Going cashless: Should small business clients do it?

“Going cashless” is trendy right now. thanks in part to the fast-casual food chain Sweetgreen’s much-reported transition away from cash this year. And then there’s the fact that only 32 percent of all transactions in the United States involved cash in 2015, down from 40 percent in 2012.

Most talk of “going cashless” involves discussions of customer-facing transactions, but as an accountant it’s worth considering whether your clients might benefit from eliminating cash from internal operations as well. After all, dealing with cash tends to be one of the most time-consuming, frustrating, and mistake-prone internal bookkeeping tasks that small businesses deal with.

Here’s an overview of how going internally cashless might benefit (or hurt) your clients and a few talking points you can offer if they ask for your insight.

5 Ways Going Cashless Can Help Your Clients

There’s no single right path for every small business, but eliminating cash from internal transactions may benefit a business in a number of ways, including these:

1. Making a business more attractive to outsiders: Whether a business is trying to get a loan, raise funding, prepare for an external tax audit, or sell, having no cash to worry about can make life easier. “Cash is often the most difficult item to track,” notes Matt Hinson, a CPA at Gainesville, Fla.-based Live Oak Advisors. Without cash, “it is much easier to present a clean record of your financial history.” When external parties can easily get a full picture of a business’s financial situation, they’re often able to make decisions more quickly and confidently, which can be beneficial for small businesses.

2. Eliminating time-consuming or costly administrative tasks: Driving cash to the bank or hiring an armored car to pick it up can be time-consuming or needlessly expensive tasks. As Thomas J. Williams, EA, of Your Small Biz Accountant, LLC, points out, “Small-business owners are pressed for time as it is and should avoid burdensome workflows that keep them from completing critical tasks that generate additional revenue.” When cash is eliminated, some of these processes can be streamlined.

3. Eliminating the temptation of theft: When there’s no cash in a business, burglars have less incentive to break in and clean out the register. And from a governance standpoint, as Hinson points out, it makes sense to eliminate temptation for employees, too. “We all love our employees,” he notes, “but theft occurs more often than we like to think.” In fact, a 2016 study by the Association of Certified Fraud Examiners found that a typical business can expect to lose five percent of its annual revenues to fraud—and in fraud cases generally, small businesses are hit harder than their larger counterparts. Internally cashless businesses don’t have to worry about this source of loss.

4. Improving cash flow: Courtney Barbee, of The Bookkeeper LLC, points out that eliminating cash helps out in accounts receivable and improves cash flow. Digital payments take less time to process, meaning that small businesses don’t have to wait as long for payments to hit their accounts.

5. Avoiding petty cash headaches: Besides increasing the risk of employee theft, petty cash has other drawbacks for small businesses. As Barbee points out, “reconciling petty cash is a time-consuming, potentially stressful activity, yet keeping petty cash on hand adds little benefit to a business.”

Potential Drawbacks of Going Internally Cashless

Of course, going cashless isn’t a one-size-fits-all solution, and it shouldn’t be presented to clients that way. For example, manufacturing businesses and others that order raw materials in bulk may benefit from having cash on hand.

“You can often get a better deal [on bulk orders] in cash,” Hinson points out. So businesses intent on maximizing their purchasing power for large orders may want to skip the cashless movement.

Another consideration is transaction fees. While these apply more to external transactions (with customers), they’re worth mentioning. Smaller and newer businesses in particular stand to suffer here, as they’re typically not large enough (or processing enough transactions) to negotiate a bulk discount.

Asking the Right Questions about Going Cashless

Even if going cashless (externally or internally) isn’t a major concern for any of your clients, bringing up the topic during your next conversation (or in your next newsletter) might be worthwhile. Why? Demonstrating that you’re abreast of trends is one way to build trust.

Plus, being proactive about accounting trends can be a big boon for accountants; according to a Wasp Barcode study, small-business owners’ top complaint about their accountants was that they were “more reactive than proactive.” Offering insight beyond the core work you do for a client is an effective way to generate goodwill, which can bay dividends in the long term.