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Archive 2015 · Discounts for paying cash...

  
 
MattGruber
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p.1 #1 · p.1 #1 · Discounts for paying cash...


More and more I am getting asked if I offer a discount if the client pays in cash/check. I understand that this popular in other business due to credit card fees. I get that part. But most of my clients are paying with check anyway, so offering a 3% discount for paying how they most likely would be paying anyway loses me money, right? Am I overthinking this? I can understand if almost all of my clients were paying via credit card, but even then- offering a 3% discount, just to combat the 3% credit card fee is a wash.

Just to use an example figure: say my package was $1,000. If the client payed by credit card they would still only be paying $1,000, yet I would be receiving $970. By offering a discount of 3% for paying cash/check, I would be receiving $970. I see no point in this unless I start charging people an extra 3% fee to pay by credit card.

Someone help my sanity... Maybe I just haven't had enough coffee yet today.





Aug 23, 2015 at 11:05 AM
sherijohnson
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p.1 #2 · p.1 #2 · Discounts for paying cash...


that could be what they are thinking, that you have a built in pricing that covers the cost of those fees


Aug 23, 2015 at 11:30 AM
TTLKurtis
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p.1 #3 · p.1 #3 · Discounts for paying cash...


I used to say yes to this request but then it's more work for me driving to meet them in person to collect the cash because I don't have a physical studio. Just send a check or pay with CC whatever you prefer is what I say now. Once my Braintree free processing runs out (50k promotion) I will begin saying I prefer check agonize again haha.


Aug 23, 2015 at 11:39 AM
amonline
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p.1 #4 · p.1 #4 · Discounts for paying cash...


I tell people I'm already competitively priced for cash sales, and I take the 3% hit on credit cards. If they take it further, I explain that it is mere pennies and the CODB in the big picture. 90% of my clients prefer checks and multiple payments anyway, so it's never an issue that's brought up or asked. It's probably been seven or eight years since anyone asked for a cash discount. I can actually remember the guy. lol

This is not to say that the idea you propose couldn't work for you. It's your business. Pulling out a calculator and removing an amount in person at the consult might even be a selling tactic.



Aug 23, 2015 at 12:57 PM
MattGruber
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p.1 #5 · p.1 #5 · Discounts for paying cash...




amonline wrote:
I tell people I'm already competitively priced for cash sales, and I take the 3% hit on credit cards. If they take it further, I explain that it is mere pennies and the CODB in the big picture. 90% of my clients prefer checks and multiple payments anyway, so it's never an issue that's brought up or asked. It's probably been seven or eight years since anyone asked for a cash discount. I can actually remember the guy. lol

This is not to say that the idea you propose couldn't work for you. It's your business. Pulling out a calculator and
...Show more

Yeah, I think I just need to explain to people that I don't charge them extra for the credit card payments- that I take the small financial hit.



Aug 23, 2015 at 01:05 PM
Depth of Feel
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p.1 #6 · p.1 #6 · Discounts for paying cash...


They think cash means you are not paying taxes.


Aug 23, 2015 at 02:01 PM
FrancisK7
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p.1 #7 · p.1 #7 · Discounts for paying cash...


In my parts asking for a cash discount is asking for 15% off (our tax) because they expect us to keep the wedding off the books.

So when I am asked this I do say I can give them 3% off and that's it. Only one couple pushed the question further and I explained there was no way for a photographer to keep a wedding out of the books. Between social media sharing and Canadian Revenue Agency agents not being morons, they would immediately spot an empty Saturday on the schedule in the busy August season when all other Saturday were otherwise booked. It's just not possible to hide the transaction "under the table" as we say here, like it is often done in certain service areas like plumbing, renovating or any menial tasks/labor.

Plus, defrauding the government isn't a great business plan.




Aug 23, 2015 at 02:55 PM
amonline
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p.1 #8 · p.1 #8 · Discounts for paying cash...


I don't think the OP's intention had anything to do with the option of defrauding taxes. Let's not steer this off-topic.


Aug 23, 2015 at 04:27 PM
MattGruber
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p.1 #9 · p.1 #9 · Discounts for paying cash...


Thanks for the input, all. The instances I was talking about were specific to credit card vs cash and the related fees or discount. I have encountered I think 2 people over the years who have asked about a cash discount, referring to under the table tax fraud crap. I told them no.


Aug 23, 2015 at 04:41 PM
stevez32
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p.1 #10 · p.1 #10 · Discounts for paying cash...


Yes, offering the discount is the same result for you, you get the $970, but the client gets the discount of $30 and for some people that makes them happy. So even though you are not getting a benefit, they get the benefit, which makes them happy. Whether its worth it to you is a personal decision.


Aug 23, 2015 at 06:43 PM
Paulthelefty
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p.1 #11 · p.1 #11 · Discounts for paying cash...


amonline wrote:
I don't think the OP's intention had anything to do with the option of defrauding taxes. Let's not steer this off-topic.


I don't think discussing taxes is off topic... the payor is suggesting/implying that we do not pay our taxes if we collect cash and therefore they can pay us less, and that is very relevant to the overall conversation.

IIRC, it is against the CC companies rules to "charge additional fees" for use of a CC, but many business simply call it a cash discount, so it is no longer a CC fee. I also get the impression that such a rule is not really enforced; I have never heard of it, but that does not mean the rule does not exist. So the verbiage used may be legally tricky as well.

My policy is discount the CC fees only for cash only, a check is not cash and has all the inconveniences and risks of going to the bank, hoping it clears, etc.

Paul



Aug 23, 2015 at 09:25 PM
FrancisK7
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p.1 #12 · p.1 #12 · Discounts for paying cash...


amonline wrote:
I don't think the OP's intention had anything to do with the option of defrauding taxes. Let's not steer this off-topic.


I wasn't suggesting that Matt's intent was to defraud. If anything he's opposed to giving cash discounts so it never crossed my mind it was a strategy to defraud the IRS.

I was only relaying my experiences with those who ask for a cash discount in my area so just he could get another point of view to consider.

Sorry if you thought I derailed your thread, Matt.




Aug 23, 2015 at 09:50 PM
nolaguy
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p.1 #13 · p.1 #13 · Discounts for paying cash...


Matt, you've gotten good advice here.

For me, there are three options:

1) politely decline with the explanations suggested above;

2) say sure, and call it a day, as long as you deliver the cash during our first visit. 3% (for example), per Kurtis' comment, isn't worth driving across town to collect, nor is it worth setting up a special appointment for $30;

3) present well deserved attitude and say "you're kidding, right?... you're concerned about $30? Let's round up and call it $50 to make sure you're happy".

I like to think I would choose Door Number 2, but my heart wants to go with 3.


FrancisK7 wrote:
I wasn't suggesting that Matt's intent was to defraud. If anything he's opposed to giving cash discounts so it never crossed my mind it was a strategy to defraud the IRS.


Francis, I think you and Barclay hit the nail on the head in assumptions about the client motivation/inference - as mentioned, 3% is paltry, most customers are looking for 20, 30% and more with such suggestions.


I've told this story before on FM, I'm sure - and frankly it has little bearing on Matt's question but it's entertaining enough to repeat when it comes to cash sales.

In the jewelry business, goods are often loaned to retailers on "memo" which is a complicated legal situation but as practiced is essentially temporary consignment.

Two or three decades ago Houston's most important wholesale diamond broker had a long time customer (who always paid in cash - with the obvious under-the-table tax-avoidance implications) take possession of a whole bunch of diamonds "on memo", then declare bankruptcy (after selling many or all of the diamonds).

I'm sure the broker sued the retailer, but the first thing he did was contact the IRS and provide all the cash sale invoices over the years - for which the broker, scrupulous fellow that he is, had kept above board and paid taxes on.


This broker was often a bona fide pain in the butt to work with but he knew his business and rocked as far as an example of bullet-proof business practices.

And he had the last laugh. He was not a man to be trifled with.




Aug 23, 2015 at 10:33 PM
playerofwar
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p.1 #14 · p.1 #14 · Discounts for paying cash...


Like said before: Paying cash = no tax. This means most of the time you give a discount of half the VAT%. Although in the USA it's not worth it a lot of the time. In Europe recieving 1000$ would result in getting less than 350$ on your own bankaccount if you pay it out.
In my experience most are looking for 10% over here.



Aug 24, 2015 at 01:01 AM
MattGruber
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p.1 #15 · p.1 #15 · Discounts for paying cash...


I appreciate all the feedback! It's nice to see the point of view from peers. It's something that I'll have to think about. I don't think I would have a problem giving a 3% discount for actual cash- if it makes the client happy then I'm happy. More than that, though... I'm not sure. I definitely would not give a 10% discount for paying cash. Sure, I want the client to be happy, but in the end giving a few hundred bucks off for nothing doesn't float my boat. And as far as the rare proposition of under the table tax fraud- never. As much as I wish I dislike sending those payments to the IRS, I do enjoy being able to get a mortgage or loan by showing how much I actually make.


Aug 24, 2015 at 07:21 AM
ricardovaste
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p.1 #16 · p.1 #16 · Discounts for paying cash...


FrancisK7 wrote:
I wasn't suggesting that Matt's intent was to defraud. If anything he's opposed to giving cash discounts so it never crossed my mind it was a strategy to defraud the IRS.

I was only relaying my experiences with those who ask for a cash discount in my area so just he could get another point of view to consider.

Sorry if you thought I derailed your thread, Matt.



If you asked someone in the UK "Do you take cash?" then you are almost definitely asking "Will you commit tax fraud to save me some pennies" - there really is no other way about it. As we can transfer money for free account-to-account over here, there isn't necessarily any fee involved (unless, of course, people want to pay with monopoly money/CC).

I recall near when I was first starting out, I didn't say "I take cash" but ended up being given a sack of cash on the day, and simply went along with it because I didn't know any better / wanted to get paid. It went straight in my account, of course.

Today I keep it really simple and there is never any issue with people paying. It's really one of the the last things you want people to spend time contemplating about. I have a "most people pay by" if the conversation comes up - "yes that's fine" is the reply. My invoice details how and when to pay me. If someone asked me "Can I pay by cash?" I'd simply tell them sure, if you want to bring it to me, but it's probably easier to transfer directly. The question over here has such explicit insinuations most true British people would be ashamed to even ask it, so, most don't.

Side note: If someone is asking to skip on price THAT far down the line, I think there is a problem of sorts. You need to set expectations, qualify clients correctly.

Good luck.



Aug 24, 2015 at 11:37 AM
rob0225
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p.1 #17 · p.1 #17 · Discounts for paying cash...


The other benefit to taking cash is no worries of a charge back.


Aug 24, 2015 at 05:01 PM
glort
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p.1 #18 · p.1 #18 · Discounts for paying cash...



" That IS my cash price. CC fees etc are EXTRA."

That's what I tell those that ask me for cash discounts.
Here at least we CAN charge CC fees on top of our price and I do. We also can transfer money between accounts free of charge.

I often have people that want to pay cash, particularly some ethnic persuasions where that is pretty much their custom as I can work out. It seems to be an honour thing of the right way to do business basically.

Cash does not mean it's off the books or tax evasion. I can take and spend cash as I like. All I do is enter it in the cash column instead of the cheque/ CC side of the books.

My father runs his entire business cash, not because he's evading tax ( he's far too straight and honest for that, unfortunately) but because all the things with doing CC is too complicated for him at 76 years old and he can't be stuffed with it.



Aug 24, 2015 at 07:25 PM
Perry Heideman
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p.1 #19 · p.1 #19 · Discounts for paying cash...














While CC transactions are easy and quick, I frankly tire of big banks getting their hand in the cookie jar on relatively simple transactions. I would be tempted to allow a cash discount simply on principle.

I deal with a company locally that I buy frames, glass, etc for prints for shows, etc and had gotten to know them quite well. One day while pulling out my credit card, I asked "Would you guys prefer a check?" They most exceedingly preferred a good old paper check to save the CC fees. Now I did not ask for a discount as I was happy to oblige, but it made me think about other retailers and the fees they must always be paying.









Aug 24, 2015 at 10:02 PM
FrancisK7
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p.1 #20 · p.1 #20 · Discounts for paying cash...


In Canada we have iPad/iPhone apps that allow us to deposit a check from home simply by taking a picture of it. I deposit checks the second the clients have left. Takes 1 minute.

No fees.

I love it.



Aug 24, 2015 at 10:54 PM





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