5 Reasons Why Small Businesses Should Rely Less on Cash
Why Your Small Business Should Consider Payment Options Beyond Cash
The popularity of cash is declining, and cashless forms of payment, such as credit cards and mobile wallets, are on the rise. While cash won’t entirely disappear any time soon, many consumers now prefer the convenience and ease of credit cards and digital payments. The Federal Reserve’s Diary of Consumer Payment Choice found that cash use is decreasing: consumers used cash for just 26% of all transactions in 2018, down from 31% in 2016. If your business’s payment options are limited, it’s possible that you’re driving away customers and missing out on potential sales.
Meanwhile, payment technology and payment security have become more advanced. An increasing number of businesses — such as Amazon bookstores and chain restaurant Sweetgreen — have even begun to experiment with a cashless payment model. While you may not be interested in going fully cashless, it’s important to make sure your business is ready to accept payments however your customers prefer to pay.
Offering payment options via credit card, electronic wallets, smart cards, or mobile payment apps can be useful for both businesses and customers for a number of reasons.
1. Simplify accounting. Accounting can be a big challenge for small businesses that only accept cash or checks. Cash needs to be counted and reconciled at the end of every business day, which can be frustrating and take up time for employees. Manual-based accounting processes are also prone to human error, making it harder to maintain accurate record-keeping.
For small businesses that maintain a complex cash flow network, navigating payments from customers and to vendors and partners can quickly turn into an accounting nightmare. No business owner wants to feel like they’re spending more time managing administrative work than actually focusing on their product or customers!
Cashless payment options can help you centralize your business’s financial processes within an online system. Because all transactions are automatically electronically recorded, it becomes much easier to maintain an accurate, historical record of payments received from customers, as well as payments owed to vendors or contractors.
2. Get paid faster. If your business relies on payment via invoicing, having to wait for cash or checks to arrive can be frustrating — and it can impact your ability to have a healthy cash flow. Further, checks typically take at least several business days to hit your account once deposited — and there’s always the risk of checks bouncing if the owner doesn’t have sufficient funds in their account. By accepting cashless payment options, you can speed up the process of sending and receiving payments, meaning you’ll be able to access your funds more quickly and improve your cash flow.
3. Lower operating expenses. Offering cashless payment options can help to decrease costs: handling cash is not cheap. It costs time and money to train employees how to properly handle cash payments and count register balances. Transporting cash isn’t cheap, either. If your business collects a high volume of cash, you will likely need to hire an armored car service to transport and deposit cash at the bank, which can cost anywhere from a hundred to over a thousand dollars, depending on the distance and volume of cash. Once at the bank, business owners can rack up fees for depositing and processing significant amounts of cash, coins or checks. By managing payments electronically, small businesses cut out the expenses associated with physically handling cash.
4. Make customer checkout a faster, easier process. For brick-and-mortar businesses, offering cashless options can help to streamline the payment experience for your customers since cash transactions are proven to take longer than digital payments or card transactions. Offering cashless payment options at checkout can help to reduce lines, particularly during peak hours. This will also help to improve the in-store experience, boosting customer satisfaction.
5. Reduce risk and improve payment security. While bills and coins you can touch and count may feel more secure than exchanging funds digitally, this feeling can be misleading: accepting cashless payments can actually help to keep your money safer.
There are risks associated with keeping cash on hand, including an increased chance of theft, externally and internally. Any business that accepts cash is more susceptible to robbery, and the 2015 US Retail Fraud Survey found that US retailers lose $60 billion a year from shrinkage, or internal theft from employees. Outside of theft, there’s also the risk of cash or checks simply getting lost or damaged in a natural disaster such as a fire or flood.
Due to advances in technology and cybersecurity, such as built-in fraud protection and easy payment tracking, credit cards are a safer payment option than ever before. In addition to credit cards, there are a variety of secure options for accepting mobile payments, including mobile wallets and payment apps. To maximize security, it’s best to choose a cashless payment method that is well known and respected.
As you can see, there are a number of benefits for small businesses in accepting card or digital payments. However, it’s not for everybody. A 2017 FDIC survey found that 6.5% of the US population did not have access to a bank account or line of credit, so it’s important for business owners located in unbanked or underbanked areas to accept cash payments. Some customers may simply want to pay with cash, as a matter of personal preference. It’s also important to consider how much money your average customer is spending at your business. Some small businesses will require a minimum purchase amount of $10 for customers using credit cards, to help offset the fees to process the transaction. If your customers typically spend below that threshold, they will need to have the option to pay with cash.
Again, what’s most important is that you offer your customers the ability to pay however they prefer, no matter the reason. By restricting payment options to cash and checks, you could be missing out on a number of benefits, including lower costs, a better customer experience, and the ability to get paid more easily and quickly. To set your business up for maximum success, you should be prepared to accept all forms of payment — whether it be cards, digital wallets, mobile payment apps, or cash — in order to give your customers as much choice and flexibility as possible.