We’ve all seen it – the little food truck that accepts credit card payments using a Square credit card reader connected to a mobile phone or the craft fair vendor that tells you about their online Etsy shop and gladly completes sales using the Etsy Credit Card Reader.
Technology advancements in the last 5 years have simplified the process for accepting cards and it’s now as simple as connecting a low cost, or even free, card reader to your mobile phone. This has put accepting credit card and ePayment methods within reach for most small business owners.
Now, more than ever, consumers and producers are shunning cash as their preferred method of purchasing and shifting to credit, debit and electronic payment options. Drivers of this change include the increased convenience, security and even travel rewards provided by newer payment methods. Yet most small businesses are not taking advantage of this with Forbes reporting that 55 percent of the United States’ 27 million small businesses do not accept credit cards.
As successful small businesses recognize the value of accepting card payments, the old “Cash Only” signs are disappearing and there’s a shift in how owners are choosing to run their businesses. This is the rise of card and electronic payments.
This shift in the payments economy is projected to cause the value of point-of-sale cash payments in the US to shrink by 10% between 2012 and 2019, while the rest of the payment economy is expected to grow by more than 11% over the same period.
And it’s not just cash. According to the Federal Reserve, the use of checks in the US has fallen more than 50% since the year 2000 and is projected to continue to fall as businesses look for faster, more secure means of paying and being paid. Checks tend to be the payment method most susceptible to fraud – affecting both payers (unauthorized or fraudulent checks drawn on accounts) and payees (bounced or fake checks received for goods and services).
The Cashless Revolution
The shift away from cash has reached such heights in Europe that, according to The Independent, the Danish government is actively trying to accelerate cash’s march to the grave by making it legal for merchants to refuse cash payments, citing the high handling and security costs associated with accepting cash payments.
In the US, the cashless revolution is also taking root with innovative startups like Uber refusing to accept cash altogether. Why would Uber, a high growth company valued at more than $50 billion, refuse to accept cash payments?
For Uber, skipping cash means better tracking of business performance and streamlined operations that don’t need to accommodate the high cost of managing, securing and transporting cash. With 69% of Uber’s core market indicating that they wouldn’t buy from a business that didn’t accept card or electronic payments, cash would simply be an unnecessary burden to Uber that would drive up its costs of operating and limit the flexibility required to achieve success.
What does this all mean for small business owners?
All of this data indicates that cash is not the future and so, small businesses that are prepared and able to accept ePayment and credit cards are the ones that are best positioned to flourish. As these newer, growing forms of payment become more popular, they will eventually supplant cash as the go-to payment methods in all situations.
Here are a few things for small businesses to consider when making the decision on whether or not to accept credit cards and ePayments:
- If your average ticket price is greater than $20 you’re probably missing out if you aren’t accepting plastic or ePayments. Data published by the Federal Reserve indicates that about half of consumers would prefer to pay with something other than cash when the transaction is worth more than $20. The number continues to decline and the ticket price rises. When you combine that with the number of vendor options customers have when buying, that means someone else is probably getting the big sale, if you have a cash only policy.
- Think about who your clients are and who you want your clients to be. The preference for making purchases with cash decreases as household income increases. According to the Federal Reserve, at least two thirds of households with an annual income of more than $50,000 prefer to pay with something other than cash. Those earning more than $200,000 per year have a 9 to 1 preference for using a non-cash method.
- High income households use credit cards for more than 40 percent of their monthly transactions – much more frequently than any other payment option. The data is clear that the moneyed set prefer not to use cash – funny how that works.
- One of the major drivers of selecting a vendor is convenience and ensuring that your clients can pay with their preferred method will increase the likelihood that your business will be the one they select.
What does this all mean for the accountant?
Accountants and accounting practices that are well versed in electronic and credit card payments trends and technology are well positioned to advise and guide their clients towards success in the new world of small business commerce.
As new forms of payment become more and more prevalent, small businesses will expect their trusted advisors to be a source of information and sound advice on choosing which payment types to accept and what providers to use. Accountants that can distinguish themselves and extend their practices into payments advisory will provide even more value to their customers.
How is FreshBooks helping small businesses take advantage of this trend?
Over the past few years, FreshBooks has taken steps to eliminate barriers and ensure that every FreshBooks user has the ability to take advantage of the trend towards non-traditional and ePayments. FreshBooks users globally can accept credit card payments via partners such as PayPal and Stripe.
Users in the US and Canada have the added advantage of having credit card payment capabilities fully integrated into their accounts via FreshBooks Payments. This means, that these users can begin accepting credit card payments for their invoices from the moment they sign-up for an account with FreshBooks.
This native payment capability within FreshBooks has significantly reduced the time it takes for users to get paid for their work. When paid by credit card, 75% of invoices are paid within 10 days. It takes about 40 days for the same percentage of invoices to be paid via cash and checks.
Beyond online credit card payments, FreshBooks is constantly researching and investigating new payments methods to ensure that its users have the best payments tools available to them.