In today’s digital world, it’s hard to believe that many U.S. small businesses still do not accept credit cards. Think about it, when was the last time you wrote out a check to your local grocery store? Or paid for a nice dinner with a wad of cash?
Although reasons for running a cash-only operation are understandable, research shows that cash payments are plummeting, resulting in $100 billion in untapped annual sales. If you’re thinking about starting a business or accepting alternative payment methods, here are 6 good reasons to choose plastic over paper.
Reason #1: Improved Cash Flow
With the majority of consumers citing debit and credit as their preferred method of payment, not only can accepting credit cards aid in expanding your customer base, it can also help merchants shorten funding times, resulting in increased cash flow, which is crucial for business growth.
When using a fully-integrated payment processing solution to accept credit cards, deposits typically occur within 24-48 business hours, reducing the time and expense of sorting and transporting funds to the bank and speeding up your payment cycles.
Reason #2: Accurate Accounting
Cash payments don’t leave a paper trail, making it harder to reconcile accounts. This makes it more difficult to keep accounting records organized and increases the likelihood of an IRS audit.
Cash-only transactions are a red flag to government officials, raising suspicions of omitting income. Diversifying your payment options helps ensures you have some kind of paper trail, improving your ability to reconcile accounts and minimizing the likelihood of an audit.
Reason #3: Increased Average Ticket Size
Customers typically spend about 18 percent more when paying with credit cards. Experimental research shows that by removing cash from the equation, you encourage people to spend more. In some cases, customers are willing to spend up to 100% more when using credit cards to make a purchase.
Additionally, if you are running a cash-only business you are creating unnecessary friction in the mind of the customer during the transaction process. Handing over a credit card instead of cash requires less thought on behalf of the consumer, and one of the biggest differences between a cash transaction and a credit card transaction is the delayed effect of seeing your combined credit card spending when the statement arrives.
This delay encourages overspending amongst consumers who use credit cards to make their purchases. Not so great, for customers with poor spending habits, but, great for business. This is especially true if you sell products with sensual appeals such as lotions, perfumes, cosmetics, or clothing.
This leads us to the next benefit…
Reason #4: Enhanced Customer Service
There is no better way to lose a customer than increasing friction at the point of sale. Accepting credit cards is not only convenient for customers, it offers them more choice, flexibility, and also improves transaction speed.
Adopting mobile transaction technology such as a tablet-based point of sale system further enhances the customer experience by empowering staff to complete sales transactions from any location within the store.
Reason #5: Expanded Customer Base
In recent years, the percentage of people who use credit cards as their sole method of payment has risen with more than half of all credit card holders using their cards for everyday purchases.
Additionally, the surge of cash alternative technologies like Apple Pay is proof that money is becoming increasingly digital. In fact, 50 percent of Americans say they carry no less than $20 cash in their wallet, and 10 percent say they don’t carry cash at all. If you’re a ‘cash-only’ merchant, you’re unknowingly limiting your potential customer base.
This is especially true amongst millennials, who prefer using plastic for purchases even when the amount is less than five dollars.
Reason #6: Minimize Security Risks
Keeping large sums of cash on hand is a security risk for small business owners. The less cash you have on your premises, the less attractive you’ll be to criminals and corrupt employees.
If you’re thinking about starting a business or expanding your current payment options, accepting credit cards is an excellent way to increase sales, improve cash flow and minimizes some of the risks associated with running a small business. If you’re still unsure if accepting credit cards will benefit your business, speak to a payments provider to determine how much credit cards will cost you annually, in comparison to the potential profits you could be losing by denying customers that option.
How to Accept Credit Card Payments in Your Small Business?
For business owners with consistent transaction volume, we highly recommend a point of sale system as the go-to solution for accepting credit card transactions. Not only does a POS system empower you to accept a variety of payment types, it can also help you automate and simplify cumbersome day-to-day tasks such as inventory management, employee tracking, and customer marketing, saving you time and money in the long run.
Before you venture into the world of credit card payments, remember, not all point of sale systems and payment processing solutions are created equal. Before you sign up for a service, make sure to do your research to ensure that their services and fees will be a good fit for your business now, and in the future.