Every business needs to decide how it will accept payment from its customers. Cash is the most obvious means of payment. Many businesses have tried to simplify things and reduce expenses by only accepting cash. However, most studies have found that this is usually not a good decision.
There are a number of drawbacks to running a cash only business. Here are some reasons why you should consider accepting other forms of payment.
Risk of Losing Customers
The most obvious problem with only accepting cash is that you risk losing customers. Many customers expect that most businesses they visit will accept credit cards. They may go to an ATM to take out cash if they really like the service that you provide. Unfortunately, you may have a real problem if there aren’t any ATM nearby.
This can also be a serious problem if you are a restaurant or other business with a lot of competition in your vicinity. Your customers may also simply decide to go to another place of business that is on the same road.
Headaches Recording Transactions
Counting all the cash that you have on hand can be very tedious and time-consuming, especially if you have a high volume of sales. You have a lot of other things to do with your time than counting cash.
Keeping a lot of cash on hand can be very risky. You will be at a much higher risk of losing everything to a robbery or embezzlement. You will also have to be particularly careful when going to the bank to deposit your money.
The IRS is more likely to hassle businesses that only accept cash. You will need to make sure that you keep accurate records and are diligent about reporting your earnings to avoid triggering an audit.
The tax laws are even more problematic for businesses that sell large ticket items. You will need to file Form 8300 if you conduct a single cash transaction that exceeds $10,000.
Mistakes that Cash Only Businesses May Be Making
Some companies have good reasons to be cash only businesses. However, most of them make their decisions based on misconceptions. For example, many businesses think that it is too risky to handle credit cards because they have to worry about identity theft or hackers. They don’t take the security risks of holding cash into consideration at all.
Some businesses also worry about getting their money as soon as possible. They think that they are going to have to wait a lot longer if they accept cash or credit cards. The truth is that money from checks and credit cards can reach your bank account just as quickly as cash.
You want to make sure that you understand the drawbacks of running a cash only business. You may be better off purchasing a reliable credit card machine so customers can use that option as well.
About the author: Kalen is a freelance financial writer and entrepreneur. He shares his experiences running a startup so that others can do so more effectively.
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