

Smartphones and mobile technology are used for every day human interaction and so much more. Although regulators and lawmakers have been behind the curve in adjusting to this new reality of businesses collecting data and understanding how it is used, there is new vigor with four major privacy laws protecting consumer data.

General Data Protection Requirements (GDPR) – issued by the European Union for all businesses targeting the collection of personal data of EU citizens, the regulation sets forth specific guidelines about how data can be collected, where it is stored, and how it is used and shared. There are steep penalties for violators, as much as 4% of annual revenue.

California Consumer Privacy Act – similar to the GDPR but requires consumers to opt out of any effort to collect data by businesses.

Colorado Privacy Act – Scheduled to come into effect on July 1, 2023, CPA is very similar to the California Consumer Privacy Act in that it requires the consumer to opt out of any data collection efforts by businesses.

Virginia Consumer Data Protection Act – This is Virginia’s version of the California Consumer Privacy Act, which requires consumers to opt out of any effort to collect data by businesses. It also requires companies only to collect data needed for their business and inform the consumer of their rights around this law and the different recourse they have. The law will come into effect on January 1, 2023.

How to protect your data?

In an Ipsos poll conducted in 2022[MF2] , 70% of consumers in the US think it has become more difficult to control who has access to their data. Only a third of respondents believed that businesses collecting that data have appropriate controls in place to protect that data. According to that same poll, Ipsos presented six security safeguards around data protection and asked the respondent how many of those safeguards they had implemented. Only a sixth of those questioned had implemented those safeguards. Less than half the respondents had implemented three or fewer safeguards.

The survey found a correlation between those who had the fewest safeguards implemented and how despondent they felt about the ability of regulators and companies to protect their data. More than 70% of those surveyed wanted their online presence to remain anonymous or wanted the ability to erase whatever online data had been collected about them. Nearly 80% of those who participated in the poll wanted a permission-based system for collecting and accessing their data.

All in all, the findings of the survey point to the fact that consumers are concerned about their data being collected but don’t understand how to protect their privacy. Below are some safeguards that privacy experts advise consumers should implement to protect their data and their privacy.

• Advertising and tracking app blockers – many websites you visit have trackers that track every move made while on their website. These trackers can collect IP addresses to locate you, which device and browser you used to access the website, what pages were visited, and how long you stayed on a particular page. Some trackers even track your activity once you leave the site, tracking activity across the internet to build an entire profile of your online habits, search inquiries, and preferences. Consumers are advised to install browser extensions blocking those ads and tracking technologies.
• VPN is an encrypted virtual tunnel between the user and the internet. All data goes through this virtual tunnel, masking the user’s IP address. Using a VPN means no one can see what you are visiting online as it is encrypted, and since the IP address is masked, your location is also indecipherable.
• When the product is free – you’re the product. Social media and hundreds of apps and tools are free to use and share your data. These platforms and apps collect your data to accurately target you for advertisements or to outright sell the information such apps have collected about you. Privacy experts have recommended to avoid free apps and platforms where possible.
• You don’t always have to use your actual information. That’s not to say one should use fake information on their tax returns. Instead, you don’t need to sign up for the latest cheese or razor blade subscription with your data. Using phony information for such services can safeguard your privacy.

Conclusion

As of fiscal yearend 2021, Google had more than $257.6 billion in annual revenue[MF3] , up by more than 41% from the year before. The company’s market capitalization is over $1.2 trillion[MF4] . More than 80% of that revenue is from advertisements. Meta, the parent company of viral social media platforms such as Facebook and Instagram, had annual revenue of nearly $118 billion for yearend 2021, an increase of 37% from yearend 2020[MF5] . The current market capitalization of the company is over $300 billion[MF6] .

These companies have established trillion-dollar business empires built on collecting and harvesting consumer data and then micro-targeting marketing and advertisements on behalf of their customers. This is the birth of surveillance capitalism, with its widespread data collection and the commoditization of that data in the name of capitalism. This is due to the fact that there is a profit-making motive that arises from the advertising industry seeing endless possibilities from the use of specific personal data points generated from almost every human action possible and then gathered to target consumer behavior with immense accuracy.

Regulators and lawmakers are finally waking up to the power of big tech and looking to enact safeguards to protect consumers’ privacy and data. However, the practice that businesses collect data and the for-profit model that the practice has spawned will not go away. The process will continue to proliferate, albeit with the guardrails of regulation. These companies will continue to operate and flourish around the law with even newer and more clever ways to hook consumers to the latest technological innovation and extract even more data.

Consumers must understand and stay aware of the latest data collection practices that businesses employ and the impact their actions and the use of technology have on the data they are disclosing.

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 [MF1]https://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century

 [MF2]https://www.ipsos.com/en-us/news-polls/data-privacy-2022

 [MF3]https://www.globaldata.com/data-insights/internet-services-technology-media-and-telecom/googles-revenue/#:~:text=Google’s%20Revenue%20(2002%2D2021%2C%20%24%20billion)&text=Google%2C%20the%20search%20engine%20giant,revenues%20in%202021%20from%20advertisements.

 [MF4]https://www.google.com/finance/quote/GOOGL:NASDAQ?sa=X&ved=2ahUKEwiNnIysiPL7AhUF7KQKHdhuDPIQ3ecFegQIKBAj

 [MF5]https://investor.fb.com/investor-news/press-release-details/2022/Meta-Reports-Fourth-Quarter-and-Full-Year-2021-Results/default.aspx

 [MF6]https://www.google.com/finance/quote/META:NASDAQ

Tanning salons have always sought to offer best-in-class differentiated services, resulting in the best possible customer experience for their typical hectic and busy schedules. As more and more consumers are looking for experiences over material items, customers are seeking quality, a seamless visit experience, and hassle-free choice of payment capabilities.

There are a host of services on offer, including UV tanning, sunless tanning, spray-on, and airbrush tanning. These services are often complimented with additional offers such as merchandising, yoga and spa services, and Cryotherapy. All the various service lines offered to a host of customers throughout the year make tanning salon software that much more important for customer satisfaction, as well as efficiently managing the tanning salon.

As a result, we look at the five best tanning salon software that are currently available in the market. Our criteria for this list of the five best tanning salon software include payment processing capabilities, point of sale systems available and their integration capabilities with the tanning software, customer support, pricing, and finally, the ability of the tanning salon software to streamline operations via tertiary services, such as reporting and analytics, customer and employee management, and client outreach.

5 Best Tanning Salon Software

Bonsai

One of the best tanning salon software currently available. Bonsai has made a name for itself in many service-based industries, and the company’s POS offerings offer tremendous value for money.

The tanning salon software provider offers a sophisticated POS system that combines a suite of features, customer outreach and loyalty program capabilities built in, sleek hardware, and staff and inventory management tools.

• POS systems – The POS solution offered Bonsai is packed with features. Tanning salons can easily integrate secure payment processing and seamlessly process payments for EMV chip cards, collect payments via NFC, and traditional magnetic stripe card processing.
• Support – This is one of the best features of the tanning salon software provider. The company offers US-based client support, available 24/7/365.
• Pricing
  • Payment processing is fixed at a lifetime rate of Interchange + an agreed upon markup and per transaction fee negotiated between the merchant and the POS company.
  • Monthly costs for the Bonsai software can range from $39.95 – $69.95
  • The POS system may cost an average of $1,200 based on need and scope at the location.
• Tertiary Services – There are abundant add-on options available for Bonsai’s tanning salon software solution. The additional features include;
  • Bonsai Mobile Analytics app, which includes real-time sales analytics and customized reporting.
  • Appointment booking and waitlist features.
  • Inventory tracking tools that offer low-stock alerts in real time.
  • Employee management and payroll tools

MangoMint

This salon software is a great option for tanning salons that need software which is easily customizable if the business has many service providers. The company has a number of niche features as the software caters mainly to salons and spas.

• Support – MangoMint has a great feature that allows customers to reach out via the software’s in-app chat support function if businesses have any inquiries and would like help with the salon software at any time. The company also mentions on-demand phone support.
• Pricing
  • MangoMint’s payment processing rates are 2.4% + $0.15/transaction for in-person payments and 2.8% + $0.20/transaction for online payments. For salons processing payments of more than $50,000 per month, MangoMint offers discounts that are discussed based on specific enterprise-client fee arrangements. The company has no long-term contracts, as it employs a month-to-month billing cycle.
  • MangoMint’s salon software price ranges are as follows;
  • Essentials – $165 per month for small businesses with up ten service providers and three locations. Additional locations cost $95 per month
  • Standard – $245 per month for medium-sized businesses with up 20 service providers and five locations. Additional locations cost $135 per month
  • Unlimited – $375 per month for large, salons with unlimited service providers and locations
  • The company offers several tertiary services for a cost, which include:
  • Integrated forms of all kinds have a standard cost of $50/per month and an additional $25 per month for each additional location.
  • The Essential Plan charges $25 per month for integration with MailChimp and WaiverForever marketing apps, each. There are no costs for this integration with the Standard and Unlimited plan offerings
  • There is Shopify and Webhooks integration available with only the Standard and Unlimited plans which cost $50 per month each, but the Shopify monthly cost is waived as part of the Unlimited plan. 
  • MangoMint offers a display and iPad-based POS solutions, along with a mobile card reader. For $100, the company also offers a Bluetooth card reader that can plug into a smartphone. 
• Many tertiary services come as part of the MangoMint software, starting with the Essentials plan, which includes:
  • Inventory and staff management tools
  • Reporting and analytics
  • Gift card loyalty programs
  • Online booking and calendar management
  • Mobile app

Square

A close second to Bonsai in offering one of the best tanning salon softwares currently available to tanning businesses. The company got its start in 2009 and remedied a nerve-wracking pain point for businesses. Square offered a quick payment processing setup procedure and pioneered payment processing with mobile card readers that could easily connect to smartphones, bringing mobility to all types of businesses. The company has expanded its lineup of POS terminals and has launched the Square app store, allowing businesses quickly to add whatever features they need from payments and POS software. Today, the company offers tanning salon software that is ideal for relatively small tanning salons.

• Support – Square has invested a considerable amount of effort during the past few years to develop the company’s Support team. Square now even offers support via social media. The company has an extensive online resource library to answer any questions users may have. Square also fosters a great seller community that merchants reach out to with any inquiries.
• Pricing
  • Payment processing rate is 2.6% + $0.10/transaction for in-person dipped, swiped, and tapped transactions. Those rates increase if the transaction is online or the card information has to be keyed in.
  • Monthly costs vary depending on the Square add-on features businesses need to use. Below are some examples of their features and costs
  • Square Appointments – $29/month for the Plus tier / $69/month for the Premium tier
  • Square Payroll – $29/month + $5 for each employee
  • Square Loyalty – $45/month
  • Square Marketing – $15/month
  • Square Invoice – $20/ month
  • The POS system is offered for free.
• Square also has a range of POS solutions that tanning salons can select from. The company has taken traditional and boxy-looking hardware and has turned them into sleek and sexy devices that include two-way screens called Square Register, a single screen called the Square Stand and host of mobile card readers – one for contactless and chip transactions and another for magnetic stripe card transactions. , ranging from
• Tertiary Services – As you can see from their pricing options, there are a host of additional services Square offers, mostly for an additional cost. The company has its own app store that businesses can use to select the specific tools and features they need and buy.

Vagaro

One of the best options for tanning salon softwares, Vagaro also specializes in catering to spas and yoga studios. The company has more than 100 add-on features for businesses to choose from. However, the company’s strongest functionality, which makes it stand out among the competition, is Vagaro’s booking and appointment-setting tool, utilizing a very easy-to-understand drag-and-drop user interface.

• Support – Vagaro is proud of its Customer Support. There is a section on its website’s landing page showcasing the company’s support record. The company offers 24/7 support via chat, email and phone, and most incoming calls to its support desk are answered within three minutes. Vagaro client’s customer satisfaction rate is an impressive 95%.
• Pricing
  • The company has processed $2.3 billion in payments for 174,000 businesses in Australia, Canada, the UK, and the US. Vagaro’s payment processing rate is 2.75% for dipped, swiped, and tapped transactions. Those rates increase to 3.5% + $0.15/transaction if the transaction must be keyed in. There is a discount in rates for businesses that processes more than $4,000 per month, the rate of which is 2.2% + $0.19/transaction for dipped, swiped, and tapped transactions and 3.0% + $0.19/transaction for keyed-in transactions.
  • The company has a monthly fee ranging from $25 – $85, depending on appointment volume. Furthermore, there are over a hundred features that are all available at an additional cost of $10 per month per feature. Some of those features include;
  • Customer Reminders via email and texts
  • Customer Tracking
  • Various client outreach forms
  • Accounting and Payroll integration with QuickBooks, Xero, and Gusto
  • Website builder
  • Client Loyalty programs via gift cards
  • Reporting and Analytics
  • The company offers a free mobile card reader when you sign up for the company’s payment processing service. Businesses can purchase other POS equipment directly from the vendor or through Vagaro.

Tan–Link

Tan–Link is the best tanning salon software for those salons that have a high rate of membership clients. It’s another software targeted purely to salons and has many features that specifically cater to their needs.

• Support – Tan–Link has a dedicated page for a comprehensive resource library
• Pricing
  • Tan–Link software cost is broken down into tiered plans ranging from $129 per month to $199 per month, per location. There is an enterprise plan of $250 per month per location and includes differentiated features such a data imports and custom-made reports.
  • The company offers add-ons such as 24-hour kiosks and customized security offerings, all at additional costs, which the company does not disclose on its website.
  • Tan–Link easily integrates with many different payment providers. However, the company does not mention specific payment processing rates that it has secured with any vendors and offers directly.
  • Tan–Link does not directly sell POS systems, however, the company does advise businesses to use iPad tablets and card readers. Tan–Link recommends adding on additional hardware depending on the need of the business to include a desktop, barcode scanners, etc.
• Many tertiary services come as standard with the Tan–Link software specifically addressing tanning salon needs, including:
  • Real-time status of tanning beds
  • Curbside check-ins
  • Recurring billing
  • Employees, inventory, and customer management functionality
  • Reporting dashboards and tools
  • Loyalty programs

Making software decisions are never easy. The decision becomes even more pronounced if they involve the financial well-being of a business. Tanning salon software is instrumental in making the operation of the business more efficient, allows the salon to offer top-notch customer service, and save money in the process. In offering the five best tanning salon software, we presented specific options informed by our deep industry expertise in tanning salon payments processing. Certain features are vital to the healthy operation of tanning salons, such as the ability to integrate a range of payment processing options, great customer support, pricing that is value-driven and accommodative to the size of the business and software that offers niche add-ons to address tanning salon needs.

Needless to say, with the range of options available, many service providers will offer free trials. Tanning salon business owners are advised to carefully consider the level of handholding and guidance offered during the trial period to gauge the overall expertise and level of service of the different service providers.

Businesses across the world process billions of transactions for a variety of products and services daily. These merchants are highly dependent on the seamless processing of payments as most of these transactions are cashless. However, problems can arise in the processing of these payments stemming from systematic errors or mistakes by either the staff of these companies or the cardholders themselves. This is where a voided transaction or a refund is utilized by merchants, both of which are an integral part of the cashless payments’ lifecycle.

In this article, we are going to explore what the different stages of noncash payment processing are. We will explain what a voided transaction is, what a refund is, the difference between void and refund, and how and when each can be utilized by merchants. We’ll also delve deeper into the usual timespan, how different balances show up in customer accounts depending on if they issue a void or refund, and how they are reversed.

What is the credit card transaction process?

When a credit card transaction is made, the following process occurs:

1. The cardholder presents their credit card to the merchant and provides their signature or enters their PIN to authorize the transaction.
2. The merchant’s point-of-sale (POS) terminal, card reader, or payments gateway sends the transaction details, including the purchase amount and credit card information, to the merchant’s acquiring bank or payment processor.
3. The acquiring bank or payment processor verifies the transaction information and sends it to the card issuer, which is the bank that issued the credit card to the cardholder.
4. The card issuer checks to see if the cardholder has sufficient credit available and, if so, sends an approval message back to the acquiring bank or payment processor. Within this step, the issuing bank authorizes the transaction by issuing a six-digit code transmitted to the acquiring bank – effectively earmarking the required amount to be set on hold, known as a preauthorized charge, but not having physically transferred them yet. This step is also known as authorization.
5. The acquiring bank or payment processor sends an approval message to the merchant’s POS terminal, indicating that the transaction has been approved.
6. The merchant completes the transaction and gives the cardholder a receipt.
7. The merchant processes the batch to the merchant service provider. The batch process in a credit card transaction refers to the process of grouping and submitting multiple transactions at once for processing. This is typically done at the end of the business day or at predetermined intervals. It is this specific step that settles the transaction, and the card issuer charges the cardholder’s account for the amount of each purchase in the batch, and the acquiring bank or payment processor pays the merchant for each transaction in the batch. This step is also known as settlement.
8. The card issuer charges the cardholder’s account for the amount of the purchase and the acquiring bank or payment processor pays the merchant for the transaction.
9. The card issuer sends the cardholder a statement showing the transaction and any other charges or payments made to the account during the billing period. The cardholder is responsible for paying the balance on the account by the due date.

What is a voided transaction?

A voided transaction refers to treating the sale as if it never happened. A voided payment is a transaction that was never settled by the merchant because it was promptly identified as an error and never included in the merchant’s batch processing.

When a void is processed, the credit card issuer is notified that the transaction should be reversed, and the funds that were preauthorized or placed on hold from the cardholder’s account at the authorization stage of the credit card processing are released.

Voids are typically used when a transaction is made in error or when the goods or services being purchased are not delivered or are not as expected. For example, if a customer is accidentally double charged on their credit card, they may request a void to reverse the second charge. Or, if a customer orders a product online and it is not delivered, they may request a void of the original transaction.

To process a void, the merchant must have access to the original transaction information, including the transaction number and the amount of the original charge. The void must also be processed before the credit card issuer settles the original transaction, which typically occurs at the end of the business day. If the transaction has already been settled, it may not be possible to void it and the cardholder may need to request a refund instead.

A voided transaction is a great feature in rectifying or correcting team member mistakes or incorrect transactions that have been processed erroneously. It is important to remember that upon voiding a transaction, the client will still have the authorization visible on their credit card, but they will not actually be charged for this transaction. While it may take some time – the authorization will disappear from the customer’s card. Another upside to this feature is that the merchant is not charged for the transaction since the charge is never included in the batch processing. However, it is important to remember that the merchant will still be required to pay the preauthorization charge fee.

How does a voided transaction work?

When a merchant voids a transaction, you are effectively discarding an authorized sale from the batch of sales that the merchant would typically capture at the end of your business day or at specific intervals during business hours. For example, a merchant who processes 25 sales throughout the day and later realizes that one of those was put through mistakenly, that transaction is excluded from the batch. As the merchant processes that batch of transactions, instead of 25 transactions, only 24 are captured. The transaction is voided prior to the settlement phases of the credit card transaction. Hence it is reversed as if it never happened.

When the merchant voids a transaction, the authorization still appears on the cardholder’s account as that step of the credit card transaction was completed. The merchant will be subject to the cost of that step. However, since the transaction was not included in the batch processing, that authorization will reverse without ever having to pay the payment processing rate, and the customer isn’t charged.

The payments gateway or the POS terminal communicates the merchant’s intent not to settle the authorized payment to the issuing bank, the issuing bank releases the funds reserved from the cardholder’s account as part of the authorization stage.

If a merchant needed to process a voided transaction but accidentally included the transaction for batch processing to be settled, the only option is to process a refund.

What is a refund?

A refund is a transaction that involves returning money to a customer whose card or account has been erroneously charged. This can occur for various reasons, such as returning a product, canceling a service, or issuing a credit for a mistake or error.

To process a refund, the merchant initiates the transaction through their payment processor. The transaction will appear on the customer’s credit card statement at first being charged and then as a refund. The merchant will be charged the payment processing rate for the amount that was initially processed. The merchant may also be charged a nominal fee for processing the refund.

It’s important to understand that once a transaction has been settled, the merchant has no other alternative but to process a refund, according to card network guidelines. Before initiating a refund, there are a few steps the merchant should be aware of:

• The vendor is still charged the payment processing rate by the merchant service provider for the sale that was authorized. This is because the transaction has gone through and is at the next stage, where it is open to dispute from the client. From the perspective of sale and payment processing, that step is complete and subject to the processing fees.
• The customer’s funds are in limbo as the refund is considered a separate transaction and is processed as an independent, second offsetting sale. All this means is that the money is first withdrawn from the clients account, and upon completion of the refund process, they are provided the equivalent amount of refund. How long these steps usually take are a source of annoyance for some customers, for which the consumer may also be subject to credit card interest and fees.

What is the difference between void and refund?

The difference between void and refund of the transaction is based simply upon the criteria of whether it has undergone step two of the credit card transaction process – was it is settled or not. A void is a type of transaction that cancels a credit card payment before it is settled, while a refund is a transaction that returns money to a customer after a transaction has been settled.

Here is a breakdown of the key differences between voiding a transaction and issuing a refund:

• Timing: A void must be initiated before a transaction is settled, while a refund can be issued at any time after the transaction has been settled.
• Purpose: A void is typically used to cancel a transaction that was made in error, such as when a customer realizes they were charged twice for the same item. A refund, on the other hand, is used to return money to a customer for a variety of reasons, such as returning a product or canceling a service.
• Effect on the customer: When a transaction is voided, the customer’s credit card account is not affected, and a fully authorized, the charged transaction does not appear on their statement. When a refund is issued, the customer’s credit card account is credited with the refund amount, and the transaction will appear on their statement as a credit.
• Fees: Merchants may be charged a fee by the merchant account provider for issuing a refund, but they generally will not be charged a fee for voiding a transaction.

How long do voided payments and refunds continue to show on a customer’s accounts?

Typically, a voided transaction will not appear on a customer’s credit card statement at all since it is a cancelation of the payment before it is settled. However, it’s possible that a record of the attempted transaction may appear on the statement, with a notation indicating that it was voided. The typical expected timeline for such voided transaction to appear on the statement is within 24 hours.

A refund, on the other hand, will appear on a customer’s credit card statement as a credit. The length of time that the refund appears on the statement will depend on the billing cycle of the credit card issuer. For example, if the refund is issued during the same billing cycle as the original transaction, it may appear on the same statement as the original transaction. If the refund is issued after the billing cycle has closed, it will appear on the customer’s next statement.

In general, it’s a good idea for merchants to keep records of voids and refunds for their own accounting purposes, even if they do not appear on the customer’s credit card statement. This can help with reconciling accounts and tracking financial transactions.

Conclusion

Once a transaction has been processed, it is not yet deposited into the merchant’s account – the funds are simply reserved on the customer’s account as part of the issuing bank’s duties in a credit card transaction. The funds are only deposited once the transaction is settled once the merchant processes a batch. Voiding a sale is the action of stopping the transaction from being settled. If a merchant needs to void a transaction but has sent the batch for settlement, the only alternative is to process a refund. Merchants generally prefer to void transactions rather than process a refund since a voided transaction isn’t charged a processing fee and involves less hassle for their customers.