Speaking as a business owner, I’ll admit that I never sat down and thought about the disadvantages of cash. I agree that it takes time to count (including an occasional screw-up like a $15 discrepancy between what’s in the drawer and what’s supposed to be in the drawer, and we spend an hour trying to figure out how and why it happened), and yes you have to physically drive to the bank to deposit it, and there’s a chance that it can get stolen.
But consider these advantages. When a customer pays by check, the money isn’t actually credited to my account until after midnight. When they pay by credit card, we often don’t get the money until day after tomorrow. But when they pay by cash and we take it to the bank, the money is credited to our account instantly. Also, checks can bounce and credit card payments can be disputed but not so with cash. I’ll admit counterfeiting is a possibility but I’ve never seen a counterfeit bill in my entire life whereas we get bounced checks at least once a year, sometimes once a month.
BTW, you might think checks don’t have to be taken to the bank, we can just use the online deposit feature, but that takes time too and there’s a limit to how many checks you can deposit remotely each month. We end up having to take checks to the bank anyway about half the time.
So, here goes my attempt to quantify the costs for taking in $100,000:
CREDIT CARDS
Money is delayed 1-2 days. cost = $75
Processing fees. cost = $2,750
disputes & charge backs. cost = $100
ESTIMATED COST 2.9%
CHECKS
Money is delayed until after midnight. cost = $50
extra time spent waiting for customer to write checks. cost = $100
bounced checks = $600
time spent going to the bank. cost = $1,200
ESTIMATED COST 2.0%
CASH
extra time spent counting & reconciling the cash drawer. cost = $3,700
time spent going to the bank. cost = $2,400
“shrinkage” due to theft, etc. cost = $100
ESTIMATED COST 6.2%
Wow, I wasn’t expecting the numbers to turn out that high. Huh, maybe I should reconsider taking cash. But what’s the alternative? If we cut down the amount of cash we take in each day by half, that wouldn’t save much because we’d still have to count the drawer and go to the bank. All that would do it increase the ratio of the cost by having the same expense for a smaller benefit. Maybe if we took less cash and only went to the bank once a week… Let’s see how the numbers change.
CASH
extra time spent counting & reconciling the cash drawer. cost = $2,500
time spent going to the bank. cost = $480
“shrinkage” due to theft, etc. cost = $50
ESTIMATED COST 6.1%
not much improvement there.