The Simple Pros and Cons of Accepting Cash in Your Small Business

Should Your Retail Store Stop Accepting Cash Like Other Cashless Businesses?

A growing number of small and midsize businesses are going cashless—accepting payments only by debit card, credit card or mobile wallet. The Los Angeles Times is one of several outlets reporting on the trend. Last year Visa held a “Cashless Challenge” giving $10,000 to each of 50 small business owners who went cashless. Winners were uniformly enthusiastic about the benefits of being cash-free.

Cashless Businesses on the Rise

So far, the no-cash trend is mostly limited to restaurants, usually fast-casual chains that want to keep lines moving during busy day parts. However, 44% of consumers in a TSYS survey prefer paying with debit cards and 33% prefer paying with credit cards; just 12% prefer using cash. Is the time approaching when going cash-free in your retail store will be a smart move?

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Cash Cons

Entrepreneurs who’ve banned cash payments tick off a list of complaints about cash:

  • Cash payments slow down the line at the register as customers count their money and salespeople make change.
  • Having cash in the register makes a store more susceptible to employee theft and can also expose employees to the risk of robbery. You and your employees may not feel safe leaving the store at closing time with a lot of cash to deposit.
  • The time needed to count and recount cash, reconcile the registers at the end of the day, and take cash to the bank to deposit could be better spent on growing your business and providing better customer service.
  • Accepting cash means you risk accepting counterfeit bills by mistake, particularly if you accept bills over $20 in denomination.

Cash Pros

Of course, there are some reasons to accept cash, too.

  • You get the money immediately — you don’t have to wait for a payment to process.
  • Unlike credit card payments, there’s no merchant fee to your business for accepting cash.
  • By not accepting cash, you’re shutting out some customers, such as:
    • Teenagers who may not have credit cards or bank accounts but have cash to spend
    • People who prefer operating cash-only as a budgeting tactic
    • People who don’t have bank accounts, have bank accounts without debit card functionality, or don’t have credit cards. According to the Federal Reserve, 5% of Americans are unbanked (meaning they have no bank account) and 18% are underbanked (meaning they have a bank account but frequently use alternative financial services like payday lenders and check cashing services).
    • A bill introduced in Washington, DC, last year would make it illegal for retail food businesses to insist on card payments, based on the belief that refusing to accept cash is discriminatory against low-income consumers.
  • Before you decide not to accept cash, you need to assess the risk of offending some customers who may stop shopping at your store.

Ready to Ban the Buck?

Before you ban cash, do some math to make sure if it’s worthwhile for your business.

  • What percentage of your customers actually pay by cash? Track this for a month.
  • How much time do you and your employees spend dealing with cash (counting cash, reconciling registers, and making trips to the bank?) Track this for a month.
  • What type of merchant card fees are you paying to accept payment cards or mobile payments? How much does this add up to in a month?
  • Is your bank charging you to accept cash deposits?

It may actually cost you less to go cashless when you add up the time saved. (And check with your insurance agent to see if going cashless will lower your store’s insurance premiums.)

Federal law does not require a business to accept paper bills or coins. According to the Treasury Department, “Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.”

If your state laws say you’re in the clear and you decide to go cashless, you must also inform customers of your no-cash policy before goods are exchanged. You can easily do this with signage in your checkout area.

Not ready to go totally cash-free? Do what a growing number of entrepreneurs are doing: Post a polite sign letting customers know that you prefer card or digital payments, but that you’re happy to accept cash, too.

Photo via Shutterstock


Rieva Lesonsky Rieva Lesonsky is a Columnist for Small Business Trends covering employment, retail trends and women in business. She is CEO of GrowBiz Media, a media company that helps entrepreneurs start and grow their businesses. Visit her blog, SmallBizDaily, to get the scoop on business trends and free TrendCast reports.

3 Reactions
  1. The pro is that it increases cash flow. The con is that some people prefer buying with their card.

  2. The other thing to consider is how many tiny sales you have. My business isn’t retail, and we have few cash customers at the high end, but we offer copier services to the public. If somebody is paying 15 cents to copy a single page I don’t want to pay a 30-cent transaction fee for the debit card!

  3. I find it odd that the Treasury Department made the statement, “Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise.” I find it odd because you can find this statement printed on US cash, “This note is legal tender for all debts, public and private.” If cash is legal tender, can a business refuse to do business with a cash-paying customer? Can the business NOT agree to the customer DEBT and therefore NOT accept cash payment? I don’t know the answer, but I would like my question added to the debate.

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