The Dangers Of Running A Cash Business

We have all probably been to an establishment that offers cash discounts, doesn’t charge tax on cash payments or even some back in the day that only accepted cash. While a lot of times these businesses can be small mom-and-pop type shops, like restaurants, sometimes they are also larger companies using cash businesses as a method to get away with some shady business, such as money laundering. Well not everyone running a cash business has nefarious purposes but regardless of that as a business owner, you are putting yourself at risk with the law as well as running the chance of ruining your business reputation. There are other risks involved with running a cash business that can be detrimental to your success that we will go over below, so read on to learn more. 

Penalties

There are a variety of penalties that you can incur by contributing to the underground economy in Canada. If you’re caught hiding income you may face a conviction for tax evasion that could not only ruin your finances but also ruin your reputation as a business person and a member of your community. 

Lack of Financial Records

When you run a cash business, you are not creating a successful track record of financial documentation. As such it can be harder to get bank loans for expanding your business, purchasing properties, buying a vehicle, and creating an overall better life for yourself and your family. 

Partnership and Employee Limitations

 Running a cash business limits your possible partnerships and relationships with vendors. The majority of vendors will not take cash for payment, especially reputable ones and on large orders. You will also end up paying your employees in cash which can create difficulties for them. If they aren't paying taxes, or contributing to their EI, or CPP they are at risk of running into financial and legal problems down the road. It also makes it harder for employees to build credit and pay for things like mortgages and vehicles, which they need. Cash businesses can be very limiting and running one is like sacrificing dollars to save pennies. 

Customer Limitations 

The vast majority of clients and customers do not carry cash on them anymore and as such being able to pay with credit and debit cards is such an expected feature of a business that the lack of a card terminal can be seen as bad customer service. You can end up inconveniencing the majority of your shoppers, missing out on a significant amount of potential sales and taking a big security risk. 

Reduced Cash Flow

As a business owner, you also want to maximize your cash flow. Letting the customer pay on the spot means instant payment collection and a positive impact on your cash account. Even after taking into account 2-3% transaction fees that are charged by the card companies. You still don’t chase customers for an unpaid invoice.

Well there might be some short term advantages to running a cash business, this choice will eventually catch up with you and the negative consequences can stack up. It isn’t worth it to risk your reputation, your business, the wellbeing of your employees and the convenience to your customers to run a cash business. 

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