The past decade ushered in a myriad of changes in the business landscape — from the meteoric rise and evolution of technology to the COVID-19 pandemic, which impacted our consumer behaviors nearly overnight. One of the biggest changes in business is consumers’ payment preferences. Cash remains a staple, but cards have evolved into contactless and mobile solutions.
For so long, cash was king — but is that still true? In our blog, learn about how customers paying in cash can benefit your business, and how these benefits stack up against card transactions.
How Accepting Cash Benefits Your Business
What are some of the benefits of allowing your customers to pay in cash?
1. Simplified Accounting
Having multiple payment channels can be tricky to track, especially for small businesses without a designated finance department to monitor what goes in and out. On top of this, accepting non-cash payment methods like cards and mobile wallets opens you to the risk of fraudulent chargebacks.
2. No Credit Card Transaction Fees
Accepting credit cards involves paying fees to your payment processing provider — which cuts into your potential profit and impacts your bottom line. Additionally, it also involves the installation of special equipment that costs a rental or leasing fee, plus takes up extra counter space.
To sweeten the deal more, you can incentivize customers who pay with cash through a cash discount. This is a discount that is offered to patrons who opt to pay in cash because the merchant will not need to pass on credit card processing fees. For more information on cash discounts, read our blog on how you can celebrate your customers with a cash program.
3. Immediate Access to Cash
Being “liquid,” or having access to cash, is important for any business so that you can pay for expenses not included in your loan’s stipulations, and be covered in case of an emergency. Instead of relying on credit cards, which are like revolving loans, you can pay for unexpected expenses upfront without worrying about interest.
Why Your Business Shouldn’t *Only* Accept Cash
Do these advantages mean that other payment options are a no-go? Not exactly.
1. Consumers Choose to Pay in Different Ways
The COVID-19 pandemic, and the consequent need for contactless payments, undoubtedly increased card transactions and expedited the adoption of mobile payment methods. Statistics show that cash payments declined from 16% in 2017 to 11% in 2021, while mobile payments have steadily increased from 3% in 2017 to equaling cash at 11% in 2021.
By only accepting cash, you risk turning away the vast majority that prefers credit (40%) and debit (30%) card spending over cash, as well as those who prefer alternative non-cash methods — losing potential revenue and possibly developing a poor reputation.
2. Reduced Human Error in Accounting
POS systems, which enable businesses to accept multiple payment methods, are equipped with software that consolidates and categorizes information. These are transformed into easily understandable dashboards and reports, which business owners can use to make informed business decisions. This takes the work out of sorting through different data streams to get your finances in order.
On the other hand, cash payments don’t leave a paper trail, so it can be challenging to account for everything at the end of the day. If done incorrectly, you may find yourself in a spot of trouble with the IRS.
3. Multiple Security Risks
Aside from the risks associated with improper accounting, holding too much cash in-store makes you vulnerable to various security risks. A dishonest employee may be tempted to swipe a few dollars every now and then — and they could get potentially get away with it because cash transactions are harder to track.
You may also be vulnerable to outside theft and counterfeit cash if word gets out that you keep a lot of cash in the register.
The Importance of Accepting Credit Cards
A hybrid approach is best for both your business and your customers. Here’s why.
Cater to Consumers’ Payment Preferences
Considering the many payment options available to consumers now, including tap-to-pay or contactless payments (which are activated through card accounts), the logic of “the more, the merrier” can apply in this case.
Accepting card payments can help increase your revenue because customers can pay however they want, instead of being inconvenienced to adhere to a single payment method.
Added Credibility
Accepting card payments helps legitimize your business, which is important for new and small businesses that are looking to grow their consumer base. Typically, businesses that accept non-cash payment methods display logos of these financial institutions on the door or counter, to entice potential first-time buyers and let non-cash-paying customers know they are welcome to purchase.
It also helps level the playing field for small businesses, as it’s likely that most (if not all) of your competitors will accept both cash and non-cash payment methods.
Reduced Chances of Bad Checks and Counterfeit Cash
Card transactions are verified as approved or disapproved in real-time, eliminating the risk of accepting invalid checks or false money. The transaction is authenticated by the relevant financial institutions on the spot, so you’re assured that you will be paid for the purchased product.
Overall, providing customers with the option to pay in either cash or card gives you the best of both worlds. Cash transactions help ensure you have easy access to liquid money in times of emergency and reduce your credit card transaction fees. On the other hand, card payments increase your business’ credibility and enable you to cater to consumers’ evolving payment preferences.
Whichever way customers want to pay, True POS has you covered! Contact us for a free quote today.
