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The Worst Event Deposit Practices We’ve Seen and What To Do Instead

by | Feb 13, 2024 | Best Practices, Business, Finances, Tech

When it comes to deposit practices, we’ve heard it all – from accepting deposits via paper check to manually compiling credit card information in a spreadsheet – and we’ve advised thousands of events businesses on how to do better.

Our team invests large amounts of time in getting to know our clients and helping them build sustainable and secure growth practices. And having heard the same deposit-practice horror stories several times over, we feel the need to discuss the drawbacks of bad practices and how to make smart financial decisions for your business.

Whether you accept refundable deposits for damages or non-refundable deposits as down payments for space reservations, it is of vital importance to implement clear and secure deposit practices for your events business. At best, failure to do so will result in operational inefficiencies – at worst, financial security risk and legal repercussions.

Buckle up, buttercup – here are the worst deposit practices we’ve heard about and what you should do instead.

Planning Pod’s event management tools and event payment processing system are built to help you manage deposits securely with streamlined tools and integrations with a variety of vetted payment processing partners.

Deposit practices you shouldn’t be following

A person is filling out a paper check with a pen.

1. Holding onto paper check deposit payments

Once upon a time, accepting deposit payments via check was a common practice, but those days are long gone. Holding onto physical checks for refundable damage deposits poses several unnecessary security risks to your business:

  • Fraud: If a client writes a bad check, then it’s up to you to have an awkward conversation and do your best to chase them down for the money – the headache of which might not even result in getting the payment they owe you. 
  • Loss/Theft: If a client’s check gets lost or stolen, your business is at fault for their information falling into the wrong hands. And, you no longer have access to those deposit funds.
  • Delayed funds: If you need to deposit the check after an event due to damage, it can take up to 5 business days (which could add up to 7 calendar days) for the funds to be withdrawn from your client’s account. This can be frustrating for them as well as negatively impact your cash flow.

Jump to smart deposit payment options that offer your business more security, less busywork, and stabilize your cash flow.

2. Providing refunds via paper check

If you’ve already accepted funds for a refundable damage deposit and it’s time to give them back to your client, you might be tempted to write them a physical check to avoid having to cover electronic payment processing fees. 

However, doing this poses similar security risks to your business as accepting deposits via check in the first place, and even greater risk for client dissatisfaction.

  • Loss/Theft: If the check you made out to your client gets lost or stolen in transit, you better believe they won’t be satisfied with you writing out yet another check. Plus, your business’s account information could now be at risk if the check was stolen in-transit.
  • Slow processing: The delay in receiving a refund via check can create a negative experience for clients, especially if they need the money urgently.
  • Limited reach: Not everyone has easy access to banking facilities or prefers receiving checks, potentially causing inconvenience to some clients.
  • Internal hassle: Being responsible for cutting refund checks on time is a huge hassle for any business. It’s a tedious process, and missing or forgetting to do it will certainly result in client frustration.

Jump to efficient electronic deposit options that free your time and stabilize your finances.

We’ve talked to a lot of event businesses who process refundable deposit payments via credit card, only to make a credit card payment or refund back to their client when the time comes to refund it. This practice is definitely not as simple or secure as it may seem. Here are the risks:

3. Refunding already-processed credit card transactions

  • Getting dinged with processing fees: Every time you process a credit card payment, you are charged a fee of around 2-4% of the transaction amount. If you then refund the payment, you are still charged the processing fee, meaning you lose money on both the initial and refunded transactions. This can significantly eat into your profits, especially for large deposit amounts.
  • High likelihood of chargebacks: Chargebacks occur when a customer disputes a charge with their credit card company and requests a refund. Since deposits are essentially pre-payments for future services, they are more susceptible to chargebacks compared to regular purchases. If a customer cancels their event or claims dissatisfaction, they are more likely to dispute the deposit charge, leading to a costly chargeback for you.
  • Negative impact on your account: Frequent refunds and chargebacks can raise red flags for credit card companies and may lead them to increase your processing fees or even terminate your merchant account. This can severely impact your ability to accept credit card payments in the future.
  • Administrative burden: Processing refunds manually can be time-consuming and require careful record-keeping to avoid errors and reconcile accounts. This adds unnecessary administrative work to your already busy schedule.
  • Negative customer experience: Delays in processing refunds can frustrate customers and damage your reputation.

Jump to secure electronic deposit payment options.

4. Manually compiling credit card information in a spreadsheet

When it comes to bad practices, this one is the worst of the worst. A myriad of issues comes along with manually compiling your customers’ credit card information, each of which could mean life or death when it comes to your business:

  • Data breaches: A single spreadsheet is a prime target for hackers due to its lack of robust security measures. If breached, all your customers’ sensitive financial information could be compromised, leading to identity theft, fraud, and legal repercussions for your business.
  • Accidental exposure: Human error can lead to accidental data leaks, such as sharing the spreadsheet with unauthorized individuals or losing it entirely.
  • Compliance issues: Failing to comply with data security regulations like PCI DSS (Payment Card Industry Data Security Standard) can result in hefty fines and damage your business reputation.
  • Administrative burden: Manually entering and updating card information is a tedious, error-prone process. Not to mention that managing a single spreadsheet becomes even more cumbersome as your customer base grows, and sharing that information securely with internal staff is a challenge – you would need to manually grant access to each authorized person to view your spreadsheet.

So, what are the smartest ways for an event business to accept deposits?

Thankfully, there are 2 distinct options that can improve your business’s cash flow, increase financial security, and reduce administrative work. But before we dive in, let’s talk about the importance of communicating your deposit practices clearly to your clients. 

A quick note on clear communication

You should always be sure to add a deposit policy section to your booking contracts and/or proposals that explains:

  • What the deposit is for
  • Whether it is refundable or non-refundable
  • How it will be used

Giving your clients a clear understanding of your deposit policy is crucial to client satisfaction, retention, and your own protection against chargebacks in the case of a dispute or misunderstanding. 

The smartest deposit options for event businesses

A woman with dark, curly hair stands in front of a yellow background and is holding up a credit card in one hand and holding the other hand to her face with an expression of pleasant surprise.

Option 1: Credit card holds

We strongly recommend working with a payment processor that facilitates placing an authorized hold on a credit card for damage deposits. 

A hold isn’t an actual charge that will show up on your clients’ card statements; rather, it’s a verification by a processing merchant that those funds are available for the transaction should you need to process it. This is a great option for refundable deposits in particular.

Here are the advantages:

  • Easy refund process: Refunding a damage deposit taken via credit card hold is as simple as releasing the hold, either automatically (after a designated period of time) or manually through your online processing portal.
  • Faster dispute resolution: Credit card processing systems often offer faster dispute resolution for both merchants and cardholders, minimizing friction and delays in case of concerns about the nature of non-refundable deposits.
  • Convenience and flexibility: Accepting deposits via a credit card hold caters to diverse client preferences for payment methods, simplifying the deposit process and making it more accessible without you having to cover processing fees in the case of a refund.
  • Increased security and protection: Compared to cash or checks, credit card deposits offer an extra layer of security for both clients and businesses. Clients benefit from chargeback protection in case of unforeseen circumstances, while businesses have a guaranteed way to collect the deposit if cancellations occur outside the allowed timeframe.
  • Improved cash flow: Receiving deposits upfront via credit card hold improves cash flow predictability, allowing for better financial planning and resource allocation.

Option 2: ACH bank transfers

ACH transactions are another secure, convenient, and cost-effective option for accepting deposits. Here’s why:

  • Reduced fraud risk: ACH transfers rely on bank account information, making it more difficult for fraudulent transactions compared to credit cards or checks.
  • Strong encryption: Secure protocols encrypt data transfer, minimizing the risk of information breaches.
  • Automated refunds: Streamline the refund process by directly transferring funds back to the customer’s bank account if no damage occurs.
  • No chargebacks: Unlike credit cards, there’s zero risk of chargebacks on ACH transfers unless there’s an error or unauthorized access.

Remember, secure deposit practices aren’t just about efficiency – they’re essential for your business’s financial health and reputation. Ditch the outdated methods and embrace the future of secure, digital deposits so you can focus on what you do best: creating unforgettable events and growing your business.

Planning Pod’s integrated invoicing system with multiple payment processing options helps to ensure secure deposit practices, timely event payments, and stable cash flow for your events business. Get started today!