A business that runs on cash transactions takes cash regularly. One of the reasons why a business is cash only is the unavailability of credit or debit card processes and mostly its aim to save on service fees. At some point, a business can run on cash only basis when it needs to provide cash payments for employees, services, and vendors.
Advantages of cash payments
- Receive payment instantly. You don’t have to wait for a check to clear or card transaction to be processed in your account.
- No fraud, bounced checks, or bogus cards.You don’t have to try to get money from people whose payments have no bank clearance.
- No need for fees for card payments. Fees can only reduce your net profit on every transaction. When the transaction is small, such fees can be particularly challenging especially to SMEs.
Disadvantages of a cash only business
Be mindful that accepting and paying cash is legal but making cash transactions to evade taxes is no longer legal. In fact, these businesses are often pursued by law due to underreporting income and avoiding payroll taxes, as well as other payments and tax reports.
- Risk of losing a sale. Note that a lot of people don’t carry with them so much money especially younger shoppers who often carry no cash. Not accepting their debit and credit cards can often lead to losing a sale.
- A security risk for businesses. Having cash-on-hand is essential to make change, but having so much can become a security risk. Daily deposits to the bank are required when having lots of daily cash transactions.
- Reporting of cash income. Cash businesses can have a major problem when reporting income to the IRS. Moreover, when a cash business reports a loss for many years, it can be under scrutiny from an IRS audit.
- Avoiding cards will cost your business.Cash only signs in some company registers may become deterrents for business growth. That is because customers with cards will tend to leave and never return.
Advantages of card payments
As you can see, it will cost your business if you will not offer flexible payment options. Instead of focusing on the disadvantages of accepting credit cards, having additional sales because of accepting card payments can easily make up for the transaction fees
- Card payments are safer. Instead of thinking about data theft and fraud when dealing with credit card processing, having a large sum of cash on hand can put you at risk for internal and external theft.
- Payment processing is faster.Accepting cash would seem the only best solution because you don’t want to wait for card payments to be processed or check payments to clear. But merchant services and payment gateways can expand your payment methods without hurting your cash flow. It can also guarantee next-business day settlement of funds from card payments.
- Merchant services can help you grow your business.Partnering with a merchant service gives you access to 24-hour technical support, comparative rates, and local service to ensure smooth operation for your business