The Way People Use Money Vs. the Way Businesses Move Money

‘Money never settles’. If that statement means anything, it is as true as it sounds. Money continues to change hands as people and businesses use it in daily transactions. If it was easy for societies to do this during the gold and silver era, it would be effortless to move money today.

Digital technologies in finance have changed the way people and businesses move money. We have moved from the hand-to-hand transfer of raw cash across a network of middlemen to cheques, bank wires, and instant transfers.

While many payment systems are available to both individuals and businesses, how people use money differs from businesses move money. In this article, we try to compare the two, showing you how people and businesses relate to money differently.

How People Use Money

Let’s start with you and me as individuals earning money at the end of work daily, weekly or monthly. There are usually several things you can do with that money. If you take out all the noise, it all comes down to these basic things:

• Pay Taxes

Almost every income earned by individuals is taxable. Governments employ their citizens’ money in this way to be used for national projects. For most people, taxes are deducted from their earnings before it gets to them. While you cannot completely avoid this use of money, you can always learn the tax codes applicable in your country to reduce how much you pay in taxes.

• Spend on purchases

People spend money on purchases when they buy new clothes or furniture or pay for a vacation. Purchases are one of the ways we use money.

• Pay bills 

Bills are defined as ‘necessary recurring expenses’. This differs from ‘purchases’ in that people need to pay bills to make use of certain services daily, weekly or monthly. Feeding cost is one bill that rarely fails to appear on everybody’s budget; so also are mobile expenses, entertainment costs, transport costs, and other expenses you can’t do without month in, month out.

• Save money

Of course, saving money is one way people use money. The need to keep a part of our economic juice never goes away and must be satisfied. People save for various reasons; to prepare for an occasion, to pay for an expensive need like properties down the line, to up funds for investments, to simply have a growing bank balance, etc. Traditional banks are usually used for savings, but with modern banking methods, today such as mobile banking, e-wallets, and m-wallets, crypto-wallets, etc. people have more ways to store their money than before.

• Invest money

Personal investment cannot be ruled out of the many ways we use money. This is ‘multiplying money’ earned by using the investment vehicles available. The easier forms of investing money are through the purchase of stocks, bonds, index funds, EFTs, and so on or buying commodities like art and flipping them when they appreciate. More in-depth investments include diving into real estate for cash flow or starting a business.

• Transfer money 

People transfer money in different ways from simple giveaways to others around them to sending money overseas to family and friends. Overseas money transfers are known as remittances and every year, over $500 billion is moved across borders by individuals.

How Businesses Move Money

Although some of the basic ways people move money equally apply to businesses, there are some differences. For example, while both people and businesses pay taxes and people spend only after taxes are deducted; most businesses pay taxes after major business expenses have been paid and profits before taxes are taken.

• Business taxes

Businesses move money by way of taxes; some simple, others complex. For businesses, there are various forms of taxes such as income tax, excise tax, property tax, sales tax on products and services, dividend tax, payroll tax, etc.

• B2B bills payment

A major way businesses move money is by payment B2B payments. Every business needs supplies (products or services) from another to function. If you’re starting an online business, you would need the services of payment gateways to accept payments. If you are setting up a physical location, the services of the interior decorators or electricity company need to be paid for. And so on.

• Banking and Specialized banking services

Businesses operate for profit, and the movement of money through banking plays a major role in how businesses manage transactions and stay profitable. Banks serve as financial pillars for many businesses helping in the safe-keeping of money, settlements, account balances, and transfer of funds. Banks and EMIs along with other financial institutions offer specialized banking services including portfolio management and specialized lending to businesses.

• Operating costs

The same way individuals make purchases and pay bills, businesses do too – only that the items on the list differ. Salaries and overheads among others count as bills for many businesses. They equally move money via purchases, be it a piece of new office furniture, new software or installation, etc.

• Investment

For businesses, this method of moving money is fundamental. Consciously or subconsciously, companies are always on the hunt for new ways to bring funds; therefore they make investments in various forms. Opening a new branch office or channelling funds into research and development are internal investments made by businesses – money flows out to others to bring in more. More complex business investments include securities and acquisitions.

• Remittance

Businesses play a huge role in global remittance. With the availability of freelancers online, businesses can employ the services of workers in other countries and send them payments after service deliveries. Also, companies can source local suppliers across borders and pay them for supplies they need. Money moves from country to country this way, made possible by business interactions physically or online.

A cost-effective way your business can move money

Staying ahead in business means finding ways to maximize profits while keeping costs as low as possible. Moving money comes at a cost even though it is an activity every business performs one way or another. Your job as a business owner is to find out cost-effective ways your business can move money while staying profitable.

When it comes to international remittance and bill payments, your business needs the Money Transfer Application. This is an all-in-one money transfer software that lets you send money across 250 countries and pay bills in as much. The Money Transfer Application organizes every way your business moves money in one place and gives you control through a single touchpoint.

With MTA, you can easily track transactions and know how your funds are been utilized anytime, anywhere. This is the bespoke solution for money transfer operators and bureau de change businesses. Contact our sales team today to learn more about the Money Transfer Application.