By JULIE BICK December 18, 2005
WHEN C. J. Liu bills her clients, all it takes is a few mouse clicks, and for the most part their payments end up in her bank account a few days later. She does not need an assistant to send out invoices or to track accounts payable and receivable. She never has to wait for checks to arrive in the mail, and she does not have to visit the bank.
Like many others who run small businesses, Ms. Liu, who offers business and personal coaching in Seattle, is a PayPal customer.
From its inception seven years ago, PayPal, based in San Jose, Calif., has grown to service more than 86.6 million accounts in 55 countries, and it expects to process $25 billion in money transfers this year. About 70 percent of the payment volume comes through PayPal's parent company, eBay, and is used to buy and sell items on the Internet. But more and more, small businesses and sole proprietors outside of eBay are using PayPal as their back offices.
Merchant services is "one of our biggest areas of focus for growing the business," said Sara Bettencourt, a spokeswoman for PayPal.
Ms. Liu can send e-mail invoices to her clients by clicking on the PayPal Web site. The clients -- who, at Ms. Liu's request, have also set up PayPal accounts by registering bank account or credit card information -- click on a button embedded in the message to charge the sum to their credit cards, and the money is transferred to Ms. Liu's PayPal account. Along the way, Ms. Liu receives confirmation when the bill has been paid and can review the status of her accounts receivable online.
Based on her business volume, less than $3,000 a month, Ms. Liu pays
2.8 percent of her total sales, as well as 30 cents a transaction, for this service. "It saves me the hassle of the billing side," she said, "so I can concentrate on my client work."Many of the newest and smallest businesses find that using PayPal is more cost-effective than turning directly to a credit card company to process transactions. A new business may be charged much more by credit card companies because it may not have much sales volume or credit history, said Avivah Litan, a research vice president at Gartner Inc.