22 January 2024

The Good and Bad of Using Cash in Your Small Business

By Ronald Smith

As a small business owner, I often wonder about the advantages and disadvantages of accepting cash payments. Is it really worth it? Let’s dive in and explore the simple pros and cons.

Pros of Accepting Cash:

Firstly, cash payments are convenient for both you and your customers. No need to rely on credit card terminals or worry about technical issues. Just collect the cash and complete the transaction.

Secondly, cash payments are immediate and final. Once you have the money in your hands, there’s no need to wait for banks to process transfers or worry about chargebacks. It provides a sense of security and stability.

Thirdly, accepting cash allows you to avoid transaction fees imposed by credit card companies. This means more money in your pocket and potentially lower prices for your goods or services, making you more competitive in the market.

Cons of Accepting Cash:

On the flip side, accepting cash comes with a few drawbacks to consider. Firstly, there’s the risk of theft. Cash is tangible and can be stolen or misplaced easily. You need to take extra precautions to secure it, such as using safes or regular bank deposits.

Secondly, there’s the issue of record keeping. Cash transactions can be harder to track, which may lead to difficulties in accurately monitoring your business’s finances. Proper bookkeeping becomes crucial to ensure you have a clear picture of your income and expenses.

Finally, accepting cash can create potential tax-related problems. Cash transactions can be more difficult to report accurately, which may lead to issues with the tax authorities. It’s important to keep impeccable records and consult with a professional to ensure compliance with tax regulations.

In conclusion, accepting cash in your small business has its positives and negatives. While it offers convenience, immediacy, and potential cost savings, it also poses risks of theft, challenges in record keeping, and tax-related issues. Assess your circumstances and choose the payment method that best suits your business needs.

The Good and Bad of Using Cash in Your Small Business

I’ve noticed that more and more small businesses are choosing to go cashless, meaning they only accept payments through debit cards, credit cards, or mobile wallets. I read about this growing trend in several news outlets, including the Los Angeles Times. It’s interesting to learn that last year, Visa even held a Cashless Challenge, where they gave $10,000 to 50 small business owners who embraced the cashless approach. And guess what? The winners were all really excited about the benefits of going cash-free.

The Rise of Cashless Businesses

Currently, the trend of going cashless is mostly seen in restaurants, particularly fast-casual chains that want to keep the lines moving smoothly during busy times of the day. But did you know that according to a survey by TSYS, 44% of consumers prefer paying with debit cards, while 33% prefer credit cards? On the other hand, only 12% of people actually prefer using cash. It makes me wonder, will there come a time when it will be a wise decision for retail stores like yours to join the cash-free movement?

The Downside of Going Cashless

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  • Cash payments can slow things down at the register. Customers have to count their money, and salespeople have to make change. It takes time and can hold up the line.
  • When you have cash in the register, it puts your store at risk. Employees might be tempted to steal it, and there’s also the danger of robbery. You and your employees might not feel safe leaving the store with a lot of cash at the end of the day.
  • Counting and reconciling cash, as well as going to the bank to deposit it, takes up valuable time. Instead of focusing on growing your business and providing great customer service, you’re stuck dealing with cash-related tasks.
  • Accepting cash means there’s a chance you could accidentally take in counterfeit bills. This is especially true if you accept bills that are higher than $20.

Benefits of Cash Payments

  • You get the money right away. There’s no waiting for a payment to process.
  • Accepting cash is beneficial for your business because unlike credit card payments, there are no fees charged to you as the merchant. You don’t have to worry about any additional costs eating into your profits.
  • When you choose not to accept cash, you are excluding certain customers from making purchases. This includes:
  • Teenagers who may not have credit cards or bank accounts but still have money to spend. By not accepting cash, you are missing out on their potential business.
  • Some people prefer to use only cash as a way of managing their finances. If you don’t accept cash, you are preventing these individuals from buying your products or services.
  • There are also people who don’t have bank accounts, have accounts that don’t allow debit card usage, or simply don’t have credit cards. According to the Federal Reserve, around 5% of Americans don’t have a bank account, and another 18% have accounts but often rely on alternative financial services like payday lenders and check cashing services. By not accepting cash, you are excluding this significant portion of the population as potential customers.

Is it Time to Say Goodbye to Card Payments?

Last year, a bill was introduced in Washington, DC that wants to make it against the law for stores to only accept card payments. Some people think that this is unfair to people who don’t have a lot of money.

  • Do you think we should ban cash at stores? Let’s do some thinking before we decide.
  • First, figure out how many of your customers actually pay with cash. Keep track of this for a whole month.
  • Next, think about how much time you and your employees spend dealing with cash. Counting cash, checking the register, and going to the bank all take time. Keep track of this for a month too.
  • Then, look at how much money you have to pay in fees to accept card or mobile payments. Add up how much this costs you in a month.
  • Finally, find out if your bank charges you to deposit cash.

Did you know that going cashless might actually save you money? That’s right, when you consider the time saved, it could end up costing you less. Plus, you might even be able to lower your store’s insurance premiums by going cashless. It’s worth checking with your insurance agent to find out.

Here’s the thing: federal law doesn’t require businesses to accept physical money. According to the Treasury Department, private businesses have the freedom to decide whether or not to accept cash, as long as there’s no state law saying otherwise.

If your state laws allow it, and you decide to go cashless, there is one important step you need to take. You have to let your customers know about your no-cash policy before they make any purchases. You can easily do this by putting up signs in your checkout area.