Whether you’re celebrating multiple years at the head of your own enterprise or launching your very first start-up, there’s a decision you need to make that could have a major impact on your profit margins: is your business going to accept cash?
The first challenge to the idea that cash is king came back in the 1950s the first credit cards were issued. Flashforward to today and, as an increasing number of businesses are discovering, not only is cash less essential than it once was, but there are a growing number of reasons why you should consider ditching it altogether.
It’s the way of the future
Across the world, many countries have established themselves as pioneers in the move towards a cashless society. More than ninety per cent of consumer transactions in Belgium no longer involve cash. Part of this is because, in common with several other European countries, Belgium has capped the amount that can legally be paid in cash to further discourage its use. In Australia, the amount of cash being used by shoppers has fallen by a third over the last six years. In India, a country famous for its underground economy, restrictions on the amount of cash that can be used in a single transaction and the amount of cash individuals are allowed to hold are both being considered.
The country at the forefront of the revolution is Sweden, a country where even the smallest, least significant transactions are now fully digital. You can’t use cash to pay for a bus or buy a ticket for the subway in Stockholm. In fact, retailers are actually legally entitled to refuse to accept coins and notes. Such is the spread of the technology that even street vendors and churches can accept card or phone payments, further eliminating the need to carry cash.
According to Sweden’s central bank, cash transactions accounted for less than 2 per cent of the value of all payments made in the whole country during 2016. That figure is expected to drop to around 0.5 per cent by 2020.
Even a significant number of the country’s banks have become effectively cashless. Around 900 or the 1,600 bank branches in the country no longer store cash or accept cash deposits. The number of ATMs across the country has also declined, contributing to a significant drop in the amount of Swedish krona in circulation which has fallen from 106bn in 2009 to just 80bn in 2016.
One recent study by a leading consultancy found, while it might seem counterintuitive, preventing customers from paying with cash can have a positive effect on your bottom line. Taking in cash and checks was found to cost businesses 7.1 cents for every dollar they received while receiving payments from digital sources cost just 5 cents per dollar.
Consumers would gain too across all levels of society. The same survey found that in an average month, those without bank accounts spend up to $15 on cash withdrawal facilities such as check cashing bureaus. If these people were able to switch to digital payments, they could save themselves up to $180 per year in fees.
Although such a move might look as though it might disadvantage the poorest members of society, this is not necessarily the case. In Sweden many homeless people can earn money by selling a weekly magazine known as Situation Sthlm. Last year a charity provided the sellers with readers that allow them to take card payments. Sales have increased by a third as a result.
Although there are certain online security risks that are associated with accepting credit card payments and utilizing internet banking, there are numerous steps you can take, such as keeping all your software up to date, periodically changing your passwords and using two-factor authentication, that you can use to protect your online assets. However, if you have a brick and mortar location and a till behind the counter, it will always be a point of vulnerability.
Another disadvantage of accepting cash is that you then need to have a significant amount of cash available in order to provide people with change, meaning you won’t always have the option of emptying the till and storing all the cash somewhere safer.
From payments to oversees suppliers and employee payrolls to business taxes and license fees, every type of payment you need to make can be online. There is simply no need and no advantage in having cash. Sticking to digital payments means you’ll always have a record of every dollar you spend and, should there ever be a query, you’ll be able to trace an outgoing or incoming payment back to its source and resolve the issue.
With such a huge variety of online methods of moving money around available it’s not always easy to work out which method will suit your business best. Visit Sending Money Online HQ to find out more about the various options for transferring funds over the internet safely and securely.
It could cost less than you think
Some small business owners are well aware of the disadvantages of continuing to accept cash but wary of the cost of upgrading point-of-sales systems in order to move to cashless options. Companies involved in the processing of credit and debit card payments take a small fee for every transaction they put through their systems so it’s no surprise that they are extremely keen to see society move into a cashless era.
You may be able to take advantage of this and get the company to pay for the necessary upgrades to your systems. In the summer of 2017, Visa announced it was offering payments of up to $10,000 to 50 U.S.-based small businesses that were keen to become completely cashless. Although the program is initially aimed at restaurants and other establishments in the catering sector, Visa made it clear that it expects to expand the program in the coming years, both to other industry sectors and into other countries.
It takes too much time
One of the key benefits of no longer accepting cash payments is that you’ll no longer have to take time out each day to visit the bank and make deposits. You and your bookkeeper will also save time when it comes to updating your financial records as, while most accounting software adds online transactions automatically, it requires cash payments to be added manually.