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While we’re not yet living in a completely cashless society, as technology progresses, we move ever closer to that future. What does this mean for your business’s cash flow? Here’s a closer look at how you can reap the rewards of a cashless payment system.
The benefits of cashless payments
There are several benefits to a cashless payment system, both for businesses and customers.
It’s easier to monitor your cash flow, since all cashless payments go directly into your business bank account. A cashless payment system prevents employee errors and missing change.
There’s a reduction in petty theft because business premises don’t hold any cash. If you eliminate cash payments, you eliminate the incentive for this type of crime.
Higher-level financial crimes are also discouraged with electronic cash flow management. Taking cashless payments leaves a clearly defined paper trail, automatically. All sources of funds are easy to identify, making it harder to commit fraud.
It’s easier to move money across borders. This can be a major source of admin and paperwork for businesses that deal with international clients. Rather than exchanging pounds for the local currency in person, you can simply use cashless payments as you travel abroad.
Another way that cashless payments can optimise your business cash flow is by saving money on storing and depositing funds. Your payments are stored and submitted automatically into your bank account.
Drawbacks of a cashless payment system
Of course, we don’t live in a fully cashless society yet and automatic payments aren’t perfect. Here are a few potential dangers to be aware of with electronic cash flow management:
There is less privacy involved with cashless payments. While this may not be a problem for your business, some clients may object to putting their data out there. Cash enables anonymous transactions, while all electronic payments are automatically tracked.
There’s also a security risk involved if your cash management system isn’t adequately protected. Without proper security in place, hackers could drain your bank accounts or sensitive information could be subject to a data breach.
Apart from these more sinister problems, innocent mistakes like power glitches and outages can always bring your system down. Without the ability to accept cash as a backup you might need to shut the business for some time.
Automatic payment processors often charge fees for cashless transactions. It’s important to compare platforms carefully so these don’t end up cutting into your profits. This could erode any savings you’ve made by eliminating cash handling.
How do cashless payments work?
There are a few different types of cashless payment systems to choose from, each of which will have its own benefits. All work with the basic premise of transferring funds automatically from one bank account to another.
Credit and debit cards: These are the most popular and longstanding cash alternatives. Customers present their cards in person or enter card details online to process a payment. Credit card companies usually charge fees.
Mobile payment services: Mobile wallet services like Apple Pay let you make a payment simply by tapping your phone on a sensor. This automatically transfers cash from your digital wallet into the business account.
Electronic payment apps: Increasingly, apps like PayPal are becoming a viable alternative particularly for person-to-person payments.
How to choose the best cashless payment system
For the purposes of optimising your business cash flow, there are plenty of techniques to use. You can negotiate better deals with your vendors and use more efficient accounting systems, for example. There are also a few features to look for with any cashless payment system:
Positive customer reviews
User-friendly fee system without hidden costs
Fast transfer of funds
Ability to track sales in real time
Central dashboard for making transfers
Ability to track invoices
Ability to take multiple types of customer payments
The best systems will let you automate your payments, speeding up the flow of cash into your business while attracting new customers along the way.
We can help
GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.