Taking Cash Only: What Businesses Should Consider Before Cutting Ties with Plastic
Cashless societies are the dream of many consumers who prefer the convenience of paying for their purchases with plastic. On the other end, some merchants view plastic as one more expense that negatively affects their business cash flow.
In this post, we’ll detail four things small businesses should consider before cutting ties with plastic.
1. Pesky fees:
Small businesses are ditching the practice of accepting debit and credit cards largely due to the costs of processing the transactions.
Processing transactions in which the consumer swipes their cards as debits and enter their PINS is generally cheaper for merchants than processing credit cards. Still, that fee can cause cash flow problems.
Fora debit card transaction, the fee is up to $.21. On top of that, the merchant pays .05% of the payment. Fees to process credit cards vary. Industry leader, Visa, gives merchants a fee of 1.51% plus $0.10, when consumers swipe their credit cards.
The fee situation is aggravated when consumers use their cards to make very low cost items. A $2 cup of coffee, for example, can easily affect a business’s profits when those fees are factored in.
2. Need for speed:
Retailers often wait a few days to receive the funds they make from credit card purchases. The same is true for debit card purchases if the consumer doesn’t enter their PINs. This process can take days, and can pressure business cash flows, which is another reason merchants are choosing to accept cash only.
This is especially the case for restaurants, where a large percentage of their staff is made up of waiters and waitresses who make most of their earnings through tips.
Cash-only restaurants don’t have to worry about this wait time. Like other businesses that only accept cash, restaurant operators immediately receive the money. They can then quickly use it to dole out tips to wait staff and to pay vendors.
3. Losing customers:
Small businesses must also factor in the possibility of losing customers. As consumers grow more enamored with swiping their cards to pay for everything, cash-only businesses may run the risk of losing them.
It could be because the consumer is so disgruntled that they choose to take their business elsewhere. On that same note, a shopper may just not have cash on them.
In either of these cases, the risk of losing customers could be mitigated by the possibility of gaining new customers. The segment of consumers who do not have debit and/or credit cards, or even bank accounts is growing.
Observers point out that the unbankable population comprises about one-fifth of the population. Businesses located in areas with this group stand to benefit, as well as those local shoppers.
This group, commonly referred to as the unbankable, are limited in their payment options. Reaching out to them, once a merchant goes cash-only, it could reap new customers.
4. The lurking robbers:
Perhaps the most frightening part of going cashless is increased risk of being targeted by robbers. The U.S. Small Business Administration noted that having large amounts of cash on-hand can increase security risks.
To keep predators at bay, cash-only business owners should consider hiring private security, or off duty officers. However, the costs associated with this having this protection must be kept in mind.
While a cashless society may be a dream for some, there are just as many who view cash as the best way to conduct transactions. Owners who go cash-only, if they play their cards right, may find it to be worth it.
Small businesses merchants who are considering becoming cash-only businesses should check out the U.S. Small Business Administration’s accepting cash only page for more information.
Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.