Being a cash-only business can have certain benefits, including reduced overhead, no risk of funds being withheld, and simplified accounting. For some small businesses, this may appear like a desirable option. But we are going to outline some of the costs of being a cash-only business, and the benefits of accepting credit cards for small businesses.
Though some customers may prefer to use cash for small purchases, it is becoming more common for people to even use credit cards for purchases under $5. These days, most people don’t carry around much cash, and often rely on credit and debit cards for most purchases. If your business is cash-only, you will limit sales to only people who are carrying enough cash on them. Even having a sign on the door or an ATM nearby will reduce the number of people who are willing to make purchases at your business, and knowing that they won’t be able to use cards at your establishment, people may choose not to come back.
Only taking cash can also limit your business’s opportunity for growth. Though you may be able to provide in-person sales, only taking cash will prevent you from selling to customers online or over the phone. This is particularly relevant today, with more and more customers choosing to make purchases online. On top of that, if you only accept cash, you are limiting your customer base to people who live nearby you or can make it into your store.
If all of your sales involve cash, you have a greater chance of encountering counterfeits. The U.S. Department of Treasury estimates that between $70 and $200 million in counterfeit money could be in circulation today. Because of this, if you are a cash-only business, all of your employees will need to know how to spot a fake.
If you are a cash-only business, you will have a greater chance of encountering theft. That means that for your business, you will need to have strict policies for handling cash. While this is likely necessary for all businesses, the risks of losing money to theft will likely increase in a cash-only business. Furthermore, there is also the risk of miscalculation and error. Though accepting cards may decrease the need to manually enter and calculate totals, when dealing with cash, especially during busy times, employees will likely need to do so, increasing the chance of error, which could result in loss of money.
Because it is easier for cash-only businesses to underreport earnings, the IRS is more likely to audit them. This means that as a cash-only business you will need to spend more time and effort in accounting or risk a time-consuming audit. Despite how honestly you’ve reported your earnings, if your business is cash-only you will need to take the time to carefully document each transaction, and even if you do so, you’ll still be subject to the distrust of the IRS.
With the many costs of being a cash-only business, it may pay for your small business to accept credit and debit cards. There are many payment processors that can help you process credit card payments. We at Moolah are in the business of helping the process of accepting credit cards for small businesses because we know how important all payment types are. With simple and affordable pricing, free PCI compliance, and the best there is to offer in software, hardware, and support, we believe Moolah is a great place to take care of your card processing needs.