Is cash dead? …what about bar work?

Before I start, you will notice that on this website you will not be bombarded with pop-ups, cookie warnings and adver­tise­ments. That’s because I use affiliate links — a much fairer way to finance the internet. This article is NOT sponsored and I have been using card readers for my own businesses since 2017. You can read more about affiliate links here.

Is cash really dead?

YES!! Let me explain. When I first started in the business, accepting credit cards was incredibly expensive. You would have to spend hundreds of pounds on the card reader and printer, pay a high monthly service fee AND pay incredibly high trans­action fees. Even consum­ables were insanely expensive. You would even need your own physical phone line for your card machine — that was a nightmare. There was very limited choice in who you could use for merchant services, there was no way to manage things online, and for most smaller businesses it was more hassle than it was worth. Therefore, only the larger players accepted credit cards.

Boy, times have changed. The card is now accepted every­where and therefore no one carries cash with them anymore. Even if you’re just buying a cup of coffee, most people simply tap their contactless payment method of choice — be it their smart­watch or their phone. You can read more about the Tide card reader here.

We ask: Is cash obsolete? Credit cards become obsolete quickly! Customers expect to pay electron­i­cally, and if you don’t allow this as a payment option, you’re at a HUGE disad­vantage. It makes NO DIFFERENCE what your business does — whether you are a plumber, an electrician, a window cleaner, a garage, a cafe or a mobile hairdresser. For heaven’s sake, don’t put obstacles in the way of customers giving you money!

Since 2017, my home mainte­nance and woodworking businesses have accepted credit cards. From that point on, I NEVER had a situation where the customer preferred to pay me with cash. Without exception, all customers were very happy that I now accepted the card.

• Nobody has cash on them anymore
• Electronic payment is expected
• Even credit cards are becoming obsolete
• It’s profes­sional
• It’s easier to be accountable
• You don’t “acciden­tally” spend the money

Lordy, Back to the future I thought we had hover­boards by now! If you’re still sticking with cash as a form of payment, you definitely need to change your mindset.

What about bar work?

If you run your “business” on the basis of putting as much money in your pocket as possible, then unfor­tu­nately you are on the wrong website. It’s not the 1980s anymore. I’ve seen this countless times and it never goes well. Here are the most common scenarios:

1. Low-income earners

You earn so little money that you don’t have to pay taxes on it anyway. In the meantime, you’ll spend a lot of time covering up paper trails.

2. Middle income earners

They set a self-imposed cap on your earnings in the hopes that you will “stay under the radar.” HMRC probably doesn’t care but you’ve completely stunted business growth. You are constantly afraid that you might be audited. If you get checked, you’ll have had a few months of restless nights. Your business is doing pretty well, and if you changed your mindset, you’d probably make more than the few grand in taxes you saved.

3. High earners

You’re wasting signif­icant amounts of cash in the hope that HMRC doesn’t come after you. You cannot transfer it as there will be a paper trail. We all know that cash lying around the house can be spent in a flash — £10 here, £20 there. All in all, it adds up, and well done, you’ve created a spending monster that constantly needs to be fed. They are committing outright tax evasion and have so far gotten away scot-free. However, the paper trails are increasing. Emails, text messages, and social media messages confirm jobs here and there, but you have no record of earnings from them. Since your suppliers don’t accept cash, you end up with a paper trail of expense receipts with no corre­sponding income. So they develop sophis­ti­cated methods to “hide” the expenses, meaning it is almost impos­sible to use them to offset your legit­imate profits. It’s terribly compli­cated to manage, enormously stressful, and if you get audited (and are audited), it becomes a nightmare. I was audited, had a very simple deal with nothing to hide, and it lasted more than three months. It was terrible. It will take much longer to audit you because things are so compli­cated. Expect more than six months of sleep depri­vation… during which time you’ll be trying to run your business. HMRC is breathing down your neck, so do every­thing by the book now. Only in the eyes of HMRC you’re suddenly earning signif­i­cantly more than ever before. Don’t you think that’s what it looks like? a little bit suspi­cious? Good luck – you’re on your own with this.

But Amazon, Google etc do it – screw HMRC!

Don’t get me wrong, I’m not crazy about the tax practices of certain large corpo­ra­tions, but the big difference is: IT’S LEGAL! (At least for now) And guess what? Nothing stops you from doing the same. And guess what? You still use Amazon and Google, so don’t be so hypocritical! Would it be in your interest to have one? double Irish with a Dutch sandwich Tax scheme to save a few pounds? Of course not. Is it fair? No. But since there have been taxes, people have tried to avoid them. I ask you: If Amazon and Co. suddenly started paying their fair share of taxes, would you stop evading taxes? I refer you to the last sentences of the last paragraph. Stop worrying about things you can’t control. You do it. There’s a lot to be said for how productive you can be when you’re less stressed.

Is tax evasion on a small scale pointless now?

So here’s the thing. When I started working, the personal tax allowance in the UK was £3,765. Now you can earn £12,500 a year in the UK in 2019 and 2020 without paying a penny of income tax. If you make a profit of £20,000 as a self-employed person, you will only pay 13% tax and NI on your total income*. That’s pretty generous in principle. Check out what you would pay in other countries! With this in mind, you really need to ask yourself: Is working with cash in 2020 really worth the risk and effort? And while we’re at it…

Customers – DO NOT ASK FOR A CASH DISCOUNT! When a customer asks if they can get a discount by paying cash, what they’re actually saying is, “Can you please commit tax evasion so I can pay less?” It’s crazy. Stop it!

How do I get paid cashless?

There’s a whole world of ways to get paid without having to deal with a bunch of dirty bills. Let me just get this out of the way – checks are also obsolete. I say this as I sit here looking at a check from HMRC for overpaid taxes, a check from DVLA for car tax refunds and a check from my insurance company for car insurance refunds . Don’t follow their example, please assume that the checks are dead too. Anything that involves driving to a physical bank to tell them via any piece of paper to transfer money electron­i­cally from one account to another is completely ridiculous in this day and age. I have used the following success­fully over the last few years:

Faster payments (online transfers)

• Pros: Ideal for large amounts as they are free and you usually receive the money the same day
• Minuses: You have to do a lot of invoicing paperwork and customers often “forget” to pay

Accept credit and debit cards

• Pros: Very conve­nient for the customer, minimal paperwork
• Cons: There is a small trans­action fee and it may take a few days for funds to reach your account

PayPal friends and family

• Pros: Great for friends and family
• Cons: No solution for business payments

GoCardless

• Pros: Ideal for recurring payments, minimal paperwork
• Cons: There is a small trans­action fee and requires the customer to set up a direct debit, which can put some people off

Counter & Transfer wise

• Pros: Ideal for inter­na­tional payments, hassle-free paperwork
• Cons: Not supported by some inter­na­tional suppliers and banks

Of course, there are other, more obscure options like Bitcoin and Ethereum. We’re not there yet, but watch this space. For most businesses, faster payments (online transfers) or credit/debit cards are the most sensible options you can offer your customers. There are very few reasons why you need anything else.

How do I accept credit and debit cards?

There are several ways to make in-person credit card or contactless trans­ac­tions. I used iZettle for several years before it was acquired by PayPal and it was great. I’m also a Tide partner and their offering looks very inter­esting — read my full review here! There are many other options, all very affordable and easy to use. You install an app on your phone, your phone commu­ni­cates with your card reader and you can use all common electronic payment methods, from contactless to Chip & Pin, Apple Pay, Google Pay and every­thing in between. All paperwork is automated and can even be integrated into your accounting software. It looks completely profes­sional and customers love it.

I’ve even started accepting credit/debit card payments for larger orders. In the past, when I completed an instal­lation, say for £3,000, I would invoice the customer and they would pay me via online transfer. Usually this was fine, but there were a few cases where the customer “forgot”. This gets stressful after a while. Okay, on a £3,000 order you’re looking at a £52.50 fee, but look at the benefits:

• Payment is (pretty much) guaranteed
• You don’t have to waste time checking if you’ve been paid
• You don’t have to waste time chasing the customer
• You don’t have to waste time printing invoices and receipts
• No need to waste time going to the bank (if paid by cash or check)

For me this is worth £52.50. If the customer really wants to pay by bank transfer, don’t be afraid to ask them to do so before leaving the property. Just politely say, “Would you mind making the transfer while I’m here so I can check if it arrived?” Or you can pay by credit card if you’d like?” At this point I realized that most customers immedi­ately took out their credit cards. Job done. On to the next one.

What about the “cashless society” and CDBCs?

This is all a very valid concern. Giving banks and govern­ments even more control over my finances doesn’t make me happy. CDBC stands for Central bank digital currency and has been used in some countries to completely replace cash. Think Bitcoin but managed by the government. Not a good view.

The good news is that most govern­ments are phenom­e­nally ineffi­cient and disor­ga­nized. The chances of currencies being completely replaced by something on a blockchain in my lifetime are relatively slim. Realis­ti­cally, every­thing is already electronic and has been for a long time. If govern­ments really want to control your finances, they can. You don’t need CDBCs to make this possible. Just look at 2022 Trucker protests in Canada. All sorts of bad things happened there without the need for CDBCs.

Must my business accept cash as “legal tender”?

No, that’s a myth. You don’t have to accept cash if you don’t want to. I’m not going to reinvent the wheel. Dan from Blackbelt Barrister has made some excellent videos on this very topic.

Is cash really dead?

I’m trying hard to justify the existence of cash in a modern society, but I’m having a really hard time. Sometimes I feel a bit “tinfoil hat” and worry about the state intruding on your every move. Then I remember that life is less stressful when you stop worrying about things you can’t control. I can control whether my company accepts cash, and for me the effort is rarely worth it. Don’t get me started on coins.

There is a common saying in the UK: “Take care of the pennies and the pounds will take care of themselves.” So is that true? No it’s not. It’s complete nonsense. Watch the pennies, and all you have is a lot of pennies.

This has been talked about for several years 1p and 2p coins become obsolete (Yes, they are outdated and have been for a long time). The real question we should be asking ourselves is whether cash is now obsolete?

What do you think? Is there still a place in the world for cash and checks? Have there been any horror stories about customers missing payments?

*Based on a personal allowance of £12,500, which equates to taxable income of £7,500. Income tax applies on £1,500 at 20%. Class 2 NI due of £156. Class 4 NI due of £1,023.12 based on 9% over threshold of £8,632. This gives a total tax bill of £2,679.12, which is around 13% of total income. Payments on account, VAT or other types of income are not taken into account.

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Last updated on September 5, 2024 by Andy Mac

Author: Andy Mac

Andy MacLellan has been running his own businesses for almost 30 years. During this time he has founded award-winning companies and provided consulting services to some of the world’s largest blue chips. His life now revolves around providing independent assis­tance to small businesses.