Credit card sales for Popcorn

[ronin718]

We had our Program Launch last night, and our council popcorn head was there promoting the changes to the upcoming sales year. One of the items he introduced was a new way that enabled on-site same-time sales using credit cards. It's a little device from Square Up that plugs into certain smartphone devices and you can run the credit card through it. Some details:

- no equipment cost
- no limit on devices per unit (pack, troop, etc)
- must have an Iphone, Ipad, or Android-based smartphone
- purchases deposited to unit account daily

While I think it's great that we're coming into the 21st century, there is one thing I'm not wild about. The cost for this is a 2.75 percent fee per transaction. I know, this is fairly typical, and on the face of it seems fairly inexpensive. However, as our council guru stated, the fee comes entirely out of the unit's proceeds. This is where I kind of balk. Yes, the potential for increased sales would seem to offset the costs. However, this 2.75 percent represents nearly 10 percent of the unit's proceeds.

Some may say "no big deal", and for most folks, that is probably true. But for units like mine who give the full share to the boys, that potentially represents multiple outings. My son averages over $3000 in sales annually. This transaction fee takes over $80 out of his proceeds. Since many of our monthly outings run $20 or less per participant, this represents four months of outings.

Has anyone already started using these devices for their fundraising efforts? If so, am I out in left field?

[Quailman]

Your calculation is based on using credit cards for each and every dollar sold. If that were the case, you'd need to increase sales by 9 percent to break even (assuming a 30% share to the unit). I'll bet you have less than 25 percent on credit cards.

If everyone who bought popcorn without a credit card last year does so again this year, then any additional sales using credit cards are incremental.

I think it's a good idea for the boys to have another sales tool in their arsenal.

Scout: Would you like to buy some popcorn?
Potential Customer: I don't have any cash.
Scout: We accept checks payable to Troop XYZ.
Potential Customer: I lost my checkbook.
Scout: We also accept credit cards.
Customer: Rats! Okay, show me my choices.

Who eats the chargebacks? The unit, your council, or Trail's End?

[ThunderingWind]

How does the program work in the NCAC?

3000 retail sales
- 1500 cost of popcorn 50% of sales price
- 600 20% Council Share
===========
900 to Scout 30% of sales price
- 80 Credit Card fees (if all sales were credit card)
===========
820 left in Scout Account

So where is the Unit Share out of all this? I have never heard of a Unit taking a cut. Well, I actually have but it was because the Council gave up some of their cut to each unit if certain requiremetns were met.

[ronin718]

Quailman... You make a good point, something I hadn't considered. However, I'll bet if you offer cash, check, or credit in your sales pitch, the majority of folks will go credit due to ease of process and points in the credit card program of choice. As for the chargeback, if I understand the question correctly, you're asking who pays the processing fee. In that case, the unit is paying for the chargeback, and that will subsequently get taken out of the proceeds from the sales. Since in my troop the proceeds go to the scout account, this means the money really comes from the boy.

TW... Trails End gets 30% of the sales price for the product cost. The units in NCAC get 30-33% of the price, depending on various incentives from council. The rest goes to council, which if my math adds up, gives NCAC 37-40% of sales price. It is up to each unit to decide what they do with their proceeds. Most, if not all, packs put the proceeds towards unit operating expenses, with little to no funds going to the boys. Troops tend to vary, with some taking all, some splitting with the boys, and others giving it all to the boy's accounts.

[Quailman]

It's all "Unit Share" since according to IRS rules for 501 (c)(3) organizations, there can be no benefit to individuals from fundraising efforts. That's been covered in another discussion.

Chargebacks are the amounts the credit card company deducts from the settlement when a cardholder contacts them to say "I don't remember buying anything from a company called Trail's End." The transaction needs to be researched so the charge will be reinstated. I suspect TE will eat these because it won't be much and it won't be worth the effort to trace it back to the council and/or unit.

[nolesrule]

I've been considering using this device for my business, so I've been researching it a bit.

A couple nice things about it is you can

1) associate a photo taken with a camera and a note to the transaction, so you could photograph the buyer at the time of the transaction
2) it records GPS data for the location of the process
3) it will email a receipt to the buyer if they give you an email address.

Obviously, that won't defend you against a true misuse of a credit card, but it provides quality defense against people who forgot about the purchase or "change their mind" about an order.

Chargebacks are going to be incurred by whoever holds the Square account, as they don't care if it's a business or individual who signs up for the account. It's not really any different than dealing with bad checks.

[ronin718]

Okay, new term ("chargeback") to file away for reference. Thanks. As for the proceeds, I guess since the unit never relinquishes control of the proceeds (even when it's in a Scout account), then that satisfies the rules for IRS purposes.

RE: email receipts, that was one thing I left out from the presentation. Popcorn guy said that an email notification is sent with each purchase to the account holder and an email could be sent to the purchaser as well.

[WVBeaver05]

Interesting discussion. Here is my opinion:

Accepting credit cards is intended to make more sales. In business they are OK to accept the chargeback for the increase. Here the profits/proceeds are split 3 ways (Trails End, Council, Unit).

In my "ideal world" (which I haven't found BTW - I you located it send me the coordinates ), the cost of the chargeback would be split along the lines the profits/proceeds are and that would be fair. However, I recognize that it would cause a lot of work to achieve that fairness so it probably won't happen.

YiS