Is cash dead? …what about cash-in-hand work?

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Is cash really dead?

YES!! Let me explain. When I first started out in business it was crazily expensive to accept credit cards. You’d need to spend hundreds of pounds on the card reader and printer, pay a high monthly service charge PLUS stupidly high transaction charges. Even consumables were crazily expensive. You’d even need a dedicated physical phone line for your card machine – it was a nightmare. There was very limited choice as to who you could use for merchant services, no way of managing things online and for most smaller businesses it was more hassle than it was worth.  As a result only the bigger players accepted credit cards.

Boy have times changed. Everywhere accepts card now and as a result nobody carries cash anymore. Even if you’re just buying a cup of coffee most people just tap their contactless payment method of choice – be it their smart watch, phone or even just their ring.

We’re asking whether cash is obsolete? Credit cards are rapidly becoming obsolete! Customers expect to pay electronically and if you don’t allow it as a payment option you’re putting yourself at a MASSIVE disadvantage. It makes NO DIFFERENCE what your business does – whether you’re a plumber, electrician or window cleaner… a garage, coffee shop or mobile hairdresser. For heaven’s sake, don’t put obstacles in the way of customers giving you money!

My property maintenance and woodworking businesses started accepting credit cards in 2017. From that point onwards I NEVER had a situation where the customer preferred to pay me with cash. Every customer without exception was very happy that I now accepted card.

• Nobody carries cash anymore
• Electronic payment is expected
• Even credit cards are becoming obsolete
• It’s professional
• It’s easier to account for
• You don’t ‘accidentally’ spend the cash

Lordy, Back to the Future thought we’d have hoverboards by now! If you’re still clinging on to cash as a payment method you really need a change of mindset.

What about cash-in-hand work?

If you operate your ‘business’ on the basis of putting as much cash in your back pocket as possible then sorry but you’re probably on the wrong website. It’s not the 1980’s anymore. I’ve seen this countless times and it never goes well. Here are the most common scenarios:

1. Low earner

You make so little money that you wouldn’t have to pay tax on it anyway. Meanwhile you’re spending a significant amount of time covering up paper trails.

2. Mid earner

You put a self-imposed cap on your earnings in the hope that you ‘stay under the radar’. HMRC probably don’t care but you’ve completely stunted business growth. You’re constantly worried that you might get audited. If you do get checked you’ve got a good few months of restless nights. Your business is doing pretty well and if you changed your mindset you’d probably make more than the couple of grand in tax that you’ve saved.

3. High earner

You squirrel away significant amounts of cash in the hope that HMRC don’t catch up with you. You can’t bank it since there’ll be a paper trail. We all know that cash left lying around the house gets spent before you know it – £10 here, £20 there. It all adds up and well done, you’ve created a cash spending monster that constantly needs fed. You’re committing full-on tax evasion and you’ve gotten away with it so far. However the paper trails are building up. E-mails, text messages, social media messages all confirming jobs here and there yet you have no record of any income from them. Since your suppliers don’t accept cash you end up with a paper trail of expense receipts without any corresponding income. So you come up with elaborate methods of ‘hiding’ the expenses meaning it’s almost impossible to use them to offset your legitimate profits. It’s horrifically complicated to manage, hugely stressful and when you get audited (and you will get audited) it’s going to be a nightmare. I’ve been audited, had a very simple business with nothing to hide and it lasted for 3+ months. It was horrible. It will take much longer to audit you since things are so complicated. Expect 6+ months of sleep deprivation… during which time you’re trying to run your business. HMRC are breathing down your neck so you’re now doing everything by the book. Only in HMRC’s eyes you’re suddenly making significantly more than you’ve ever made before. Do you not think this looks a little bit suspicious? Best of luck – you’re on your own with that one.

But Amazon, Google etc. do it – screw HMRC!

Don’t get me wrong, I’m not exactly enamoured by the tax practices of certain large corporations but the big difference is IT’S LEGAL! (for the moment anyway) And guess what? There’s nothing to stop you doing the same thing. And guess what? You’re still using Amazon and Google so don’t be such a hypocrite! Would it be in your interest to set up a double Irish with a Dutch sandwich tax arrangement to save a couple of quid? Of course not. Is it fair? No. But for as long as tax has existed people have been trying to avoid paying it. Let me ask you this, if Amazon and the like suddenly started paying their fair share of tax would you stop committing tax evasion? I refer you back to the last couple of sentences of the last paragraph. Stop worrying about things you can’t control. You do you. There’s a lot to be said for how productive you can be when you’re less stressed.

Is small scale tax evasion now pointless?

So here’s the thing. When I first started working the UK personal tax allowance was £3,765. Now, in 2019-20 you can earn £12,500 per year in the UK without paying a penny of income tax. If you make £20,000 self employment profit you’ll only be paying 13% tax and NI on your overall income*. This is pretty generous in the scheme of things. Have a look at what you’d pay in other countries! With all of this in mind you really have to ask yourself – in 2020 is cash-in-hand work really worth the risk and hassle? And while we’re at it…

Customers – STOP ASKING FOR A CASH DISCOUNT! When a customer asks if they can get a discount for paying by cash what they’re actually saying is “Please can you commit tax evasion so that I can pay less?”. It’s insane. Stop it!

How do I get paid without cash?

There’s a whole world of options to get paid without having to handle a bunch of grubby notes. Let me just preempt this – cheques are also obsolete. I say that as I sit here looking at a cheque from HMRC for overpaid tax, a cheque from the DVLA for a refund of car tax and a cheque from my insurance company for a refund of vehicle insurance <facepalm>. Don’t follow their lead, please assume cheques are also dead. Anything that involves you having to drive to a physical bank to tell them, via a random piece of paper, to electronically move money from one account to another, is utterly ridiculous in the modern age. Here’s what I’ve used successfully over the last few years:

Faster Payments (online transfers)

• Good points: Great for large sums as they’re free and you’ll generally receive the money on the same day
• Bad points: You’ll have some invoice paperwork to handle and customers often ‘forget’ to pay

Accept credit & debit cards

• Good points: Very convenient for the customer, minimal paperwork
• Bad points: You’ll have a small transaction fee and it can take a couple of days for funds to hit your account

PayPal friends & family

• Good points: Great for friends & family
• Bad points: Not a solution for business payments

GoCardless

• Good points: Great for recurring payments, minimal paperwork
• Bad points: There’s a small transaction fee and the customer has to set up a Direct Debit which can put some people off

Payoneer & Transferwise

• Good points: Great for international payments, easy(ish) paperwork
• Bad points: Not supported by some international suppliers and banks

Of course there are other more obscure options such as Bitcoin and Ethereum. We’re not there yet but watch this space. For most businesses the sensible options to give your customers are Faster Payments (online transfers) or credit / debit card. There’s very few reasons why you need anything else.

How do I take credit & debit cards?

There are several options for taking face-to-face credit card or contactless transactions. I’ve been using iZettle for several years and love it. I’m also looking at SumUp as an alternative. There’s many other options out there, all very reasonably priced and easy to use. You install an app on your phone, your phone talks to your card reader and you can take all common electronic payment methods from contactless through to chip & pin, Apple Pay, Google Pay and everything in between. All the paperwork is automated and it can even integrate with your accounting software. It looks totally professional and customers love it.

I even started accepting credit / debit card payments for larger jobs. In the past when I completely an installation, say for £3,000, I’d invoice the customer and they would pay me by online transfer. Normally this was fine but I did have a couple of instances where the customer ‘forgot’. This gets stressful after a while. OK, so on a £3,000 order you’re looking at a fee of £52.50 but look at the advantages:

• Payment is (pretty much) guaranteed
• You don’t need to waste time checking if you’ve been paid
• You don’t need to waste time chasing the customer
• You don’t need to waste time printing invoices and receipts
• You don’t need to waste time going to the bank (if you’re paid by cash or cheque)

For me this is well worth £52.50. If the customer really wants to pay by transfer don’t be shy about asking them to do it before you leave the property. Just politely say “Would you mind doing the transfer while I’m here so I can check it came through? Or you can pay by credit card if you prefer?”. At that point I found most customers immediately got their credit card out. Job done. On to the next one.

Is cash really dead?

I’m trying hard to justify the existence of cash in a modern society but really struggling. I do sometimes get a bit ‘tinfoil hat’ and worry about the state’s ability to pry in to your every movement. I then remember that life is less stressful if you stop worrying about things you can’t control. I can control whether my business accepts cash and for me it’s rarely worth the hassle. Don’t get me started on coins.

There’s a phrase commonly used in the UK “Look after the pennies and the pounds will look after themselves”. So is this true? No it is not. It’s utter nonsense. Look after the pennies and all you’ve got is a lot of pennies.

For several years now there’s been talk of 1p and 2p coins becoming obsolete (yes, they are obsolete and have been for a long time).  The real question we should be asking is whether cash is now obsolete?

What do you think? Is there still a place in the world for cash and cheques? Have you had any horror stories with non-payment from customers?

* Based on £12,500 personal allowance giving a taxable income of £7,500. Income tax due of £1,500 at 20%. Class 2 NI due of £156. Class 4 NI due of £1023.12 based on 9% over threshold of £8,632. Gives total tax bill of £2,679.12 which is around 13% of total income. Doesn’t cater for payments on account, VAT or any other forms of income.

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Originally published: 26th November 2019
Last updated: 26th November 2019

Last Updated on 26 November 2019 by Andy Mac