Cash, Check or Charge: Which Payment Method Should You Accept?

For many restaurants and food service businesses, the option to go cash only is too good to resist. You can make wads of cash each day while avoiding pesky bank fees, increasing your profits with every card not swiped through a credit card reader. But the reality rarely lives up to our dreams.

For one thing, even if owners like the idea of cash-only sales, it’s clear customers do not. “Seventy percent or more of all transactions are handled through a credit card,” says Robin Gagnon, restaurant broker and principal of Atlanta-based We Sell Restaurants. A 2014 report from Javelin Strategy & Research found that cash transactions are down 10 percent since 2012 and are forecast to continue dropping. “You can’t really be in business without accepting this form of payment,” Gagnon says.

The HideOut Inn in Chicago discovered this firsthand. It was a cash-only enterprise since its founding, but it began accepting cards in 2013. “We just wanted to allow our customers to have that option,” says Seth Dodson, the establishment’s program director. “The biggest advantage is probably for our customers who no longer need to use our ATM.”

Encourage Cash, Accept Cards

“As much as we love cash sales, it’s not practical to expect others to always have cash,” admits Ryan Miller, co-owner/general manager of Deli Ohio in Canton, OH. “In the last 3 days, 66 percent of our sales have been via cards. It’s just the way the world works today.”

That’s why more and more restaurants and caterers like Miller are encouraging cash sales rather than requiring them. Signs are strategically placed to remind patrons that “cash is always appreciated,” and regulars remember to stop by the ATM before coming in.

Pushing cash sales is especially important for larger tickets and phone orders. For large catering orders, Miller encourages patrons to pay by check so he can avoid the 4.5 percent service fee for keying in cards. Otherwise, he includes the fee in the total cost. “Sometimes the customer is willing to pay the fee, other times they’ll gladly give you a check or cash to avoid it.” The key is having a policy and clearly communicating it up front.

Talk with your banker or merchant services provider to understand the fees associated with different types of card transactions and develop policies to help you reduce them — or just include them in your costs. Some trade groups and chambers of commerce also offer discounted processing as a member benefit.

Hidden Pros and Cons

There are some unexpected pros and cons to each of your payment options.

Operating on a cash-only basis may make you feel like you have more control over your money, but it can cost you. First, there’s the emotional cost: the stress of having large amounts of cash lying around, even if you use good point of sale cash-handling practices and have a security safe. But the second cost is monetary. The savings you make by avoiding credit card processing are “usually mitigated by costs related to depositing cash — driving to the bank each day, perhaps incurring cash-handling fees from the bank — as well as lower average ticket sales versus credit or debit cards,” says Anthony Pili, vice president of strategic planning for Greater Hudson Bank in Bardonia, NY. “I've seen restaurant clients increase their average sales ticket by 30 percent just by accepting credit cards, which more than justifies the processing fees.”

Taking cards also creates a paper trail that can make it easier to get a business loan when it comes time to expand or grow your business. “With regularly documented sales, banks and lenders have a larger appetite when it comes to providing financing,” Pili notes. “An owner will have a better chance to qualify for a loan or a merchant cash advance to borrow against future credit card sales.”

The trend lines show that your patrons want more than lots of food options — they want payment options, too. While cash may still be king, its reign is weakening. Smart business owners encourage cash sales, and find effective ways to keep processing costs in check.

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