Paying the required surcharges on debit card transactions made by your customers is an operational cost that many business owners would love to see disappear.
The good news for Australian businesses is that the Government is also keen to ditch debit card surcharges. In October 2024, plans were announced to ban debit card surcharging from 1 January 2026, subject to a consultation undertaken by the Reserve Bank of Australia (RBA).
The key aims are to lower costs for consumers, in an economy which is increasingly cashless, and to reduce the surcharge costs currently being experienced by smaller consumer-facing businesses that use EFTPOS to take debit card payments.
So, what are the pros and cons of this proposed surcharge ban?
1. Benefits of a ban on debit card surcharges:
Improved customer experience
A ban on surcharges may lead to a more positive customer experience, with your customers no longer being surprised by additional costs at the checkout. This could lead to a more transparent buying experience.
Simplified pricing
Without surcharges, you can present a simpler, more open pricing structure to your customers. If the price is $10, that’s what the customer pays. This reduces confusion and means that customers pay the price they were expecting.
Reduced administrative costs for you
With the debit surcharge removed, you no longer need to add that percentage charge to the customer, and pay it to your bank or service provider. In short, the expense of taking card payments will disappear.
2. Potential negatives of a ban on debit card surcharges:
Those plus points all sound highly engaging, and could help to simplify the buying process for both you, your staff and your customers. But there is a potential downside:
Who will absorb the administrative costs?
The Government’s plan is for both consumers and businesses to have that extra surcharge cost removed. But there is likely to still be an administrative cost to the bank and EFTPOS provider. This cost could be passed on to the business user in the form of other inflated bank charges.
So, will the surcharge cost simply be pushed back to the business owner? Or will the Government put measures in place to stop this? Treasurer, Jim Chalmers is quoted as saying:
“Consumers shouldn’t be punished for using cards or digital payments, and at the same time, small businesses shouldn’t have to pay hefty fees just to get paid themselves.
We’re prepared to ban debit card surcharges, subject to further work by the Reserve Bank and safeguards to ensure small businesses and consumers can both benefit from lower costs.”
Further feedback from the RBA consultation and comment from the business community will be needed before this surcharge ban becomes effective in 2026.
Talk to us about the impact of a debit surcharge ban
If you’re currently paying surcharges on customer debit payments, and would like to know the potential impact of this proposed surcharge ban, please do contact us.
We can help you understand the benefits of the removed costs and what this might mean for your operating expenses, margins and overall profitability.
You can also comment on the RBA consultation. Stakeholders can provide written submissions by 3 December 2024.
At the point of selling your business, getting a good price for the company will be a major goal. A key way to achieve this is to add value to the business as part of your ongoing exit strategy.
In this series, we’ll give you all the advice you need to plan your exit, add value to the business, negotiate a great deal and define your new pathway once the business is sold.
You’ve put blood, sweat and tears into this business. So, you’re going to want to achieve a sale price that reflects this hard work, giving you the funds to start the next phase in your journey.
Your potential buyer will be looking for a profitable, well-run business that can prove it’s a viable enterprise. To do this, it’s vital to look at core ways of improving the attractiveness of the company, gradually adding incremental value and allowing you to negotiate a good price.
Let’s take a look at some important ways to add value to the business:
Increase your profitability
A buyer wants an acquisition that will turn a profit. To boost the company’s profitability, look at improving your margins, reducing costs and increasing revenues. Ways to achieve this can include streamlining your operations, negotiating better deals with suppliers and increasing brand loyalty with your customers.
Strengthen your financial performance
It’s important to run a tight financial ship. Aim for the company to be in a positive cashflow position, reduce your ageing debt and strengthen the balance sheet to demonstrate financial stability. This will mean getting in control of your inventory and spending, being proactive about collecting outstanding receivables and exploring financing options, such as invoice finance or bank loans.
Nurture your customer relationships
Loyal customers spend more and provide a stable pipeline of sales and revenue. Building these strong customer relationships is a critical part of adding value, and can start by providing excellent customer service, offering loyalty programs and actively seeking (and acting on) customer feedback.
Invest in the company’s growth
A growing company is an attractive proposition to any buyer, so it’s important to continue investing in growth. Explore new products, services or markets to expand the business’s potential, add value and show the potential behind your business concept. The R&D, strategic planning and resourcing that’s involved will be an investment that pays off once you have an interested buyer.
Prepare for the due diligence process
Before a buyer makes an offer, they’ll want to carry out due diligence checks on the business. To be ready, you’ll need to get your financial records, contracts and other relevant documents in order, and make sure all the information is easy to find and access. Making these checks simple and straightforward helps potential buyers assess the business’s value and gain confidence in the company.
Talk to us about planning the sale of your business
Making your business more attractive to a potential buyer takes good planning, patience and a real focus on adding value. Starting this value-add process early is vital.
If you want to start adding value to the company, prior to selling up, come and talk to us. Our team can help you deliver an exit strategy that increases value and delivers a great deal.