Accounting Terms 101
Merchant services are not necessarily all about accounting, but they are certainly directly related. In order to get the most out of your business, it is important to understand these basic accounting terms.
Profit: in a nutshell, profit is the bottom line of your business cash flow when all expenses and revenue are accounted for. However, profit will generally exclude debts, draws, and distributions. Profit is generally the difference between your revenue and your operating costs, product costs, and interest/depreciation.
Accounts receivable/accounts payable: of course not all money is already in your bank account. Accounts receivable refers to money to which you are owed. Accounts payable refers to payments for which you are responsible.
Equity: tied directly into assets and liability, equity is an individual or business’ valued ownership of a business.
Assets: a business asset may be a physical product, a real estate property, intellectual property, or any other valued item which is owned by your company.
Liabilities: the inverse is known as a liability. These are goods, services, or money which you owe to another individual or business.
While there are certainly more accounting terms which are beneficial to know, the above terms are a great place to start for baseline knowledge when it comes to small business accounting.

Merchant Services Goods and Products
Point of Sale Systems (POS Systems)
Most often called simply POS Systems, point of sale systems are electronic devices which store, manage, and maintain key information such as sales records, buying trends, inventory reports, and more. POS Systems also accept and process electronic payments from debit cards, credit cards, gift cards, and more.
Mobile Payment Solutions
For small businesses looking to accept payments on the go, mobile payment solutions allow for online or offline electronic payment processing. With features like digital signatures, inventory management, and receipt customization, the line between in-store and mobile payment solution capabilities is becoming more and more blurred all the time.
Credit Card Machines
The workhorse of many small businesses remains the credit card machine. Capable of accepting chip, swipe, or manually entered credit card transactions, these machines are tailor-made for speed and security. It is important to look for a credit card machine which is capable of accepting different types of payments such as Visa®, MasterCard®, Discover®, American Express®, Pin Based Debit, Wright Express, Voyager®, EBT®, and Gift Cards.

Financial Terms for Merchant Accounts
Acquiring Banks and Issuing Banks
It can be confusing to understand exactly how credit card and debit card transactions are completed. The acquiring bank refers to the merchant’s bank, AKA the bank which will be acquiring the funds. The issuing bank is the bank which represents the credit card companies. Acquiring banks and issuing banks are involved in credit card transactions to approve and eventually transmit funds for purchases.
Authorization and Authorization Codes for Funds Validation
Speaking of approvals, all credit card and debit card purchases must go through an authorization process. For debit purchases, this may include checking the available balance of the consumer’s bank account. For credit card transactions, issuing banks will authorize or decline a purchase.
An authorization code is then transmitted back through to the merchant. It is important to understand that authorization codes are vital for merchant’s recordkeeping. If you are processing a transaction manually, always get the authorization code when possible.
Batch Processing for Business Transactions
Many POS systems will batch transactions for mass processing at the end of a business day or at some other predetermined time. Many merchants choose to automatically batch transactions at the end of the day, while others choose to manually batch transactions as they see fit. When we refer to “processing”, we are referring to settling and closing that batch of transactions.

Merchant Services Terms for Billing and Fees
Chargebacks, Incidental Fees, Account Suspensions, and Account Terminations
Of course there are even more terms which are specific to merchant services, including:
Chargebacks: when a transaction or group of transactions are disputed, this may lead to a chargeback. Successful chargebacks will force merchants to return the money.
Incidental fees: one-off fees such as chargebacks, set-up fees, account closure fees, batch fees, and more may be considered incidental fees.
Account suspensions generally occur when the merchant has been found guilty of some sort of infraction. These can result from chargebacks or other wrongdoing.
Account terminations: similarly, infractions may result in an account termination. This can come with associated financial costs as well as a need to seek a new merchant service provider.
Merchant Service Fee Structures
Interchange-plus pricing structures allow for the greatest transparency. These track and show interchange charges, processor fees, and other charges separately so that you can see exactly what you are paying for which services.
Tiered pricing models use a system that charges different rates for different types of transactions based on dollar amounts and more.
Membership pricing structures instead use a flat payment to cover transaction fees. Other incidental fees may still be charged separately.
Flat Rate pricing models are similar to interchange-plus without the transparency. This can make life simpler, but may also allow merchant service providers to inflate their prices.
True Merchant Offers Professional Merchant Services for Your Small Business
At True Merchant, we strive to simplify the process and choose payment processing solutions which fit the individual needs of our clients and their businesses. Our payment processing professionals are able to provide flexible pricing options which fit the budget of just about any business. We are proud to offer a wide range of services including payment processing, CardPointe, CardSecure, EBT payments, and much more.
For more information, feel free to contact our sales team today and find out how True Merchant can go to work for your small business!