How much does accepting cash as payment cost businesses? And is it worth it for companies and governments alike to move further away from cash or is it here to stay.
In the UK, recent studies have fund that use of cash is costing SMEs an average of £3,638.57 or $6,127.35 dollars per year. That is almost £18bn or $30.31bn annually. Out of 1,000 surveyed companies, half reported that cash led to more accounting discrepancies than other payment types. 14% of respondents reported that the cost of handling comes to almost £10,000 a year.
According to recent research, cash payments have numerous ways of costing businesses money and time. As such, the business of cash management is a critical activity for companies of all sizes. Businesses and financial managers must ensure that companies have sufficient funds when and where they are needed, to focus on business operations.
Business and governments that suffer from inadequate cash levels must reexamine and modify their plans, spending time and effort to obtain and keep additional financing. This adds to the existing high costs of cash. Cash management practices for large and small businesses may vary greatly, with unique specializations and relationships.
Another example of expensive cash handling operations is seen in Nigeria, where an estimated $5.1 billion (N800bn) is spent annually on printing and handling cash. A recent MasterCard study explains that countries across the globe spend an average of 1 percent of their GDP yearly to fund minting of currency notes and logistics involving handling, processing and shipment.
“MasterCard advisers have done studies in many countries and found out that the cost of cash to an economy is about one per cent of the country’s GDP,” said Omokehinde Ojomuyide, Vice President, West Africa, MasterCard.
With the realization of how much cash truly costs, it is easier for business of all sizes to see why there is increasing innovation around digital money transfer and payments. Regardless of how companies stay innovative, payment options are clearly changing, and it is important for organizations of all types – and in all countries – to remain up-to-date on how they can remain profitable while keeping pace with the competition.