Go back one hundred years, and the vast majority of businesses were cash only. Buyers had to have some money in their pockets if they wanted to benefit from particular services.
The way we pay for things, however, underwent a dramatic change in the 1970s when card payment processing companies bridged the gap between checking accounts and merchants. All of a sudden, people didn’t have to carry cash around with them anymore and could keep it in the bank for longer, accruing interest.
Over time, cash became less popular and plastic more so, to the point today where many people don’t use cash at all. This state of affairs begs the question: is it still possible to run a cash-only business?
If you go looking for it, there are still examples of cash-only businesses in existence. The chances are that if you go to a country fair, many of the merchants there won’t offer card payment facilities: you’ll have to take cash out beforehand. Likewise, babysitting services, laundromats, street vendors, and some independent coffee shops also maintain a cash-only policy.
There are, however, some substantial disadvantages to running a cash-only business and why many companies choose to use services like PayAnywhere. Take a look at the following reasons.
You Are More Likely To Receive An IRS Audit
The IRS knows that when people operate cash-only businesses, there are more likely to underreport their taking to pay less tax. The IRS cannot, for instance, go through a firm’s bank account statements and look for anomalies or accounting errors. Instead, it has to use other information, such as receipts, to work out whether people are evading taxes or not.
As a businessperson, you most likely play by the rules. But even if you think you’re operating within the letter of the law, you have to have a pretty good accounting team to ensure that you are. An IRS audit could throw up anything and is a considerable risk to your enterprise. You want to do everything you can to reduce the chances that that will happen and that you can continue to operate your firm without the risk of government agents imposing fines. Accepting card and going through the regular business channels, therefore, is a considerable benefit.
You Are More Likely To Be Burgled
There’s a reason that thieves rob banks and jewelry shops: there’s something physical for them to steal and pass off as their own. It’s much harder to get money paid into a bank account electronically.
Holding lots of cash on your premises puts you at risk and could mean that you suffer substantial losses. You could be the victim of a private criminal or one of your employees taking money out of the till. Cash is an ever-present risk that costs a lot of money to mitigate. You may have to charge higher premiums and use specialist services to have your money taken to a bank. Often, it works out as much cheaper to just accept card payments.
You Inconvenience Your Customers
As a business, your priority is to generate revenue. You spend money on all sorts of things to achieve that: ground rent, hiring staff and paying marketing agencies. But all of that counts for very little if when customers arrive, they can’t buy your products because they don’t have cash on them.
Not accepting alternative forms of payment inconveniences your customers and makes it seem as if your company doesn’t care about their wellbeing, even if it does. Worse still, if your competitor offers card payments, then people are much more likely to go to them instead of shopping with you, forcing you to miss out on business.
Just directing customers to a nearby cash point might seem like a good idea, but you want to make sure that you get a customer’s business at the precise moment they decide to buy. You don’t want to risk having them walk off to a cash machine, decide that it’s not worth the inconvenience, and then make a purchase from your competitor instead. That’s just bad business practice.
So can you build a cash-only business? The answer is “yes,” but you automatically put yourself at a disadvantage. Not only do you have to deal with disgruntled and disappointed customers, but you also have increased security risk from holding lots of cash. All of a sudden, training your employees to be sensible with it is a priority. You’ll want to buy counterfeit detection pens and scanners to detect whether you’re being handed counterfeit bills.