What You Need to Know About Cash-Only Businesses

cash-only business

As technological advances make it easier and more affordable for small businesses to accept credit card and mobile payments, the cash-only business is becoming rare to the point of extinction. So why are some businesses remaining cash-only, even in the modern era?

Believe it or not, there are some good reasons for your business to only accept cash—but they have to be weighed against a few major inconveniences. Here is what you need to know before going cash-only with your small business.

What is a Cash Business?

A cash business, also known as a cash-only business, is exactly what it sounds like: a business that only accepts cash. While this may seem impossible as e-commerce grows and less people are carrying cash in their wallets, certain types of businesses operate quite effectively without any cashless payment systems. 

Cash businesses can be anything from a food truck to a laundromat, but most effective cash businesses are local, have a consistent customer base (that know to bring cash) and sell relatively inexpensive items.

Especially if you are the owner of a startup or new business, weighing the pros and cons can help you determine if opening a cash business is the best path to having a successful business. 

Pros of a Cash-Only Business

Many cash-only small business owners find that there are many perks to only taking cash transactions, from easier accounting to forgoing costly point of sale systems. Here are the top benefits to consider.


Accepting payments via credit cards impacts your bottom line in a way that cash doesn’t. Credit card transactions will cost you more than cash transactions because credit cards take a percentage of the purchase price that would have stayed in your pocket had the purchase been made in cash. Additionally, the extra equipment you’ll need to process credit card and mobile payments will cost you more than a simple cash drawer.


With all the new technology involved in credit card processing, there are an increasing number of vulnerabilities. Of course, you face the risk of counterfeit cash, but these days it is far more lucrative (and common) for thieves to target credit card information than to counterfeit money.

Simpler Accounting

When you start to accept online payments, credit card payments, and mobile payments, your accounting responsibilities multiply, because you have to track each individual payment method instead of just one. For business owners who regularly deal with disputed charges and payments that take a long time to process, the simplicity of cash can be very attractive.

Cons of a Cash-Only Business

Customer Inconvenience

According to a 2018 poll by the Pew Research Center, 46% of consumers said they don’t worry about carrying cash and instead use other methods of payment. This was up from 39% in 2015, indicating a growing tendency to forgo cash and opt for cashless payment methods. By failing to provide your customers with the ability to pay using their credit or debit card, many of them will feel inconvenienced, especially if your average transaction price is relatively high. After a certain price threshold, expecting your customers to pay cash is simply bad business.

Missed Opportunities

There is actually hard evidence behind the oft-heard, but usually anecdotal claim that credit cards make consumers more likely to spend money. An MIT study on the effect of credit cards on consumers’ willingness to pay showed that customers may be willing to pay up to 100% more when they’re using a credit card. If your business is cash only, there’s a very good chance that you are missing out on opportunities to raise prices and attract new customers.

No Paper Trail

Because cash payments leave no paper trail, it can be harder to reconcile your accounts with confidence at the end of the day and get a snapshot of your revenue and cash flow. Cash-only businesses may also suffer from dishonest employees because it is both easier for employees to steal cash and harder to spot employee theft.

Security (Again)

While you won’t need to worry about protecting your customer’s privacy, you will absolutely need to worry about protecting your cash supply. If your business has large amounts of cash on hand, you could become a target for theft. It is important to have a good system for regularly securing your cash and transferring it to your bank. 

A Disclaimer on Cash Businesses, Taxes and the IRS

While your decision to accept only cash at your business is both legal and preferable to some business owners, it is illegal to attempt to fly under the IRS radar by collecting only cash payments. Whether you are a cash-only business or accept a mix of credit card and cash payments, you absolutely must declare your cash transactions on your quarterly taxes

You may think you are able to get away with paying less for your taxes by not reporting all (or any) cash income, but businesses with consistent losses can become a target for IRS audits, which could get you in serious legal trouble if you have been covering up your cash revenue.

This also goes for paying employees. If you only take cash payments, it may be easiest for you to pay your employees in cash as well. It is okay to pay your employees in cash, but those payments still count as payroll and must be recorded. You also need to issue W-2 statements to your employees at the end of the year and withhold taxes from employees.

Is a Cash-Only Business Right for You?

The issue of staying cash-only or allowing other payment types for your small business isn’t black and white. Often, it depends on the type of business you run.

For example, if you own a local coffee shop, where the average purchase amount is relatively small and the customer base is familiar with the cash situation, it may make sense to stay cash-only. Customers don’t mind paying for things in cash if the price is low enough and they know the drill.

However, if you sell high-end furniture for thousands a piece or you are located in a touristy New York neighborhood, you may lose customers by accepting only cash. If the cost of losing those customers is higher than the cost of offering more payment options, sticking to a cash-only policy will do your business more harm than good.

At the end of the day, you know what’s right for your business. Whether you choose a cash-only approach or are looking at cashless payment processing systems, Credibly can help you take your business to the next level with our small business loans.

Learn more about Credibly’s small business loans options. See which financing option is the best fit for your business!

Which funding is right for your business?