You’ve completed a job and sent out an invoice via PayPal when you get a message from your client asking, “Can I pay you through Venmo?” This scenario is becoming increasingly more common for small business owners. For anyone who is unaware, Venmo is an app that allows you to pay and request money from friends on your mobile phone (and less popularly, on your desktop) within seconds. It is extremely popular with students and young professionals, with more than two-thirds of 20- and 30-somethings using the app on a regularly basis, according to LendEDU.
While Venmo was designed to ease the burden of split expenses among friends, such as meals out, buying event tickets, and even shared rent and utilities for roommates, it has become so popular in recent years that it is beginning to bleed into the business world.
Pros of Using Venmo for Business
Many entrepreneurs like using Venmo for their business transactions due to its social media-like design. Users can be friends with each other, and there is a home feed where you can see the memo field of everyone’s recent transactions, often permeated by emojis and funny quips.
Another benefit of using Venmo is that funds are transferred to your bank account like a direct deposit. Once a user pays you via Venmo, you can transfer the money to your bank account in the same amount of time that it would take to deposit a check, usually one business day.
In addition, Venmo is free to use, and has no processing fees (except on instant transfers), making it look attractive when compared to payment platforms like PayPal and Square, which take anywhere from 2-4% of your transaction in fees.
Cons of Using Venmo for Business
While Venmo is very user-friendly, many bookkeepers warn against using it for business purposes. Since Venmo was not designed to be a small business tool, it lacks many features that are essential for keeping your financial records in good shape.
According to AccountingWeb, there is no QBO feed available through Venmo, meaning that all Venmo transactions must be entered into QuickBooks manually. If you do a large volume of business and have many transactions, this can be incredibly time-consuming for you and/or your bookkeeper.
In addition, it can be difficult to sort through and categorize business and personal transactions if you are using Venmo for both purposes. Things become additionally complicated when you make payments directly out of your Venmo balance.
Venmo’s monthly statements are also lacking. To start, they cannot be opened in Excel unless you manually change the file name to add the .csv extension. In addition to this, because of Venmo’s social media-like feed, many users forgo an explanation of what the payment is for in favor of emojis, which are translated into gibberish inside the spreadsheet, making it difficult to reconcile payments and making your business’s transactions incredibly public.
The Bottom Line
At the end of the day, Venmo was simply not designed for business use. While it can be fun and easy to use on a personal level, using it to collect payments from your clients will make getting your financial records in order incredibly difficult at the end of each month. Using a software that is designed for business owners to collect payments from customers, such as PayPal and Square, is much better for your business’s long-term financial health. If you really want to avoid the fees of these programs, asking for a paper check is still preferable to using Venmo.