Do you have questions about accounting practices for your small or medium size business?
As a client of Hodgson CPA Accountants and Advisors, you can count on us for consulting on best-practice accounting for your business.
Here are some common questions:
Is your business a cash only business?
Credit and debit cards are in use every day, everywhere you look. Many consumers assume that they will have the option to pay with plastic anywhere they go. If you’re considering accepting credit cards, you need to know that doing so will increase your cost of doing business and create additional work for you or your bookkeeper. At the same time, limiting your customers’ payment options by not accepting credit cards might cost you potential business. When it comes to remaining cash-only or accepting credit, here are a few advantages and disadvantages to consider.
The upside to cash-only
- You’ll have the funds on hand immediately, with no waiting period.
- You won’t pay any third-party fees.
- Cash involves almost no risk of fraud (with the exception of the chance of receiving counterfeit bills).
- Cash transactions allow your bookkeeping to remain at its simplest.
- The upside to accepting credit cards
- Plastic is quickly becoming the most common form of payment.
- Convenience is a key factor in an impulse purchase – your customer can’t make an unplanned decision to buy if he has no cash on hand and is forced to walk away because you don’t accept credit cards.
- Some customers only use cards and simply won’t buy your product or service if they can’t.
Here’s the flip side –
The downside to cash-only
- Keeping cash on your premises presents an increased security risk.
- If your customer doesn’t have enough cash on hand, he or she will be forced to walk away from the purchase.
- Some customers will only buy from merchants who accept credit cards.
- The IRS may require additional paperwork – particularly if you accept large sums of cash or cash equivalents (money orders, cashier’s checks, bank drafts) from a single buyer. The IRS will also require information about the buyer, including that person’s social security number.
- The downside to credit cards
- You’ll probably have to purchase or lease new equipment for processing credit card transactions.
- Credit cards are susceptible to misuse, and you may be required at some point to forfeit the amount of a sale that turns out to be fraudulent.
- You’ll have to pay fees. They vary by financial institution, but it’s not uncommon to pay a flat fee per transaction, plus a percentage of the dollar amount of the same transaction.
- Credit and debit card transactions add time and a layer of complexity to your bookkeeping.
What’s your best option? You’ll have to weigh the pros and cons and decide whether the cost of accepting credit cards is greater or less than the cost of missed sales opportunities. In some industries, you can feel comfortable remaining cash-only. On-location service providers like landscapers or caregivers are examples of businesses that may be fine operating as cash-only for the foreseeable future, as is any business that is unlikely to benefit from impulse purchases. However, if you have a storefront or if you think your customers might buy more if you made it easier for them to do so, you would be wise to research credit cards options and costs. The most important factor to consider is, of course, the effect on your bottom line.
If you have any questions about the services that we provide or general accounting software questions, please contact one of the software consulting team members listed below.