When it comes to taking payments from your customers, would you prefer cash or credit cards?
We recently came across a sign for a business that only accepted cash because they wanted to avoid paying the bank a percentage to process the transactions. But does this actually work? We appreciate that everyone wants to make savings where possible but what would you do if you saw a sign that said cash only in the window of a shop or hospitality business? A cash only business would more than likely lose a customer because many people NEVER carry cash. This will put customer attrition at risk, as they will be more inclined to shop elsewhere.
This is especially more prominent since Covid-19, when many people went cashless to reduce the risk of spreading the virus. Covid 19 may not be at the forefront of everyone's mind, but the change has stuck. According to UK Finance, Debit Cards were the most used payment method at 48% of all payments made in 2021. This was followed by contactless, including paying with a watch or mobile, at 36%. Cash fell to 15% of all payments.
Many people even believe we are moving towards a cashless society.
So does cash only actually save the business money?
The short answer is NO. It costs the same, if not more for the bank to handle cash payments over card. Cash is also less secure, as it’s difficult to track, can be counterfeit, and is more time-consuming to process.
As an accounting firm, we also find that ‘cash only’ is a bit of a nightmare. When it comes to processing revenue, you need to keep track of all of your cash, both physical and digital. Digital being easier to keep track of, as this is an automatic process. You need to manually input data for cash transactions. Cash can also go missing or miscounted, so the risk of being a cash only, far outweighs the pros.
In 2022, according to the Bank of England, 1 in 30,000 banknotes were counterfeit. This may seem low, but at any one time, there are around 4.7 billion genuine banknotes with a face value of £82 billion in circulation. Credit card fraud is becoming more commonplace, which is expensive, as this leads to chargebacks, and the risk of the payment not going through.
In addition, those businesses that carry a large amount of cash are more at risk of being robbed. As unlikely as this sounds physical cash is easier to take than digital and is virtually interchangeable. You will need to take physical cash to the bank and would need to go frequently to ensure you don’t have stacks of money in-house.
Unlike credit cards, cash grants you access to the money immediately, compared to a business who sets up extended credit. You won’t need to chase payments, saving time and improving cash flow.
We appreciate that finding an accountant who can help with these things, can be difficult.
Acumenica help out cash pressured businesses day-in, day-out. Do you think Acumenica could help your business? The next step is to book a call with an Acumenica accountant so we can find out a little more about your business and how we can help you. Definitely no hard sell and no obligation.
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