Blog: Audit is not always a bad word

By Merchant Advocate

This is not your mother's IRS audit!

While the term “audit” may strike fear into the heart of business owners and concern on the part of accountants, the only one who should worry during a merchant statement audit is the processor. With 72% of businesses falling victim to overcharging, initiating a review by an independent auditor like FICPA partner Merchant Advocate is a crucial way to add revenue back to your clients’ bottom line.  

Far from being a "bad” word, the independent auditing of a business’s merchant statements serves as a vital tool for ensuring financial solvency—making sure your clients never pay more than they have to for credit card processing—and ultimately contributing to everyone’s long-term success.

Credit card spending has more than tripled in the last decade, with 77% of merchants currently accepting credit cards—a 19% increase year over year (Verifi 2024 Global Payments Report). If your client accepts credit cards, it is in their best interest to review their payment costs carefully.

The credit card processing industry is fueled by a bloated ecosystem of more than 600 different credit card types and even more obscurely named fees. While a payment transaction's path is relatively straightforward, it is a costly one for those who accept payment via credit cards. The payment touches many hands, including the processor, card association, and bank issuer—each taking their cut.

As margins for credit card processors have shrunk, they are increasingly hiding fees, raising rates several times a year, and making costly “errors” to drive up profits. Constantly changing regulations and cryptic statements add to the confusion, and unless you are an expert in merchant statement lingo, even the most seasoned CPA will be confused—by design! 

Average credit card processing fees range between 2.5% to 4.5%, which varies based on a number of factors, including what kind of purchase it is, merchant category, and type of card being used. Interchange fees are paid to the card issuer, such as Visa or MasterCard, while the payment processor adds their own charges as the facilitator. These fees can be per transaction, monthly, by statement, or even for equipment leasing.

The sheer amount of fees can be overwhelming for most business owners, which is one of the ways processors get away with overcharging. Fortunately, it is possible to understand what each fee is and break down a merchant statement to see where clients can save money. The most effective way to combat rising processing costs is to get rid of any extraneous and inflated fees by negotiating with the processor, but you have to be able to identify the issues and ask the right questions. Processors are often open to negotiating their fees to keep from losing a client, and FICPA partner Merchant Advocate will audit your clients’ merchant statements and facilitate the negotiations on their behalf.

FICPA’s dedicated representative, Michael Dringus recalls a customer who needed such intervention. “An accounting firm sent in a client’s merchant statements for audit and were astounded to learn their client was being grossly overcharged. Not only were the rates high—there were also additional fees and interchange mark-ups hidden all throughout the merchant statements.” Happily, identifying and removing these overcharges is Merchant Advocate’s specialty, as Dringus concludes: “The audit and subsequent work from Merchant Advocate led to thousands of dollars per month in savings.”

Other common ways businesses combat rising fees are through credit card surcharging or offering discounts for paying in cash. These strategies allow businesses to cover part of their swipe fees without raising prices but can be tricky to implement because the laws are constantly changing, and are different based on the state your client’s business is based in (and if they have multiple locations in different states). Most importantly, you need to be aware of how these strategies impact your clients’ businesses.

Merchant Advocate was created to bring transparency to the processing industry, putting hard-earned money back where it belongs—your clients’ bottom line. We are a trusted independent partner with decades of auditing experience, having worked with many accounting firms, and businesses of all sizes and types, to  and professional associations to help mitigate the cost of doing business with credit cards.

What would the process look like for a client? Our approach is simple. We conduct a free statement analysis of your clients’ merchant statements to uncover potential savings. If they are overpaying, Merchant Advocate negotiates with the processor to reduce rates and eliminate hidden fees. Plus, we continue to audit their account monthly to make sure rates are not raised, no new fees are added, and no erroneous charges are tacked on.

Merchant Advocate operates on an entirely performance-based model and shares in the savings achieved. Since 2006, we've saved clients more than $300 million in unnecessary fees.  To learn more about our services, please contact FICPA’s dedicated representative Michael Dringus.