How Does A Cash Discount Help Your Business?

How Does A Cash Discount Help Your Business?

Having a retail business means selling a product to customers and balancing your budget so that every month, hopefully, the sales you make outpace what you spend on operating your business, so as to make a profit. This is the basic model of business, and it has been solidly working for centuries.

However, the way that this model works changes as the times, fashions and technology do. For example, 50 years ago, cash, check and credit card were the only ways to pay for items. And while these methods of payment still exist, they are now accompanied by high tech variations, such as debit cards, online verification of credit card purchases, “cryptocurrencies,” and even the ability to pay for items through personal mobile computing devices like smartphones.

All of this means that we’ve come a long way from the humble, mechanical cash register ringing up a sale and being the primary means of collecting sales transactions. And that means that operating expenses have changed, which is one way that new methods—like cash discount programs—can help.

Micro-Transactions Eat At Your Bottom Line

Every little bit counts, and this is especially true over a long period of time. Process fees can be one of those expenses that, on the surface, don’t seem like much. It’s just a small percentage of the profit you’d normally make from a sale, diverted over to a fee charged for using a debit or a credit card. In one sense, it’s almost like a “toll” that you pay for choosing not to use to cash, except that the decision to not use cash is normally made by the customer, not you, despite the fact that you bear the cost of the transaction.

While it’s just a small percentage of the overall total sale, that’s still money that’s lost. So what happens over a long enough period of time? Just how much money are you losing? That, of course, depends on your sales, and how many customers choose to go with alternate forms of payment. But if you enjoy brisk sales, and many customers choose to use something other than cash, that small percentage adds up quickly to profit you’ve earned no longer going to you.

Cash Discounts Plug The Gap

Cash discount programs can put a stop to this, and make sure that your hard earned profits go straight to you. Rather than shouldering the processing fees, you put them on sales that use debit and credit processes. When people decide to pay with cash instead, you don’t apply those fees, giving them a cash discount instead. Of course, it’s important to remember that you clearly advertise this in your place of business. A discount is something people will want to take advantage of, so make sure that when you implement this, your customers know.

You’ll quickly see the results as all those little expenses are eliminated from your monthly operating budget. Now you no longer pay for the non-cash processing fees, and your customers enjoy a little price reduction. Everybody wins.

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