Cash, Check or Credit?
Does your business accept cash, credit
cards and checks? As a business owner, you need to be smart about how you
handle these transactions. Learn about how you can manage these transactions in
our three part article series from the Small Business Administration.
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CASH
ONLY
Cash is the most commonly accepted and
reliable form of payment for a business. Many small businesses operate as
"cash only" merchants. Years ago this wouldn't have been uncommon, but with advances in technology, business owners must ask themselves if they're
hurting their bottom line by limiting payment options.
If you're thinking about starting a cash only business or if you're considering expanding your payment
options, be aware of the pros and cons of only accepting cash.
Pros
of accepting only cash:
· Cash payments ensure
that businesses receive funds immediately. With each transaction,
your business immediately receives the appropriate payment amount without
the worry of waiting periods or not getting paid at all.
· Cash is the simplest
form of payment and therefore involves less bookkeeping. For a business, that
not only means less stress and hassle, but it also may save money in the time
and labor it would take for a bookkeeper to record other payments methods.
· There is limited risk
of fraud when accepting cash only. There are cases of counterfeit cash
payments, but compared to other payment methods, fraud is much less common in
cash transactions.
· Cash only businesses
don't have to worry about third parties or fees associated with other payment
options.
Cons
of accepting only cash:
· Customers who do not
have enough cash on them will have to walk
· Your business may lose
customers by only accepting cash. As card payments become more and more
popular, many consumers expect this to be an option when making purchases. If
they find that a particular business only accepts cash, they may feel
inconvenienced and shop elsewhere.
· Keeping large sums of
cash on your business's premises increases the amount of time you'll spend
managing finances and also creates an added security risk.
· The IRS requires that
you file a Form
8300 if your business receives more than $10,000 in cash from one buyer as
a result of a single transaction or two or more related transactions. The same
rule applies to cash equivalents such as traveler's checks, bank drafts,
cashier's checks, and money orders. The form requires the name, address,
and Social Security number of the buyer.
The nature of some small businesses may
make it smarter to stay cash only. Flea markets, street vendors, and lawn
service providers are just a few examples of common cash only small businesses.
At the end of the day, you will have to decide which payment options will
create the most success for your business.
