The thoughts that were thunk and the goings on of my life.

Thursday, July 14, 2005

Aggie Bucks. Meal Credit!

I just tried to eat lunch at this neat Italian place. Went in, ordered my food got to the line and I handed her my credit card. She said, “We don’t take Credit, only Cash or Check.” I asked if there was an ATM or something and she told me about one across the complex, over the street, in the shopping center about 10 min away. So I walked out of the restaurant and bought food elsewhere. In today’s world owning a business and not accepting credit (or at the least debit cards) is completely asinine. No real portion of the economy has run on cash in years. Cash is going to go the way of land lines and VCRs. Yeah, they can be useful in certain situations (power outage, cheap recording), but to limit your business to only one form factor of life-blood (money) is ridiculous and will quickly kill the establishment.

There are those that think that credit cards cost businesses too much to use. While there are definitely certain costs involved it’s not nearly proportional to the costs of NOT having such a system. Think of the situation today. They had a customer (me) who wanted a product. The customer used their services and products inducing labor and materials costs on part of the business. By only accepting cash they made it to where I couldn’t pay them. They lost the labor, they had to destroy the materials (or give it to an unwitting customer), and they didn’t earn any money from the sale. Instead of earning $10 they lost about $5. That’s a gross loss of $15 for one person who wanted to be a customer! Plus they won’t gain any of my business again, over the course of 2 days that could be a $25 from a single person. Imagine how many other customers they lose in any one day simply because they are the victims of poor business management. This quickly adds up to $100s or $1000s of dollars which could easily be the difference between a place being profitable and going under.

Another overseen issue is in the checkout the customer who is about to make a purchase is more likely to spend more if they don’t feel like it costs them more. In my case, had I had cash, I would have bought just a sandwich and drank some water. With a credit card I wanted to buy my sandwich, a glass of milk, a brownie, and some chips. Accessories are the areas where real profit can be generated in any industry. Just look at cell phone accessory stands in the mall, girls getting highlights in their hair, the entire jewelry industry, option packages on cars, fries and drinks at McDonald’s, and the grand daddy of them all…movie theatre popcorn. Each of those items produces huge margins and accepting credit cards increases the likelihood that your customers will purchase those objects which cost the business the least and earn them the most. By only accepting cash you doom your business to only earning the bare minimum even in the best case scenarios.

All of these topics of pure monetary assets don’t take into consideration the extra risks inherent with cash. In a credit system all that is available from the sale is a piece of paper indicating the transaction. If they use cash you have a liability on your hands that you have to protect and increase your chances of being the victim of a robbery. All pain and no gain for your business.

So for those of you running businesses out there, be smart. Accept credit cards! To not do so is foolish and means that you do not understand how the world of business works. I hope this Italian place learns how to begin accepting cash…too bad I’ll never get the chance to eat there, it looked really good.

Then again, it could be that this Italian joint was run by the mafia, and the real reason they only do cash is that the whole business is just a front.


Michael Ward said...

When Dave and I went to NYC, we walked over to Brooklyn. Right under the bridge there, there is a famous pizza place that only accepts cash. I still think it's a shame business with certain illegal ties--but, hey, the pizza was great.

Otis said...

For those wondering what Mike's refering to, check out his blog here

Yeah, I hope to visit some Mafia joints in Boston's north end this evening. We'll see if I make it out alive.