In this day and age, it’s easy to assume all companies handle their financial matters digitally. But that’s simply not true. Many businesses still handle transactions with just cash – no credit or debit cards. Let’s break down the benefits of running a cash-only business and how to do it well.
While there’s a growing trend, nowadays, in cash-less transitions, there are still cash-only businesses that manage to operate with great success. Particularly for smaller businesses, there are benefits of a cash-only business, even today.
However, there are plenty of tricks of the trade that cash-only businesses need to know to make sure that they are operating properly, reducing their risks, and maximizing their profits as much as possible.
Since cash-only businesses are becoming less common, we wanted to show you, the business owner, what you need to know to go about daily operations the right way.
What Exactly Is A Cash-Only Business?
Before we break down how to make the most of your cash-only business, it’s crucial to understand what the term actually means.
Fortunately, it speaks for itself. Certain businesses (especially small businesses) will only accept cash as payment. They don’t accept purchases that are made with the following methods:
- Credit card
- Debit card
- Money order
- Personal check
- Wireless transfer
- Any other type of mobile payment
The good news is that this is a perfectly legal and legitimate way to run a business.
The Benefits Of Cash-Only Businesses
There are plenty of benefits when it comes to cash-only businesses, especially for small businesses or young entrepreneurs who are just getting started. Here are some of the more important ones:
- No waiting required – businesses receive money for their goods and services right away. They don’t have to wait for banks and credit card companies to process the transactions.
- No fees required – keep in mind that businesses have to pay fees for accepting credit card transactions. With cash-only businesses, those fees don’t exist, which can make a significant difference for small businesses that already operate on thin margins.
- No chargebacks – only accepting cash means not having to worry about bounced checks or instances of credit card fraud. With cash, everything is done upfront with no unexpected surprises, which is typically how small businesses (retail, for example) like to operate.
Industries Where Cash-Only Businesses Are Common
There is a wide variety of industries in which companies frequently operate as cash-only businesses. These include:
- Food truck businesses
- Street vendors
- Coffee shops
- Handyman technicians
- Farm stand vendors
These are just a handful of the many small-scale business operations that have a cash-only policy.
The Disadvantages Of Cash-Only Businesses
While there are benefits of cash-only businesses, owners of these types of businesses should be aware of some of the downsides of only accepting cash.
More than half of customers (55%) prefer using credit or debit cards, and this is only steadily increasing as time goes on. Cash-only businesses could be missing out on a large chunk of the market.
Here are some key disadvantages that come with running cash-only businesses.
It Could Be Inconvenient For Customers
Arguably the biggest flaw of a cash-only business is that it might prove to be an inconvenience for some customers. As a result, they may choose not to patronize a cash-only business.
Millennials, in particular, don’t always carry cash with them. They’ve become overly reliant on using their credit cards or mobile payments on iPhones or Androids. This trend is slowly moving into other age demographics as well (including Generation Z), so there are more people who choose not to have a lot of cash on them.
People generally want to save time. So if they don’t have cash and don’t want to go through the trouble of visiting an ATM to get cash, it’s possible for a cash-only business to limit its customer base, which can hurt sales.
It Could Be A Security Risk
Cash-only businesses should be aware of the security risks associated with this type of business. Here are some security risks that come with running a cash-only business:
- Thieves and opportunistic criminals will recognize that a cash-only business will have plenty of cash on the premises, making businesses like these a potential target for crime.
- Difficult employees may look to steal cash from the register or pocket a few dollars while conducting a transaction.
- Customers could intentionally pay using counterfeit money.
- Since cash-only businesses deal exclusively with cash, anyone with counterfeit bills may try to sneak one past cash-only businesses, forcing that business to take a loss when depositing that day’s money into their business bank account.
Keeping thorough records and giving your employees specific training can alleviate these security risks. But more on that later.
Audits Are Much More Likely
Any business owner who deals exclusively in cash should also know that they might be more likely to endure an audit from the IRS.
The IRS knows that it’s easy for a cash-only business to fudge the numbers in order to reduce what they owe in taxes (1099 and W-2 taxes, for example), because there isn’t a paper trail of credit card statements to track.
This makes audits more likely for cash-only businesses, especially for businesses that report less income than they should.
Paying Employees In Cash Isn’t That Simple
For companies that only accept cash, it’s not unusual to also execute payroll for employees the same way. Not all businesses realize that this is perfectly legal, making this a convenient option for businesses that only accept cash payments.
However, this doesn’t change the fact that payroll transactions must be recorded, and payroll taxes must be paid. Paying employees in cash doesn’t change this.
If there is no record to verify that an employee has been paid, they may not be eligible to receive Social security, unemployment benefits, or workers’ compensation, so records are still important when paying employees in cash.
How To Run Your Cash-Only Business
Keep Customers In The Loop
The situation can get messy if a customer didn’t realize that your business only accepts cash and doesn’t have any at their disposal.
Most of the time, it’s best to inform customers ahead of time that you don’t accept credit or debit cards, only cash. Consider posting signs both outside and inside the business and perhaps have employees remind everyone that they must pay in cash before starting a transaction (this could especially apply to retail employees).
In addition to physical signs at your location, make sure that people are aware through both online and social media channels that you operate a cash-only business to ensure that there are no surprises for customers.
Give Emplyoees Special Training
Cash-only businesses will often need to provide employees with special training on how to handle large amounts of cash.
Here are some training guidelines and resources managers can provide for their employees:
- Employees should receive risk-restriction training on how to spot counterfeit bills.
- Special pens are available that can make detection easy.
- Employees should be trained on how to make one transaction at the cash register at a time and not to be distracted in the middle of a cash transaction. It can be easy to give a customer the wrong change or get the transactions of two or more customers confused when trying to multitask.
Ultimately, some customers will try to take advantage of a cash-only business and a vulnerable employee by claiming to have paid with a larger bill than they did.
Employees at a cash-only business should be trained to stay focused, follow a specific company policy on every transaction, and keep things simple to avoid careless mistakes.
Keep Accurate Records
Record-keeping is essential for all cash-only businesses. This prevents financial errors (including payroll errors). The best practice is to keep excellent financial records, even if everything needs to be counted by hand.
There should always be a receipt of the sales made on a given day, giving the business a record of its income rather than just counting cash at the end of the day.
Likewise, counting the cash in the register against the receipts can alert business owners to instances of employee theft or any human error in calculating change on transactions, reducing business costs in the long run.
Make Your Cash-Only Business Safer
Teach your employees how to handle cash and keep accurate financial records
Use The Latest Technology To Run Cash-Only Businesses
It’s one thing reading steps on how to overcome some of the challenges that running a cash-only business presents. But it’s also worth acquiring some kind of training software that helps you put those practices into motion.
Just because some businesses only handle transactions with cash, it doesn’t mean that they can’t make other processes digital and therefore quicker and easier.
Tens of thousands of companies benefit from Connecteam’s wide range of essential features. Cash-only business owners can also use this all-in-one training app to teach employees how to make their cash-only business safer.
- If you want to train your employees how to tell if money is fake or not, then they can refer to the app with a couple of clicks, instead of reading through time-consuming piles of paper.
- Employees who are on-shift can fill in forms to keep records of their financial activity, preventing errors in the process. They can easily create receipts and share them with upper management with the click of a button.
- In addition, Connecteam includes communication, time tracking and workflow capabilities. And all of this is free to use.
Gone are the days of dated record-keeping tools such as pen, paper and spreadsheets. Connecteam helps cash-only business owners save time, effort and money.
The Bottom Line On Cash-Only Businesses
As you can see, running a cash-only business does present its fair share of pros and cons. While the prospect of no credit card fees and instant payments can be extremely tempting, your customers’ convenience and your business’ financial security both suffer because of it.
So it’s important to think carefully before you decide whether to go cash-only or to stick with digital payment methods. One thing is for sure, even cash-only businesses can benefit from using small business software to streamline their daily business processes.
All-in-one management apps like Connecteam can help cash-only business owners train and onboard their employees efficiently and keep thorough records without having to write it all with pen and paper. You can basically scale your company from the comfort of your mobile device.
With the key steps and tools mentioned above, you are now ready to run your cash-only business smoother and safer.