Social distancing and fears of virus-tainted dollar bills have consumers opting to use less cash for their daily purchases and instead reach for alternative ‘contactless’ payment methods. According to Visa, 63% of customers say they’re using less cash. Some businesses have been encouraging customers to pay with cards, to better maintain 6 feet apart during transactions.
But even before the COVID-19 pandemic, the number of Americans no longer using cash was quickly increasing. In 2018, 29 percent of Americans bid farewell to cash, an uptick from 24 percent in 2015. Many small and midsize business owners had noticed this change in customer behavior and some have considered going cashless.
Cashless businesses are a hot topic for many reasons. Despite the current circumstances, going cashless is not a decision to be taken lightly. If you’re a business owner who is thinking about adopting a cashless business operation, read on to weigh the pros and cons and discover some tips for making such a transition smooth for folks on both sides of the register.
Here are three benefits running a cashless business:
1. It saves time
Time may be free – but it’s also priceless. If you’re a time-starved business owner who is tired of racing from task to task, going cashless could open new time-saving opportunities. Simply put, cash transactions consume more of your time. How much time do you or your employees spend replenishing your cash flow, tallying totals and reconciling amounts to ensure proper change was tendered? Even one hour a week can add up over the course of a year. Many employees (especially younger ones) appreciate working for cashless businesses because of the simplicity. No more counting coins, replenishing cash, or reconciling totals at the end of the day. Replacing cash with neatly organized transactions on a Point of Sale (POS) system eliminates human error (and $100 dollar bills sticking together). Eliminating these manual practices could give you some much needed breathing room and more time to focus on other business priorities.
2. It could increase your sales and encourage higher spending
Cash transactions lead to slower checkout times, longer customer lines and as a result, reduced sales volume.
Moving customers through checkout becomes much faster when staff can simply swivel around a tablet to receive payment. Going cashless can give certain businesses, like cafes or fast-casual eateries, the competitive edge of faster service (especially during morning and lunchtime rushes). Customers are also likely to spend more when they use alternative payment methods to cash. Multiple studies confirm that customers will spend up to 100 percent more when using their credit card to pay instead of cash! Card companies further incentivize this behavior by offering cash back rewards or airline miles.
3. It cuts back on potential theft
Simply put, it’s really easy to steal cash. Running a cash business increases the potential for robberies. Due to the pandemic, economic uncertainty remains high (over 1.3 million Americans have applied for unemployment benefits). Employees faced with hard times may be tempted to dip into the petty cash fund, which owners have on hand to replenish cash registers.
While there are many attractive benefits to running a cashless business, it’s also important to acknowledge potential drawbacks.
1. It costs money to go cashless
Cash payments are immediate and free of fees. Many business owners hesitate to go cashless because of the transaction fees associated with alternative payment methods. Will the savings in time and the potential for more (higher dollar) sales outweigh increased transaction fees? It’s a valid question. At the end of the day, only you can decide what’s best for your business. Before closing the door on going cashless, it’s important to know that businesses with higher transaction volumes can negotiate lower fees.
2. In some areas, running a cashless business is illegal
Depending on where you live, you may not have a choice in going cashless. In certain cities and states, proponents are pushing to ban cashless businesses. They believe cashless businesses could discriminate or exclude individuals who do not have access to a bank account or credit card. In October 2019, Philadelphia became the first major U.S city to officially ban cashless businesses.
Chicago attempted to enact a ban on cashless businesses in 2018, with no success. While other major cities and states have considered banning cashless businesses as well, the 2020 pandemic could have the potential to reshape attitudes on the bans. Recently, a more comprehensive, bipartisan Senate bill was introduced to prohibit retailers from declining cash payments from customers.
3. You may deter certain customer segments
Don’t forget to factor in your clients into the decision making process. If your business is located in an area with high estimated poverty levels or primarily serves older customers, think twice about going cashless. For some customers, cash is their only option. Some owners have faced customer backlash in the form of online complaints and social media boycotts. Would a cashless policy be more of a burden or convenience to your customers?
You can use data and technology to analyze if going cashless is worth it. Some POS technologies have special transaction dashboards that deliver helpful insights. These dashboards track the volume and value of transactions that are paid with cash as a percentage of total sales each month. Look for patterns in your customers’ cash payments and take note of the following:
- Which demographics pay cash?
- Does these clients make up the base of your business?
- Do they have alternative forms of payment and could they transition away from cash easily?
- Can you afford to lose clients? Be real about who you are willing to give up.
Also, it never hurts to run the idea past your customers and collect feedback. Ask them if they would be ready for this type of transition.
Making your decision
If you’ve considered the pros and cons as well as client insights and decided to kick cash to the curb, make the transitional gradual. Everyone – you, your staff and your customers will need time to adjust. As you transition to a cashless business, it’s important to allow some flexibility in your policy. After all, your goal is to keep your customers. Keep some cash on hand or consider allowing your staff to give the occasional freebie to a customer who only has cash. Offering these accommodations will help cultivate good will and loyalty.
Finally, be sure to thoroughly communicate your transition. Place easy-to-read signage throughout the store and post regular reminders on social media channels. Remind your customers at the point of sale. Make sure your customers get the message and have plenty of time to process it.
By Deluxe.