Electronic Payments for Small Businesses: Smoothing the Flows?Nitin Sumangali |
Is cash crucial for the running of small businesses?
That’s the contention of Shari Drewett, the co-owner of the Better Being catering company and sandwich shops in New York [full disclosure: I’ve eaten some of Better Being’s sandwiches and they’re truly excellent]. She’s written this as part of The New York Times’ regular series Room for Debate. In this edition, the question being posed is: should the U.S. eliminate cash and move to fully electronic means of payment? Even as consumers continue to use credit and debit cards, and now with the growing prominence of Bitcoin, this debate looks to answer why cash remains a tool many consumers turn to.
In Shari’s post, she notes that as a small business owner having ready access to cash has been crucial to the survival of her business. She indicates that it was the best way to manage her bills and pay suppliers—especially in cases when catering clients weren’t paying their bills; her suppliers are typically local and artisanal farmers. In addition, Shari specifically mentions that she’s not against digital commerce, just that in her experience some element of cash is useful for merchants who are battling problems with cash flow.
My take is that what would help merchants like Shari are payments systems with stability and predictability. The value of cash in Shari’s examples is that she can manage it—to pay different suppliers, but also to get paid for her work.
That’s the point: electronic payments simplify the payments process, especially if dealing with far-flung suppliers like cheesemakers in one place and butchers in another. In the example of not getting paid by a catering client, having a method to accept electronic payments on the spot would be easier and more efficient than taking a stack of cash that later needs to be counted, transported and deposited (not the mention the hassle it would be to recover money if the stack didn’t add up).
If Shari could accept electronic payments from her customers and use them to pay her suppliers, she could even smooth out her cash flow and find it easier to bridge the gaps between when she needs to pay her suppliers and when she expects to receive revenue. The stability and predictability digital payments offers business owners helps make them more flexible in dealing with the daily realities of running their business. Not being tied to the amount of cash in your hand can take a lot of stress off your mind.