Cashless Business: Pros and Cons of Going Cashless
Cashless businesses are more efficient and more secure, but they have their drawbacks. Learn whether going cashless is right for your small business.
Head of Growth
While we may never see a totally cashless society, going cashless has been a rising trend because it eliminates a lot of challenges that come with running a business. According to a 2021 analysis based on Square payments data, the number of American companies that have gone cashless has doubled since the pandemic began, due in part by the need for contactless payments. Square says that up to 18% of companies that use its service have gone cashless.
Going cashless in business has both pros and cons. Most of the time, the advantages outweigh the disadvantages, but if you’re considering going cashless, you should make sure that you look at all the possibilities.
Cashless business payments can reduce fraud and crime rates as well as decrease the amount of money spent on security measures. However, there are some drawbacks to going cashless such as higher fees, excluding some customers, and privacy concerns.
In this article we will go through the pros and cons you should consider before deciding whether to go cashless. By looking at both sides, you can make an informed decision about what is best for your business.
Reduce operating expenses: The first major benefit that going cashless provides is saving time on counting change or sorting out bills after a long day's work. Less time spent counting means more time spent on other tasks, such as customer service or product development.
Save money: It's expensive to process and handle cash, especially for a small business that doesn't have a high volume of transactions. Going cashless reduces the chance of mistakes when handling change as well as the need for safes and company procedures such as counting bills at the end of the night to ensure nothing is missing. Larger companies can benefit from reduced expenses when it comes to security guards or armored trucks to transport cash.
Convenience: It is more convenient to use electronic payments than cash for both consumers and businesses. Cashless transactions are faster, which means that customers will not have to wait too long to be served. It also makes it easier for business owners to manage their funds and accounting.
One of the biggest benefits of going cashless is that it makes it easier to track inventory. If you are using a POS system then you will be able to see all the products that are on your shelves at any given time. Once you know the number, it's easy to decide what needs to be purchased and when an order needs to be placed online. This means that there will never be overstock or out-of-stock items, which will save your company money in the long run.
You are eliminating the risk of cash registers being robbed, you are reducing the chance of being ripped off by malicious employees, and you can rest easier knowing that your cash is secure. A reduced cost of security means more money to invest back into your business either through new products, services or marketing and advertising campaigns.
Customer experience is a major driver for any business. In 2021 the digital world has led to great changes in how customers are treated. The use of technology has also changed how customers interact with businesses and what they expect from them.
Businesses that take the cashless route are improving their customer experience by offering convenience and security. Security is particularly important in retail, where cashless transactions will increase customers' trust.
With credit card transaction fees as high as 3% or 4%, company owners spend a considerable amount on credit card transactions each year. Because of this cost, many small companies still only accept cash or charge a fee for credit card transactions.
To combat this some companies include credit card fees in their rates, which may result in some consumers being lost to the competition or dissatisfied when they see their bill. You'll need to crunch some numbers to see how much this might affect your business. Negotiating rates with credit card processors is sometimes possible but they will often demand seeing high transaction volumes before considering it.
One of the biggest cons of going cashless is that it excludes certain customer segments. If you are not able to provide a cash payment option, you will be losing out on customers who are unable to make purchases because they don't have one of the accepted methods of payment.
Some customers are not comfortable using credit cards or can't even afford to do so. Some market research and surveys on your buyers may be beneficial to see how many of them are open to you going completely cashless.
Privacy concerns are one of the biggest arguments against going cashless in your business. There are many ways that you can lose privacy when you go cashless - credit card information could be stolen and hackers could find out what purchases are being made in your business.
Consumers have to share their data with vendors and retailers when they use cards at checkout, which can lead to hackers gaining access to their financial information.
When you think about going cashless in your business, there are some considerations to make. For instance, if you live in a city that has a high volume of cash-based customers, then you might not want to go completely cashless.
While the trend of cashless payments is growing, there are still many people who prefer cash transactions for certain purchases. It's important to explore what your customers would want before you go cashless with your business. For example, if you own a coffee shop then research has found that 32% of your customers prefer to use cash when purchasing from you.
Is going cashless legal for your business in your State?
According to USA Today, no legislation in the United States mandates companies to accept cash, although municipal regulations may demand it.
This is a big consideration for you to research before you even start putting a cashless plan in place. Philadelphia enacted a bill in 2019 prohibiting shops from becoming completely cashless. Note that the legislation exempts companies such as parking garages, retailers that operate on a membership basis, such as Costco, and transactions that require a security deposit, such as vehicle rentals.
When you decide that it’s time to go cashless, you should let your customers know in advance to let them prepare. There are a few different ways to do this. You could place a sign in your store, send email notifications to your customers, post on social media and/or put up a sign at the register.
The most important thing is that your customers know how they can pay with the new system so there is no confusion or inconvenience for them when the day of switchover comes.
It is very important to offer multiple payment options when running a cashless business. Many people would prefer not to use credit cards or do not have debit cards, so they will need other ways of paying for what they want. Venmo, Paypal, and Cash App are all good examples of mobile payment methods that you should consider offering to customers.
You can also offer your customers loyalty cards or gift cards, and you can partner with a payment app. For example, if you're a restaurant owner you can partner with companies like Door Dash.
Apple Pay has already made a significant impact in the market and will continue to grow over time because it's convenient, easy to use, and very secure. Payments with cryptocurrencies such as Bitcoin are also something your business might consider. They offer consumers more control over their transactions with no chargebacks.
Payment fobs, Google Pay, and biometric payments are also on the rise in popularity and are methods you can consider for your company.
You should also work to reassure your customers about credit card security. You can do this in a variety of different ways such as offering a refund policy, using security measures like chip and PIN payments, and including a line in your receipts that reads something along the lines of: "We're using the latest technology to safeguard your payments."
In the past, cash was king. These days, cashless payments have been gaining a lot of popularity, and for good reason. The pros of going cashless usually outweigh the cons because it increases convenience for customers and saves companies time and money.
If time efficiency is important to you, consider going cashless. Digital payments can be processed more quickly than traditional forms of payment, which helps reduce wait times at checkout counters and allows employees to spend less time counting money.
There are many benefits you can get from going cashless in your business so it's worth starting your journey with it today. The tips above will give you a strong foundation to begin.