As an increasing number of payment methods such as cryptocurrency are developed, more businesses are turning away from accepting cash. Although cash was once the standard form of payment, small businesses are exploring options and finding new ways to make their companies better, with or without cash transactions.
Benefits of Avoiding Cash
Not accepting cash is efficient for many businesses. When your clients accept cash payments, you end up with a number of additional tasks to complete as their accountant or bookkeeper. You reconcile the cash on hand at the end of the day. Until you are ready to visit the bank, you must safeguard the cash. You compile all cash and must physically deliver it to the bank. Lastly, you must account for each deposit in the bank reconciliation. Each of these tasks are minimized or eliminated once your client no longer accepts cash. Although you still reconcile other forms of payment, cutting out one method leaves you less work to do and results in lower expenses for your clients. In addition, as you come across reconciliation errors, you have one less area susceptible to risk and error.
A natural and effective way to expand your client’s online presence is to accept multiple forms of payment. Depending on what products or services your client provides, directing customers to your client’s website to make a payment drives traffic to its promotional materials. Your client’s customers can explore other service options or learn more about your client’s areas of expertise. Having an online checkout process means the customers can order products or services at any time, regardless of whether anyone is present to collect cash.
Having less cash on hand makes your client’s small business less susceptible to fraud. Customers and employees have less opportunity to take cash from your client. Customers can’t argue payment amounts, as payment methods other than cash are usually supported by documentation. Some of these losses are intentional; others may be accidental. Handling cash instead of digital forms of payments means bills can be misplaced or miscounted. An additional type of loss is translation loss. If your client accepts cash payments in foreign currency, you need to find a financial institution that exchanges the cash. The associated fees and potential unfavorable changes in exchange rates ultimately reduce net profit margin.
Downsides to Avoiding Cash
Not everything is great for business that refuse to accept cash payments. For some, cash is still the most convenient method of payment. If cash is not allowed, your client runs the risk of alienating a portion of its client base. Many alternatives to cash payments require integration with technology. In the event you have a power outage or are not able to access the internet, you are unable to accept other forms of payment.
Cash is not contingent on any external force; if a customer has it and your client accepts, the transaction is complete. Your client now has instant access to its funds. The same cannot be said for all other forms of payment. Credit card payments may be batch processed and posted overnight. Checks must be presented to the bank. By accepting cash, your client instantly has purchasing power and is not tied to any additional payment process. This is especially true for some methods such as checks. If the check is not supported by sufficient funds, you are assessed a fee. Plus, you now have a receivable that you run the risk of never collecting.
There are no processing fees for cash. Other than exposure to inflation, accepting cash doesn’t cut into profit margins. When you accept an invalid check, you are assessed fees for insufficient funds and may never actually receive the original payment amount. To process credit cards, your client must incur upfront costs to purchase the necessary equipment and software, as well as pay an ongoing percentage of each credit card sale.
Obligation to Accept Cash
There is no obligation for your client to accept cash payments. Although cash is a universally acceptable form of tender, there are no restrictions forcing any business to accept it. As long as there are suitable alternatives for customers, your client does not run the risk of alienating any of its customer base. Your client will want to develop an internal payment policy to back the operations in case operations are questioned.
Alternate Payment Methods
Beyond the standard payment methods of check, credit card, wire transfer, or ACH payment, there are an increasing number of options for your client to implement. Mobile payment applications allow users of smartphones to transfer funds across accounts. As long as the application is downloaded and account information is provided, currency is transferable. Cryptocurrency such as Bitcoin allows instant exchange and transferring. This medium of exchange is a decentralized digital cash system. Similar to all other forms of payment, cryptocurrency does not have any intrinsic value ; it derives its value from its ability to be exchanged for other goods, services, or currencies.
Cash is a safe and simple way of collecting payment for business transactions. For some companies, it is the perfect payment solution. For other businesses, there are more effective and efficient ways to conducting business. Because there are no restrictions forcing your clients to accept cash, help them evaluate their options and implement the payment solutions that work best.