Transactions were increasingly cash free even before the pandemic, and now cash feels like an antiquated way of doing business. But for small businesses thinking that they can safely do away with the hassle of taking cash, it pays to reconsider. There are some real advantages to cash transactions.
Customers who pay with cash are saving money for the business owner. Credit and debit cards have associated merchant fees and those add up over time. Small businesses that sell directly to customers and have many transactions per day are going to see the greatest benefit from cash-using customers.
But let’s say a business is higher end, selling relatively expensive products directly to customers. Why should they continue to take cash when few customers choose that method of payment? It’s a valid question.
The answer is that one cash customer a week—or even a month—could pay those merchant fees card users generate. That can make a real difference to a small business with a narrow margin.
Small businesses need to consider their customer base. A lot of people do not have access to either a bank account with a debit card or to a credit card. If a business decides to eliminate cash sales, it has also effectively eliminated most teenagers and many college students, people who prefer using cash as a way to manage their budget, and those who do not qualify for credit or debit cards.
A business owner should never make the mistake of assuming that they do not want or need the business of someone who does not have a credit or debit card. There are many people in this category for many different reasons.
If a business is considering eliminating cash payments, it should first track how many current customers are using cash and assume that each of them will take their business elsewhere. Doing that calculation may well show that cash sales are not something that a business can afford to lose.
The moral of this story is that what a business does not know about its customers can hurt it. Assuming that everyone wants or has access to non-cash payment sources is a gamble. Offending cash using customers is a fine way of losing business.
Unlike credit card payments, those made in cash are available instantly. Some business owners cite the hassles of dealing with cash at the end of each business day as a reason to stop taking cash. But that hassle means that the money goes into the bank account of the business immediately.
Waiting periods for card payments vary from a mild irritant of a day or two to a serious inconvenience if there’s a delay for any reason. Credit card transactions are also at risk for chargebacks, in which the customer goes back weeks or months later and demands their money back for a purchase. It can be a long time until your card payments are truly securely finished.
Unless a small business operates with a very wide margin, having access to a portion of sales immediately is a vital way of having funds available for emergencies, large and small.
Ease of Use
A small business that sells directly to customers and carries goods that are low-priced is going to benefit from taking cash. People expect to pay cash for a pretzel or a pack of gum, and many still feel silly breaking out a card for a $2 item.
Knowing that a small business selling low priced items does not take cash can feel to the customer like pressure to buy more. Human beings do not like pressure and it can lead to a loss of business. That customer who feels as though they must purchase more than they intended because they’re using a credit card may well never return.
Ease of use may also apply to the business owner. A business that does not have a permanent base of operations (like a farmer’s market vendor) or provides a personal service (like running errands or lawn mowing) probably don’t want the hassle of dealing with card payments and prefer cash.
Debunking the Cons of Cash
Most of the negative aspects of taking cash are limited to a very few select businesses. Reasons including slower-moving lines and the burden of reconciling registers and taking cash to the bank at the end of the day are problems most small businesses only dream of having.
In the real world, those lines and the few minutes it takes to clear the register are insignificant compared to the reputational and financial damage a business risks by alienating cash customers.
Also cited is an increased risk of robbery when stores have cash on the premises. Again, this needs to be examined realistically based on the business in question. If the business is a convenience store with a history of robberies, then it bears consideration. If the business owners and employees do not feel at risk, careful deliberation of cost versus benefit is necessary.
Cash is King
In the end, it is up to every small business owner to weigh the relative benefits of taking cash payments. The real risk of losing customers, the benefits of not paying fees on cash transactions, the immediate availability of cash funds, and the ease of cash transactions all point to cash being here to stay.