Small businesses rightly want to maximise their revenue and reduce costs, and therefore it is completely understandable that they look at the costs of processing credit card payments and opt to take cash or bank transfers, where possible. However, while they may save the 1.75% transaction fees, it is not as simple as that: relying on cash or bank transfers has many drawbacks that survey evidence shows can cost a business much more than the transaction fee. Worldpay indicates that the cost to a business is £23145 per SME. And that cost doesn’t just reply to retailers who are taking payment instore, but to trades people and all others offering services in the field like, for example, cleaners or personal trainers.
Read on to find out exactly what those drawbacks are and how a card payments solution can help you optimize revenue and track payments.
Make Sure You Don’t Lose Customers
According to the UK Payments Market report, in 2019 the number of people who only used cash once a month doubled to 7.4 million from just two years previous to that - While we know that number has also significantly accelerated during the pandemic. In addition, in that same year, card payments overtook cash as the first choice to make payments at 51 percent of all payments in the UK in 2019.
In short, if you are not offering your customers the opportunity to pay by card, you will lose business opportunities. This is not just for retailers where insisting on cash will unfortunately lead to customers walking out empty handed or promising to go to the cash point and ‘can you keep it for me’ but never coming back. It also affects those in the service industry both those who make home visits and those you work online. Do you think that if a customer must go to a cash point to get cash, they will use your cleaning or handyman business again? You just severely inconvenienced them. Not to mention it wasted a lot of time and was inefficient for you. You can always offer to send them an invoice but that has its issues that we will cover later.
Alternatively, it can lead to not having enough change.
Safety and Hygiene
With coronavirus it is imperative to offer credit payments for safety reasons. You don’t want to handle cash that may potentially have coronavirus on it, and, more importantly, how do you think your customer will feel if they have to take change from you – In particular, when they know you have been going to numerous households.
Get More Sales
People spend more when using cards compared to cash. Ever wandered around a shop and discussed with your friend, or yourself, if you have enough money for something? Put a few items back? You are not alone; your customer is doing the same. And, while most of them have a budget, a card enables them to go over a little, cash does not.
Reduce Late and Non-Payments
An unfortunate statistic is that about 50,000 small businesses go under every year because of late payments and suffer because of non-payment. This does not only affect freelancers and agencies who are waiting for payments from larger companies they invoiced, but also trades and service businesses taking payments from their customers. In the case of large companies who simply refuse to pay invoices on time little can be done from offering them card payments; however, for those self-employed in the service sector, offering card payments can help.
For example, cases of late and non-payment can arise when a driving instructor, cleaner or plumber does a job and then expects cash payment before it starts. In the event a customer says they don’t have any cash it creates an awkward situation in which the business has to decide to go ahead and provide the service or walk away. It is likely that they will opt to go ahead and then must chase the payment at another time. Card payments can resolve this as it is extremely unlikely that the customer has no card in the house.
In the event, it was agreed to invoice the customer, invoicing with a built-in payment link to pay with a card, offers the customer a much faster and convenient way to make the payment. They don’t have the excuse of needing to open up and login to their online banking.
Efficiently Track Payments
Card payments offer an ability to track payments much more efficiently than cash or simple invoicing solutions. While these solutions have the ability to organize your invoices and customer accounts, they, as they are not linked to the actual deposit of the money, mean you have to spend your time between logging into your bank account to track payments and then updating manually to their record. A payments solution provider with card payments can automatically track all of this so you know exactly when you have been paid and by whom.
Note: not all card payments solutions providers will provide the software to seamlessly create quotations, invoices and track and organise your payments and customers.
Administration of Cash versus Cards
Whatever the size of your business cash is less efficient and more time consuming to manage.
Closing and Open the Cash Draw – Counting up cash at the end of the day and then preparing a cash draw in the morning with the correct amounts of suitable change takes time – Especially when there are count issues.
Security – Cash collected by hand needs to be deposited at the bank and for larger organisations that can even mean security costs. While you don’t need an armored truck when you are self-employed, if you expand your business and start to have several employees and they are all taking cash, you will have to think about whether they are robbed, and where the cash is stored at the office. This is a headache for security and administration as can result in more costs in terms of better alarm systems and security guards.
Visiting the Bank – Going to the bank to deposit money takes time and with coronavirus queues are longer. If it takes you an hour travelling to and depositing cash what is the cost to your business?
More easily Organise Tax Commitments - HMRC dictates that transactions are recorded in a way that enables them to check your turnover. A good payments solution will automatically organize those payments and invoices, saving you significant amounts of time.
No matter if you are a sole trader, doing freelancing work, you can benefit from accepting card payments and may find that the hidden cost of accepting cash and bank transfers outweighs the cost of the transfer fees. Hoof's mobile point of sale solution enables you to take payments any way you want and organise those payments better. Contact us to learn more.