Should Your Small Business Accept Cash?

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Cash may be king, but more and more businesses are going without it. That begs the question: Do businesses have to accept cash?

In most locations, they’re not required to accept cash, but there may be some legal pushback. For instance, New Jersey and Massachusetts banned cashless shops and restaurants, claiming cashless businesses discriminate against people who don’t have banks, generally those with lower incomes, noted Ars Technica. Such laws may crop up more often as cashless establishments become more common. Even without such laws, some companies might be pressured to accept cash. For example, Amazon backed down from its decision to go cashless in its new physical “Go” stores, reported CNN.

Even so, if there aren’t these laws in your area, the ease of using electronic platforms may be a reason to give up on cash. From traditional credit and debit cards to options like Apple Pay and PayPal, there are plenty of cashless payment methods. Here are the pros and cons of making the switch.

Man pays for food and wonders do businesses have to accept cash

Pros of Cash

Consider the trends. A Federal Reserve study published in late 2018 found that:

  • Cash is the most frequently used form of payment, representing 30% of all transactions and 55% of transactions under $10.
  • Consumers across all age groups pay with cash.
  • Cash is the most common form of payment for people in households with earnings below $50,000.
  • The proportion of consumers who pay in cash hasn’t changed significantly in recent years.

In a nutshell, the study suggested that choosing to go cashless may not be in line with consumer trends. And cash still is king in terms of getting immediate credit for payments, which helps you maximize your working capital. You also avoid paying merchant fees associated with most payment systems.

Cons of Cash

Still, here are some reasons to consider going cashless:

  • Processing cash payments at the checkout counter can be time-consuming, as cash-paying customers need to count their money and the cashier may need to provide change.
  • Your risk of theft, either by employees or robbers, is higher.
  • You may need to pay for an armored car service to transport cash to your bank.
  • You may risk getting burned by counterfeit bills.

Deciding Whether to Go Cashless

So, do businesses have to accept cash? Not in all cases, but should yours? The following questions may help you reach a decision:

  • What percentage of your customers pay with cash?
  • What proportion of your total sales volume do cash payments represent?
  • How much are you paying in merchant fees for card-based payments?
  • How much time do you or your employees spend adding up and reconciling cash receipts?

After your analysis, if you conclude that you do want to move toward a cashless payment environment, give your customers ample warning. Communicate the benefits to them, including faster service. If appropriate, you can also explain that the savings it will bring to your business will be shared with customers.

Unless there are laws in your area, there’s no right or wrong answer about whether to accept cash. Make the decision based on what makes the most sense for your business.

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