Banking tips for cash businesses

Mobile apps. QR codes. Biometric transactions. And, of course, credit and debit card payments. While the number of ways to pay for goods and services has never afforded more options, many business owners prefer to run cash-only businesses, and they have good reasons for it.

Some long-time business owners just don’t want to change things or take the time to learn something new. It’s the old “if it ain’t broke, don’t fix it” mentality. Other reasons include the fact that with cash, they can avoid credit card fees, eliminate costly chargebacks and receive immediate payment for goods or services.

Despite all the advantages of running a cash-and-carry business, there are some disadvantages, such as losing potential customers who don’t carry cash, putting yourself at increased risk for an audit and the possibility of receiving counterfeit money or even having your money stolen. But by following a few tips and careful discipline, you’ll be better able to run your cash business safely and without worry.

Keep thorough records

Unlike payments by check or credit card, there are no digital records of cash transactions. That’s why it’s important to create them. This includes recording all cash coming into your business and cash going out.

Have a voucher or receipt pad on hand to manually write receipts if necessary, and keep register tapes of all daily transactions and copies of paid invoices to vendors. Be sure to document the date, amount of purchase or payment, and description of products sold or services rendered. If you have an accountant, they can use your receipts to compile financial statements for tax purposes. Whether you have an accountant or not, it may be a good idea to invest in some type of accounting software to track and compute sales, expenses, inventory and assets. 

You will want to keep at least three years’ worth of records in case your business ever gets audited. It’s better to be overly cautious with documenting cash transactions. You will never say, “I wish I didn’t keep such good records.” The Small Business Administration provides some great tips on record-keeping for small businesses.

Listen to Uncle Sam

Cash-only or cash-intensive businesses often get the attention of the IRS because of the difficulty in reporting both profits and losses. But how do you show cash that didn’t come in? That’s why it’s so important to keep careful records. Document everything.

In addition to being extra vigilant about your own finances, you will need to document those of your customers and employees. For instance, if a customer pays you over $10,000 in cash in any single transaction or two or more related transactions, you must fill out a Form 8300 to provide the customer’s information and report the payment.

If you pay your employees in cash, you must also report any payroll and pay employment taxes. If you don’t, you may not only put your business at risk but also deprive your employees of workers’ compensation, unemployment or retirement benefits.

Keep your customers in the loop

Cash may be king, but so is information. You never want a customer to spend time adding products to their cart or receiving a service only to find out they have no way to pay for them. Make it clear to customers that your business only accepts cash. Include this message on signage at your business’s location, on your website and on social media pages. It may be a good idea to have an ATM machine on your premises for those not carrying cash.

Train your employees

This may sound like a crazy question, but do your employees know how to handle cash properly? For many millennials who grew up with electronic payments, it may not be second nature.

Be sure to train employees on making change, especially if your cash register doesn’t tell them how much change the customer should receive. It’s also important to show employees how to recognize whether money is real. A marker designed to identify counterfeit dollars is one simple and inexpensive way. Get more tips on spotting counterfeit money from the Federal Reserve.

Also, while you’d hate to believe that someone working for you would be dishonest, it’s easier for employees of cash businesses to pocket some of the revenue. Doing thorough background checks, having security cameras on the register and making sure the register receipts and money drawers add up at the end of each shift can help reduce or eliminate employee theft.

Open a business bank account

Last but definitely not least, you want to make sure any money your business takes in is kept separate from your personal assets. This is true for any business, not just cash businesses. The best way to do this is to open a business bank account.

Many businesses open both a business checking account to pay for any expenses and a business savings account to deposit any money that’s not needed for the day’s operations. It’s important to limit the amount of cash you have on-premises for the safety of your employees and the security of your business. Both your business checking and savings accounts will help provide you with the information you need come tax time — and also save you a lot of headaches should you ever be audited.

While most banks require the same documentation to open business accounts, there may be some differences depending on your type of business structure. Check with your bank to find out exactly what you’ll need to open a business bank account.

Getting started

To learn more about ways to make your cash work harder for your business, speak with a Chase business banker.