Why Peer-to-Peer Payment Apps Might Be Hurting Your Business (Even If You Love Them)

Last weekend I was at a local craft fair and had stopped a bakery booth to purchase some of their goodies.  Once she had rung up my total, she asked if I had a peer-to-peer payment app (think apps like Venmo or Zelle).  I told her, "No, I don't use those apps for purchases."  She then told me that because she was going to use a credit card processor, she was adding an additional $2.00 to my total to offset her fees.

That short conversation got me thinking about how common these apps have become for small businesses, and how risky it can be to use them.

I get it, as a small business, merchant fees can quickly add up. Especially since the vast majority of people don't carry cash any more. And they make paying individuals super simple. It’s no wonder peer-to-peer payment apps are popular among small business owners. They’re free (or nearly free). They’re quick. Your clients (and contractors) most likely already have them. But while these options seem like the perfect way to save money, they can create big headaches in your bookkeeping and tax prep.

Honestly, the benefits of using these platforms seem fantastic!

• It's Instant: Payments show up fast, often within minutes.

• Low to No Fees: Especially for personal accounts, there are no transaction fees.

• Client-Friendly: Many clients already use these apps and find them familiar.

• No Invoicing Required: Just send a username or phone number, done!

Who wouldn't find that kind of simplicity appealing?

But you’re not just a person getting paid anymore (even if you are a one person show), YOU ARE A BUSINESS.

So you need know and weigh the risks as well.  Because the risks can be costly!

1. It Complicates Your Bookkeeping

I know, you're thinking, "No, it doesn't. There are no invoices or extra fees to track."  But you need to remember, these apps weren’t designed with businesses in mind. Unlike traditional payment processors (like PayPal Business, Square, or QuickBooks Payments, to name a few), these apps don’t provide detailed reports or integrations with accounting software.

Meaning:

• No automatic categorization

• No clean audit trail

• Manual entry (and lots of it)

• You’re more likely to miss income or double-count transactions

What looks “easy” in the moment can actually cost you hours (and often dollars) later.

2. Tax Season Gets Tricky

Business payments through personal accounts on these platforms can easily get lost —especially if you’re also using those accounts to pay friends or split dinner tabs.

The IRS is paying closer attention to payments made through these apps (both those to you, and those you made), and if you’re not separating business and personal transactions properly, you could:

• Miss deductions, resulting in higher tax bills

• Underreport income (yikes!)

• Increase your risk of an audit

Even if you're not issued a 1099, you’re still responsible for reporting that income you receive through these platforms. And if you pay contractors with these apps you are responsible for issuing them a 1099.

3. It Doesn’t Look Professional

Clients might not say it, but how you accept payments can influence how they perceive your business. Using a personal payment app without a business name, invoice, or receipt? That can come across as a little...hobby-ish.

A professional payment platform adds legitimacy to your business, builds trust, and makes it easier to enforce clear payment terms and policies.

4. Business Transactions May Be Prohibited

Many of these platforms explicitly prohibit business use on personal accounts. If they detect that you're using a personal account for business purposes, the payments could be reversed, or worse, your account could be flagged, frozen, or even shut down. That’s not just inconvenient—it’s risky, especially if you keep a balance in the account.

5. Can Be More Difficult to Recoup Losses if Accounts Are Compromised

In the conversation with the baker last weekend she related to me a story about how a customer stole over $500.00 from her through her account. That was a lot of money to her business. It took her months to get the platform to even acknowledge that her money had been stolen.  And their remedy? They suggested she contact the customer and ask for her money back. 

Not all of these platforms are FDIC Insured, and not all of them offer purchase protections for the seller/business, even if you are using their business account. And yes, some of these platforms do now offer business account options, but they come with fees and terms that are very different from their personal accounts.

Nobody likes paying fees to be able to take payments. However, if you're serious about building a profitable business, it's worth investing in business systems that support you & your growth, not ones that make your financial life harder.

If you are currently using one of these apps for business payments, I strongly recommend you familiarize yourself with the terms and conditions of the app. So you don't find yourself in a costly situation down the road.

What to Do Instead

And if you want to move away from your current platform, and are wondering what to do instead.

Here’s how to migrate to a new system:

1. Choose a Business-Friendly Payment Platform

   Tools like QuickBooks Payments, Stripe, Square, or PayPal Business, are designed for small businesses and integrate with accounting software, which means fewer headaches at tax time.

2. Separate Business and Personal Finances

   Keep all business income & payments flowing through a dedicated business account. This simple step makes bookkeeping and tax reporting dramatically easier.

3. Automate Where Possible

   Payment platforms with invoicing features save you time and create a professional paper trail. You can even automate payment reminders, reducing awkward “follow-up” conversations.

4. Review Your Fees Strategically

   Don’t just focus on avoiding fees, focus on maximizing value. A small processing fee is often worth the time you’ll save on bookkeeping and the professional image you’ll project. And, calculating your fees to take into account all the costs of doing business, including those merchant fees, can make paying these feel less "expensive".

5. Create Clear Payment Policies

   Make it easy for clients to pay you by outlining accepted payment methods on invoices and your website. Consistency helps build trust and sets clear expectations. 

Final Thoughts

Peer-to-peer payments platforms may seem like the easiest option, but quite often they’re not the best business option. If you’re relying on these tools without fully understanding the terms of service, you could be putting your money, and your business, at risk.

As your business grows, your systems need to grow with you. And trust me: your future self will thank you for setting up clean, professional processes now.

Want help getting your bookkeeping in order?

At Fournier Accounting & Bookkeeping Services, I specialize in helping solopreneurs feel confident, organized, and in control of their business finances. Book a "Bookkeeper on Call" session or Contact Me today—we’ll make sure your money moves support your growth.