Many small business owners prefer that their customers pay in cash only. A payment received by credit card is subject to processing fees which eat into profit margins. Cash payments have another distinct advantage. The business owner receives the amount that is due immediately. With credit or debit cards, you may have to wait several days before your bank account is credited. Despite these benefits, small business owners (even those who run micro-businesses) would be better off if they encouraged credit card payments instead of cash only.
Here are five reasons why your business shouldn’t be cash only.
Reason 1: It can result in lower sales
Many customers carry very little cash but most people have a debit or credit card. If your business does not accept cards, it is almost certain that you will register a lower volume of sales. You could lose in several ways when you accept cash only:
-Customers could spend less if they know that they have to pay in cash.
-Some customers may simply walk away when they realize that you don’t accept credit cards.
-Credit cards encourage impulse spending. If your business does not accept cards, you will lose this advantage.
Reason 2: A cash-only business limits your access to capital
When a small business applies for a loan, one of the essential documents that need to be furnished is the bank statement. Why would a lender be interested in seeing your bank records? This document provides crucial information about your company. What are your daily/weekly/monthly sales, how much you pay for supplies, and what amount of cash is available in your bank account? A bank statement that carries these entries provides a great deal of reassurance to the lender. But your business will pass this test only if a large portion of your transactions find their way into your bank statement. If a significant part of your sales is in cash only, it could be difficult for you to convince the lender about your credit-worthiness.
Many small business owners pay off their suppliers with the cash they have collected from their customers. These business receipts never find their way into the bank statement. When your sales are paid for by credit card, your bank account will reflect the corresponding receipt. Similarly, if you pay your suppliers by check, a record of the transaction will be created in your bank statement.
By making this simple change, you could increase the chance of getting your loan approved. Lean here all you need to know to get a business loan.
Reason 3: Your competitors will get ahead
If you don’t accept credit card payments or actively discourage them, it doesn’t mean that your competitors are doing the same. The reality is that a majority of small businesses have realized that credit card sales can form a substantial portion of their business. Refusing customers who want to pay by card can result in losing them to your competitors.
Reason 4: Handling large amounts of cash can be inconvenient
Counting the cash that a customer has paid and returning change can be time-consuming. It can also be an irritant for a customer who is in a hurry. Card transactions, on the other hand, are both fast and accurate. An electronic record is created of the payments that you collect by credit card. It makes it easy to verify your transactions and check records that are weeks or months old. If your business is witnessing an increase in sales volumes, accepting payments by card can make it more efficient and free up your time for other tasks.
Reason 5: It could result in robbery or theft
It is never a good idea to keep large amounts of cash on your premises – you could be exposing yourself to being robbed. In addition, it makes it easier for employees to steal from you. Card payments are simpler to manage and have the additional advantage of reducing the sum of money that you maintain at your place of business.
To sum up, nobody likes having to pay a card processing fee but as we just pointed out, there are many advantages to accepting credit and debit cards. A Point of Sales or POS system for your business can be a useful tool to help you manage those transactions made with debit o credit cards.