Are small businesses that don’t accept credit cards as rare as a northern White Rhino?
Believe it or not, businesses that are cash-only are far from an endangered species. In fact, according to the National Federation of Independent Business, more small businesses don’t take cards than do (51% don’t; 49% take cards).
There are several reasons why small businesses don’t accept credit cards, chief among them, the 2 to 3 percent processing fees for each transaction. If you’re the owner of a restaurant and your business is only netting the average-for-the-industry 3-5 percent margin, you may indeed give a cash-only policy serious consideration.
In addition, other reasons why cards aren’t taken at stores are:
* Chargebacks: if profit margins are slim to begin with, credit card disputes can further eat into the bottom line.
* Cook the books: although it’s illegal, some businesses can have a lower tax burden if they do not report 100% of their sales; cash payments make it easier to fudge the numbers.
* Immediacy: cash payments are instantaneous; card payments can take up to a few days to show up in a business account.
Considering 50% of small business fail within 5 years, it’s easy to see why small business owners do everything in their power to maximize profits.
Cash Only Biz? Do You Know How Much Revenue You’re Missing Out On?
But does not accepting credit cards in the end actually working against the small business owner’s best interest?
According to Finder, a number-crunching data website, yes, you may be shooting yourself in the foot if you don’t take credit card payments. The data from Finder estimates businesses choosing not to invest in a card transaction facility are losing an estimated 11.8 million customers.
To put it another way, if your small biz does $2 million a year as a cash-only operation, your earnings could be $73,000 more.
Granted, these findings are based on a survey of just 6,800 or so people in a country of well over 100 million shoppers. But if the survey is at all representative of consumer attitudes in the U.S., this means nearly three-quarters (73%) of shoppers will leave a store if credit card payments are not accepted—if they lack the cash to make the purchase.
If Potential Customers Don’t Have Cash, Will They Come Back?
If you’re a small business owner who is thinking about going cash only, consider that, according to the survey, less than 30% of people who don’t have enough cash on hand will go find an ATM and come back to your store.
Let’s play devil’s advocate though. Say you’re the owner of a food truck. And your Korean BBQ tacos and other Asian fusion delicacies have garnered rave reviews. Subsequently, you’ve built a large following. Anybody who stands in line for your food knows as fact like the sky is blue that you are cash only. Maybe then, there might not be a need to take cards. But businesses like this may indeed be more of a rare breed than the typical small neighborhood shop that doesn’t take cards simply because the owner doesn’t want the hassle of dealing with banks or is weery of the processing fees.
Innovative Point of Sale Systems: Way More Than Payment Processors
But if you’re thinking about operating a new food truck or opening a neighborhood eatery, restaurant point of sale systems (POS) these days make it ridiculously easy to handle transactions. Moreover, the best-in-class POS can do way more than process credit card orders. They also track inventory, manage employee hours and payroll, analyze sales data and provide reports and much more. And if you want to reward your best customers, you can launch a loyalty program with a POS.
In light of this, even if your profit margins are slim to begin with, a POS offers business management services that make running your business easier and potentially more profitable.
Cash Only = Less Cash For You
Another thing to consider if you’re cash only is that people tend to spend more when they can use a card. In fact, people with cards typically spend up to 20% more on an average transaction, in comparison to a cash-only payment.
Thus, if you’re concerned about monthly and per-transaction fees, in the end, those fees may be at least washed out if your customers end up spending more than they normally would with cash-only transactions . Plus, they will appreciate the fact they have the choice to either use cash or credit card.
And considering that people are carrying less cash these days because of the rise of mobile payment options, it’s wise to accept multiple forms of payment, including credit cards.
Interested in a POS that can both help you manage your business and easily process multiple forms of payment? Contact us for a demonstration.