Question from a reader:”I am going only to a cash only form of business. My bad debt losses from credit cards defaulting are killing me. Any other way I could proceed with my business that I didn’t think of?”
My answer is that in your particular business it may make perfect sense for the time being to take cash only. In situations where a customer can reverse the charges on a credit card or you find out that the payment bounces higher than a rubber ball it doesn’t make any business sense to take credit cards. There is a huge drive in the economy to get cash only and I’ve stated before that in tough economic times like this, you can’t go wrong or make any enemies by paying with greenbacks.
The rub comes though when you are selling something that people want and they actually have credit left on their cards and they want to buy it and they don’t have time to hit the ATM for cash. The other question is, what about debit cards? If a debit card goes through, you have a payment there don’t you? Same rules of the game might apply though in terms of potential denial of payment. If you are selling big ticket items, like washing machines or cars, some people may not have thousands of dollars in hundred dollar bills in their wallets or purses.
Ultimately the business decision is yours and you sound like you have made the correct choice in your particular situation. For people in a gig that is not related to cash (for example people who sell clothes through a website) they may be limited to continuing taking things like paypal, credit or debit cards or even something archaic as (gasp) a check.
Before I forget, for those of you starting out your own business, make sure you have an allowance for doubtful accounts or at the very least some padding for bad checks, shrinkage (a fancy word for theft specifically shoplifting in the retail trade) and any other issues that may make a dent into your income stream from slightly nefarious activities.
Hopefully you won’t have to allow for them but it is just good sense to take them into account prior to getting started so you won’t have any nasty surprises later on (or at least minimal surprises).
Be healthy and safe!
April 28 2009
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Kim Isaac Greenblatt
Return To The Cash Only Economy