You might have heard about cash discount programs and how they can work at restaurants and other businesses that offer products for sale. But have you considered how a cash discount can work if you run a service-oriented business? You will be surprised at how well the process can work if you’re trying to get your profits under control.
Whether it’s a medical clinic, a car repair shop, or even a dog-walking service, you can offer a cash discount program for your service-based entity. The cash discount helps you recoup the expenses you might have surrounding credit card interchange and network needs.
The process is legal, as you’re letting people know they will pay less money if they order something with cash. They won’t be surprised by any sudden charges when paying with a credit card, as they will know beforehand that it will cost extra to pay for something this way.
You can even use a cash discount program if you accept payments worth thousands of dollars. Cash discounts work on check payments too.
The Beneficial Process
A cash discount program will ensure your profit margins won’t be harmed by credit card transactions. It doesn’t work like a surcharge where you’d add an extra fee for a card-based payment after the customer chooses to pay with a card. Rather, your service business will promote a discount for cash payments.
You’ll explain to your customers that they will pay more if they pay for something with a credit card. The extra total could be a certain percentage of whatever someone is spending on a service. But by paying with cash or a check, the customer will not have to pay that extra amount.
The List Price Is Essential
The most significant part of the cash discount process is to highlight a suitable list price. The list price should be the one people will pay when using a credit card. A cash discount will entail charging less than that list price.
The process is not a surcharge, as you are not asking people who pay with cards to spend more than what you are listing here. A surcharge would entail adding a surprise charge on top of the listed price. The process is illegal in some situations, plus your customers might not be happy about this idea.
Providing an accurate list price is necessary for making a cash discount service work for your needs. An accurate listing provides the customer the confidence necessary for ensuring that someone will want to do business with you. The customer won’t feel that the charge is too high, nor will there be any confusion surrounding whatever happens in the transaction process.
Bring In More Cash While Staying Reliable
Service-based businesses often have worries with card-based payments. They never know if the payments they are collecting will be accepted right. You’ll find it is easier for you to bring in money when you use a cash discount system:
- More customers will pay for your services with cash, thus reducing the risk of chargebacks.
- It takes days for card payments to go through and be confirmed, so you won’t get your money right away. But you’ll get your money instantly in a cash payment.
- Your cash on hand stores will improve when you take in more cash payments. You will require cash on hand to help you maintain your business, to provide refunds or change, or to handle other expenses in your work environment.
Necessary For High-Risk Businesses
You’ll need a cash discount system if you run a high-risk business. Many service-oriented companies are high-risk entities because they offer things that might not always be easy to deliver. A company that offers airline tickets and travel packages may be at high risk because there’s no guarantee people may use what they order, for example.
A high-risk business will pay extra in credit card processing fees. A cash discount service will be critical when you’re trying to get funds despite these significant charges.
What About Check Payments?
You can also use a cash discount system with checks. You can provide a discounted rate for people who pay with checks, as those do not require any extra charges for work. It takes a few business days for a check to clear and for you to get your funds, but you’ll still get all the money you expect to find through that check. You won’t pay anything extra in the process, since you are not going through any credit card interchanges to handle the transaction.
Check payments are critical for some service businesses. Some services may be extensive, like medical care or auto repairs. Some of these efforts can cost thousands of dollars to complete, making it impossible for someone to provide enough cash on hand for the deal. But a check payment can facilitate the effort in less time.
What Is the Cost?
A cash discount program can be advantageous, but the cost of the discounts you’re offering is essential to note. Look at the size of the discount you offer, and compare it with the charges you’d spend on card payments. The discount should be comparable enough to where you’ll get a good deal on the work at hand.
The cash discount should be affordable and easy to follow, but it works best if the total is reasonable. Customers will want to do business with you if they notice a substantial difference in the cash price for something. It shouldn’t be at your expense, especially as you try to get a profit and keep your cash flow under control.
A Smart Plan For Service-Oriented Businesses
Look at how your service-based business can benefit from a cash discount program. You’ll find it easy for you to keep your cash flow under control when you use a cash discount system for your work. It can also do well if you take in significant amounts of money, especially when finding something of note.