Are You a “Cash Only” Business?

Cash is the most commonly accepted and reliable form of payment for a business.  Many small businesses operate as "cash only" merchants.  Years ago, this wouldn't have been uncommon, but with advances in technology, business owners must ask themselves if they are hurting their bottom line by limiting payment options.

If your business currently only accepts cash payments, and you are thinking about starting a “cash only” business or expanding your current payment options, here are some pros and cons to consider.

Pros: 
o Cash payments ensure that businesses receive funds immediately without the worry of waiting periods or not getting paid at all.
o Cash is the simplest form of payment and therefore involves less bookkeeping.
o Except for counterfeit money, there is limited risk of fraud when accepting cash only. 
o There are no third-party fees associated with other payment options.

Cons: 
o Customers who do not have enough cash on them will have to walk away from a purchase they would otherwise make. 
o Your business may lose customers by only accepting cash.  As card payments become increasingly popular, many consumers expect this to be an option when making purchases.
o Keeping large sums of cash on your business's premises creates an increased security risk.
o The IRS requires that you file a Form 8300 if your business receives more than $10,000 in cash from one buyer as a result of a single transaction or two or more related transactions.  The same rule applies to cash equivalents, such as traveler's checks, bank drafts, cashier's checks, and money orders.  The form requires the name, address, and social security number of the buyer.

Accepting Card Payments - Credit and debit cards are popular, convenient, flexible, and have become increasingly important in business commerce.  So, if you are a “cash only” business, you may wish to review the pros and cons of accepting card payments.

Pros: 
o Card payments are evolving into the most common method of customer payment.
o The convenience of using credit cards generally increases the likelihood of consumer “impulse purchases,” which ultimately contributes to an increase in a business's average sale.  Customers are more likely to make these purchases if they have access to credit or their available bank account funds.

Cons: 
o Card payments come with an increased risk of fraud and are inherently more susceptible to foul play than cash. 
o Businesses that accept card payments encounter small processing fees for purchase transactions.  These fees seem insignificant but they can certainly add up, especially if your business accepts a lot of small purchases on credit cards which increases the discount rate.
o Setting up the necessary equipment to accept cards also carries additional costs.
o Card transactions add another layer of detail to your business's bookkeeping practices, along with the additional time and resources it takes to maintain these books.

The Bottom Line - Accepting card payments will, at least initially, cost your business money and add extra processes in your daily operations.  Many small business owners look at this as a necessary operating expense.  As card payments become more popular, customers will likely begin to expect a plastic option as a rule, rather than a courtesy.

On the other hand, the nature of some small businesses may make it smarter to stay cash only.  Flea markets, street vendors, and lawn service providers are just a few examples of common “cash only” small businesses.  At the end of the day, you will have to decide which payment options will create the most success for your business.

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