How cash-reliant clients are navigating an increasingly cashless world

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An entirely cashless society is a way off, but cash usage is dropping. Here’s how cash-based businesses and charities feel about the transition.

Already in decline, physical cash use reduced considerably during the Covid-19 pandemic, driven by fears that banknotes and coins contributed to the spread of the virus. Shops, restaurants, pubs and other customer-facing venues only accepted contactless payments during the pandemic, and since then, more places have stopped taking or accepting cash all together.

In response to widespread concern over the disappearance of cash from the economy, UK Finance announced a series of commitments made by banks and building societies to protect and ‘preserve’ access to cash for the long term for consumers and businesses, in 2021.

These commitments included:

  • Ensuring availability of cash for those who need it, when they need it (businesses, elderly and vulnerable).
  • Greater collaboration between banks to look at cash access requirements and needs of customers and communities.
  • Establishing a framework to identify cash ‘cold spots.’

Even so, banks are less keen on processing cash these days, with some high street banks such as NatWest now placing limits on cash deposits and withdrawals.

A significant proportion of UK businesses still rely on physical cash. According to small business lender Iwoca, 50% of SMEs say cash is ‘essential’. It’s also the case for many charities, sole traders and micro businesses.

Charities in particular rely hugely on cash donations, but with fewer people carrying cash on their person, face-to-face fundraisers are noticing a drop in people’s ability to donate. Last year, the Charities Aid Foundation UK Giving Report found that cash donations were lower than ever (cash donations accounted for 23% in comparison to 58% in 2017).

In addition, tradespeople who take cash payments need local branches to deposit their takings and may not have the infrastructure to accept digital payments.

The cost to rent or even purchase a payment terminal can be an additional expense, while every digital payment itself incurs a processing charge.

The move towards a cashless society is also impacting tipping habits in restaurants and bars, leaving hospitality staff who often rely on tips to top up their wages at a financial disadvantage.

There’s no doubt that digital transactions are vastly more convenient, easier to track and improve cashflow visibility from an accounting perspective. But for those businesses and sole traders still reliant on cash, navigating operations and finances in an increasingly cashless economy can create many challenges.

We spoke to accountants to find out how their cash-based clients are handling this.

Less cash means more transparency for our charity

Harriet Foxon, MAAT, Financial Controller, The Brick charity

We recently took the decision to move away from cash, so we’re no longer reliant on cash donations. We’re now actively encouraging digital donations through the use of electric point of sale (ePOS) systems, website links and QR codes.

Cash can cause a few issues, especially for charities. The more cash we take in, the more work that’s involved. Recording cash manually, manually banking it and then recording it in petty cash systems and so on. It was also difficult to manage and keep track of our managers’ petty cash spending but now they have pre-paid top-up cards.

Since I joined the charity, I’ve found there is much more transparency when there’s less cash involved. It’s much easier to explain and prove transactions during the audit process, which can sometimes be difficult when it’s cash. The whole bookkeeping process is also much more reliable and accurate now, too.

So I think as a charity, we’re well equipped to move away from cash. Yet the people we support who are facing poverty are the ones who will struggle. It isn’t always easy for a homeless person to get a bank account.

Verdict: As a charity, we’re moving away from cash due to admin and bookkeeping workload and reporting inaccuracies. The people we support will struggle, though.

Covid-19 pushed many businesses to transition to digital

Vipul Sheth, MD of accountancy, outsourcing and offshoring specialist, AdvanceTrack

There’s a substantial reduction in cash transactions in our post-COVID world. Even local establishments that would previously have relied on cash, such as the chippy on the corner, have transitioned to accepting card payments.

However, some businesses, especially those in-personal services like barbers and hairdressers, have chosen to remain cash-only. But with an increasing number of branch closures, some of these businesses are finding cash-only increasingly impractical when managing cashflow.

For instance, a local café that sources vegetables from a nearby greengrocer may struggle if the greengrocer is unable to accept large cash payments. This not only affects the café’s ability to source from local suppliers but also has broader economic implications, impacting employment and more.

Many businesses are concerned about the shift towards a cashless society. The transformation impacts businesses both on a profitability level and in practical terms. The transition from physical cash to digital payments can lead to a decline in the perceived value of money. Moreover, we’ve heard of some firms facing operational challenges with managing payments to employees or suppliers who still require cash transactions, as cash is no longer routinely accepted at the point of sale.

Verdict: Covid-19 has pushed many cash-only businesses to transition towards digital transactions out of necessity, affecting cashflow management.

Businesses are using the post office to handle cash

Tom Hamilton, Erdingsworth Business and Tax Advisors

Most of our clients have moved away from cash deposits and tend to have money paid in via bank transfer. The closure of many high street bank branches had made it difficult to continue with cash, especially because clients were having to travel further afield.

Many clients have now stopped taking cash altogether, asking their clients to make payments via bank transfer. The few dealing with cash are using post office counters or are seeking out the use of card machines like Sum Up or Paypal.

What’s challenging for some clients is when certain banks actually charge for cash deposits – I think this is wrong. Businesses shouldn’t have to pay to deposit business takings.

Verdict: Cash-based businesses are using post office counters to withdraw and deposit cash, especially where banks charge for cash deposits.

If you’d like to contribute to future articles like this one, contact Annie Makoff-Clark at [email protected]. Upcoming topics include professional clearance requests, poor client behaviour and whether digital-only is the answer to HMRC’s VAT problems.

Annie Makoff is a freelance journalist and editor.

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