Cash-Only Businesses at Risk

In a world where technology is progressing constantly and is almost inescapable, several small businesses continue to operate as cash-only. These businesses are suffering tremendous losses by failing to acquiesce to modern operating standards. Accepting credit cards leads to long-term benefits such as earning and retaining new customers and increasing sales. According to Intuit, the Silicon Valley software firm that develops financial and tax prep solutions by not accepting cards, fifteen-million businesses are missing out on $100 billion in sales annually—about $7,000 per company annually in either new sales or sales that go to competitors that do accept cards.

According to a study by Javelin Strategy & Research, 27 percent of all in-person POS purchases were made with cash in 2011, whereas credit card payments made up 66 percent, a figure that’s expected to rise.

“I don’t understand the small businesses that don’t take cards,” said Jason Richelson, a former grocery and wine store owner in Brooklyn and founder ShopKeep POS, a cloud-based point-of-sale software, in 2008. “In my opinion, as a grocery and a wine store owner, if you don’t take credit cards, you suffer—you could be increasing your sales 20 percent and you’re going to make your customers happier.” Another perk to accepting credit cards is that customers end up spending more money. The average spend per transaction is 120 percent higher when customers pay with credit card compared to cash, just considering ShopKeep’s 7,000 merchants alone.

For almost a decade Joe Coffee in New York accepted only cash. Not only was it more profitable since they could avoid credit card fees, but it coincided with the company’s Mom-and-Pop philosophy. After reading dozens of negative reviews on yelp about Joe’s not accepting credit cards, they realized losing current and future potential customers would ultimately lead to a loss of sales. Joe’s progression to accepting credit cards proved so successful that now ten locations take plastic.

Bhaskar Chakravorti, senior associate dean for international business and finance at Tufts’ Fletcher School points out, “as everyone becomes a lot more familiar with doing things on their phones, if the next store over offering the same set of products accepts electronic payments, then you’ll be losing business.”

The takeaway here is, keeping up with technology is crucial if you want to stay in business and be profitable, even for mom-and-pop shops. Customers thrive off convenience, and that usually comes in the form of a plastic card.

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