Keeping a business afloat is no easy matter. Some merchants have considered becoming cash only to avoid the hassle of dealing with many payment methods and to make things easier for their customers too. However, this initial simplicity is misleading, and it may be hindering your company’s growth and development in the long run.
Of course, this might not be the case, and every business is different; what works for one business might not work for another. That’s why you need to think about the pros and cons of only accepting cash so you can decide how to run your business in the best way. Read on for more information to help you make that choice.
What is a cash-only business?
A business that only accepts cash for transactions is known as a cash-only business. Customers can only pay their purchases at cash-only businesses using hard currency. In general, a company that only deals in cash will not take checks, debit or credit cards, money orders, credit, or mobile wallets as forms of payment. In addition, a business that accepts cash only may predominantly pay its suppliers with cash too (although this is not always the case).
However, the question many people ask is, can a company exclusively take cash payments? The answer is yes; operating a business that accepts exclusively cash payments is a legitimate alternative for entrepreneurs to consider. There is no mandate from the federal government requiring businesses to take additional forms of payment from clients.
It is typical practice in some sectors to restrict customer payments to cash only. This would include cafes and some restaurants, market vendors and food truck owners, laundromats, and vending machines, for example.
With that in mind, what are the benefits of being a cash-only business?
Cash payments are cheaper for a company to process than credit card transactions. You’ll need to acquire or lease card-reading hardware in order to accept credit card payments. After purchasing this equipment, you will need to dedicate time (or money to pay someone else) to keep it in good working order.
Besides investing in necessary hardware, the cost to process a payment card swipe, dip, or tap is also significant. Percentage-based fees make it difficult to anticipate exactly how much you’ll be charged whenever a customer uses a credit or debit card. Moreover, there are some processors who tack on extra costs every month or for each incident.
If you run a small business with slim profit margins, you may find that these fees mount up and have a significant impact on your bottom line. The only cost you might want to consider is an ATM so that customers can always get the cash they need to pay you. Learn more about that here.
All of the aforementioned problems disappear when cash is the only method of payment accepted. A cash register or even a simple calculator will serve as adequate equipment. You won’t be subjected to monthly fees until you decide whether or not you really use the service. The best part is that there are no transaction fees involved when customers make a purchase, so your profit margin remains unaffected.
When you take cash, the money is given to you right away. With a payment card, the money won’t go into your account until 24 or even 72 hours later. Even after that, there is still a chance that a card payment will be charged back. A customer could ask for their money back a few months after making a purchase, so sales aren’t always final until a few months after the purchase. If you have too many chargebacks, your processor could freeze your account or even close it for good. When an account is frozen or closed, you might not be able to get any of the charges back.
If you have cash, you won’t have to worry about any of these things. You get your money right away, and you don’t have to pay back what you’ve already made unless a customer has a complaint and you personally decide to refund their purchase.
And what are the downsides to a cash-only business?
Not everyone carries cash on them, and unless you do have an ATM on your premises, as we mentioned above, you might lose out on sales because people are just not able to buy from you. They only have a card with them.
On top of this, many people are happier using cards. They are more secure, they have the chance to get a refund if necessary, and it’s something that we all got a lot more used to over the timeline of the pandemic, if not before.
If you only accept cash, you might be missing many sales opportunities and limiting your income.
Maybe you’ve been to a restaurant for dinner. When you tried to pay the bill, the wait staff told you that they don’t take cards. That makes things very hard. What can you do now?
Accepting just cash can be just as inconvenient for your customers and keep you from making a sale. And if a customer doesn’t usually have cash on hand or doesn’t like using it, they may not want to come back to your business. Since repeat customers are so crucial to building a good reputation and a good income, this would be highly detrimental.
Running a business that only accepts cash can make people less likely to spend big amounts too. On a card, when they can’t see the cash disappearing, larger amounts don’t seem so scary.
Stunted business growth
Taking cash only can make it harder for your business to grow. Cash might make sense when your customer has to be there in person to get their muffin or have their hair cut, but if you run a business where you can sell online or even take orders over the phone, only accepting cash could make it harder for your business to grow. Many people today prefer shopping online because it is easier.
Online sales can also reach people who live far away from your store. If you only accept cash, you could lose customers who could help your business grow.