Cash-only businesses: tips for success

Cash-only businesses are exactly what they sound like: businesses which only accept banknotes or coins from customers in payment for their goods and services. In some cases, they pay their suppliers solely in cash too.

But why do some businesses choose to operate this way? What are the pros and cons of going cash only? And how can you run a business successfully without the convenience of card payments?

This guide answers these questions and more. Whether you’re currently researching how to start a business and weighing up different payment options or looking for tips on running a cash-only business more effectively, you’ll find valuable insights and practical advice ahead.

We’ve also got you covered if you’re a cash-only business looking to shift operations or expand into online business ideas. So, keep reading for all the details you need.

Types of cash-only businesses

We know that a cash-only business is exactly what it says on the tin – a business dealing exclusively in cash, with no card machines, point-of-sale solutions, or other digital payment options like QR codes. But how many of these businesses are out there, and what types of businesses choose this route?

Estimates vary as to the number of cash-only businesses UK-wide, but they certainly make up a minority of enterprises. For instance, just 1% of small business owners responding to the HMRC research report “Understanding the use of cash by small and mid-size businesses”in 2021 described themselves as “cash only”.

Despite this low percentage, cash-only businesses can frequently be seen within various sectors. Types of cash-only businesses you might come across include:

• Farmer’s market stalls

• Craft fair stalls

• Food trucks

• Small retail stores and restaurants

• Barbershops and salons

• Bakeries and coffee shops

• Street vendors

• Car boot sales

• Laundry services

• Street performers and buskers

What about suppliers?

As mentioned, some cash-only businesses extend their cash-only approach to dealing with suppliers too. For example, if you’re considering business ideas from home and decide to start a local cupcake business, you might get the supplies you need from a supermarket using cash.

On the other hand, some cash-only businesses stick to dealing with customers in cash while using debit/credit cards and digital wallets to purchase stock and raw materials. 

For instance, if you’re interested in things to make and sell and launch a part-time craft business, you might set up an online business account to facilitate purchases of specialist raw materials online.

It should be noted that even those businesses that deal exclusively in cash with both customers and suppliers will usually benefit from having a business account. That’s because separating business and personal finances makes it easier to keep tabs on your transactions and set aside what you owe for things like Income Tax and Business Rates.

Pros and cons of cash-only businesses

We’ve looked at what cash-only businesses are, but let’s now take a closer look at the potential benefits and drawbacks of this setup.

Pros

Here’s a roundup of the perks which owners of cash-only businesses can expect:

Immediate access to funds

Being paid in cash means you have immediate access to your funds, without the waiting period associated with bank transfers and card payment processing. Your cash flow can be put to use right away for daily expenses, purchasing inventory, or other urgent business needs.

Lower operating costs

Going cash-only means you won’t have to deal with the fees associated with card processing. While debit and credit card merchant fees are rarely prohibitive for low-risk ventures, removing them from the equation might still be good news for your business.

For example, if you’re running a coffee shop, you might find these savings allow you to invest more in quality ingredients or roll out a unique small business marketing strategy.

No chargebacks

One big perk of accepting only cash is you’ll eliminate the risk of chargebacks, which is when customers formally transactions via their bank or card issuer rather than requesting a conventional refund. This can lead to payments being reversed and the money abruptly vanishing from your account, dealing a blow to your small business finances.

Whether you’re running a shop on the high street or working on side hustle ideas at the weekend, accepting card payments means chargebacks are always a possibility. Even if you successfully dispute them, the whole process is a time-consuming hassle.

By only accepting cash, you’ll avoid these frustrations entirely. You’ll also be in no danger of falling victim to chargeback fraud, which is when customers or malicious third parties make chargeback claims for completely legitimate purchases.

Good option for young entrepreneurs

Running a cash-only business can be a great fit for young entrepreneurs, especially those under 18. 

If you’re starting out, keeping things simple is smart. Accepting only cash means you don’t need to worry about the intricacies of managing electronic payments and business accounts, which can be tricky to access if you’re underage.

Say you’re a teenager launching a small dog walking business or a pop-up accessories shop. Handling cash transactions makes it easier to manage your business without needing to juggle different small business payment options.

Cons

While there are benefits to running a cash-only business, it’s important to be aware of the potential downsides as well. Here are some of the key things to consider:

Lost sales

One major con when going with a cash-only setup for your business is losing customers who prefer to pay with cards or digital methods.

These days, the majority of people expect to be able to pay with their card or phone. If you only accept cash, many of these consumers will feel inconvenienced and go elsewhere.

For example, let’s imagine you’re in the food and drink industry running a busy food truck. If you don’t accept cards, customers who don’t carry cash will very likely stroll on to other trucks and stalls which do, potentially significantly denting your bottom line.

Chance of manual errors

Card transactions, whether taking place in person or online via payment gateways, are electronically recorded in a way that negates the risk of human error. 

By contrast, handling cash increases the likelihood of miscounts, which can complicate your bookkeeping processes. A business taking lots of small daily sales, like a newsagent or a café, could find this particularly challenging.

Higher security risks

Managing large amounts of cash can be risky due to theft or robbery. Ensuring the safety of your funds and employees requires additional security measures, which can add to your operating costs. For example, a busy restaurant might need to invest in better security systems and cash management procedures.

Increased likelihood of audits

All business owners should stay on top of their books to prove tax compliance, diligently tracking daily sales, small business expenses, and wastage. However, this is even more crucial if you only deal with physical money, as HMRC is more likely to scrutinise cash-only businesses for underreported income and tax evasion.

More time consuming

Managing a cash-only business can eat up a lot of your time. Although being paid in cash means you have immediate access to funds, it also brings with it some fairly time-consuming extra tasks – from totting up cash sales to trekking to the bank to make cash deposits.

Additionally, if HMRC launches a tax investigation into your business (which is more likely if you only deal in cash), it could take months, if not longer, to resolve. This is time you could spend on other activities, such as learning how to use social media for small business success, or devising new employee retention schemes.

Limits business growth

When it comes to planning how to scale a business, bear in mind that not offering card payment options will slow or even scupper your progress. It means you won’t be able to pursue business opportunities which require electronic transactions, and limits potential partnerships with other businesses which do accept card payments.

Plus, not taking cards will stop you from expanding online, where card payments are pretty much a must.

Let’s say you decide to scale your event planning business by selling event accessories like decorations, party favours, and custom invitations via an online store. Without accepting card payments, it would be impossible to manage online sales and reach a broader customer base.

Keeping your cash-only business running smoothly

There’s no doubt that there are some challenges involved in running a cash-free business, but here are some tips on navigating any bumps in the road.

Keep accurate records

We mentioned the importance of robust bookkeeping for small businesses earlier, but it’s a point worth emphasising.

Accurate accounting is required whether you’re thinking about how to start a side hustle or setting up a limited company. If you plan to operate on a cash-only basis, it’s especially important to get your numbers lined up properly.

Streamline your cash handling processes

Managing cash can be time-consuming, but you can make it easier by establishing efficient processes. For example, by setting up a more efficient routine for counting cash at the end of each day and reconciling your till.

Depending on the amounts involved, you could consider using a cash counting machine to speed up the process and reduce errors.

Implement security measures

Since handling large amounts of cash increases the risk of theft or robbery, it’s essential to invest in security measures like safes, secure cash drawers, and surveillance cameras.

Additionally, rather than letting large amounts of cash accumulate, schedule regular bank deposits to minimise the risk of theft and ensure your funds are secure. Set a deposit schedule that works for your business, whether it’s daily, weekly, or bi-weekly, and stick to established protocols for safe deposits.

Be sure to regularly review your cash handling procedures as part of your small business risk management strategy.

Train your staff

The benefits of training employees, which include minimising operational errors, boosting overall efficiency and enhancing customer service, become even more significant in a cash-only setup.

If you’ve got a team in place to help you run your business, make sure they’re well-trained in handling cash transactions efficiently and accurately. For example, you should teach staff how to spot counterfeit notes, and record transactions as they happen.

Use technology to your advantage

While you may not be accepting electronic payments, there are still plenty of tech solutions which can help your cash-only business run smoothly.

For example, you can use accounting tools to keep track of your small business budget, and if you’re working on how to get clients, you could consider customer relationship management (CRM) software to keep track of customer interactions and preferences.

Focus on customer service

Make sure your customer service is top-notch to make up for the inconvenience of not accepting cashless payments. A friendly, attentive and efficient service can go a long way in compensating for the lack of payment options, and help with customer retention.

Making the move from cash to cards

Even if you start as a cash-only business, it’s worth keeping an eye on the future and consider how you might incorporate card payments or digital methods as your business grows. 

Let’s consider some of the ways you can accept cashless transactions and how your business might benefit.

Card readers

Adding card payments to your setup is a straightforward process, with SumUp offering user-friendly card readers which can either work with WiFi or mobile phone data as standalone devices.

This allows you to start accepting card payments with minimal disruption. The setup is quick, and you can begin processing payments almost immediately.

Digital invoicing

Incorporating card payments into your invoicing process can make client transactions smoother and faster. By sending digital invoices that allow customers to pay online with their card, you can reduce the time spent chasing payments and improve your cash flow.

Digital gift cards

Digital gift cards make it easy to integrate online payment methods into your business. Customers can buy them on your website or via email or social media links, with the eventual recipients using them for future online or in-store purchases.

This not only provides a convenient payment option for your customers but can also help increase sales during slower periods.

Self-service kiosks

In the food and drink, retail, and hospitality sectors, incorporating self-service kiosks can really up your game. These allow customers to place orders and pay with cards independently, reducing wait times, freeing up staff, and boosting your average order value.

Take payments on your phone

With the right merchant services in place for your business, you’ll be able to take card payments over the phone using a virtual terminal. In simple terms, this is a secure web form where you enter the customer’s card details for processing online.

It’s a convenient way to secure bookings and manage transactions remotely, making your business more flexible and customer friendly. It’s especially useful for businesses which regularly take deposits over the phone prior to appointments. For example, dental hygienists or mobile pet groomers.