HMRC has today published a research report which aims to understand how SMEs behaviour towards cashless payments has been affected by coronavirus.
The main findings indicate that the pandemic has sped up the general trend towards cashless payments, with most SMEs expecting the use of online and card payments to stay the same or increase in the future.
Online payment methods were the most common, representing the largest proportion of sales in 2019-20. Although the costs associated with cash are lower than digital payments, most SMEs preferred convenience, security, and hygiene of cashless payments. Online bank transfers were cited as SMEs preferred payment method with more than 92% of SMEs accepting them.
The main barriers to accepting cashless payments, were not technicalities or cost, but a reported customer preference for cash.
HMRC’s research found that the majority of SMES felt it was never acceptable to accept cash to “avoid” paying tax, though more than one in six empathised with the self employed or smaller businesses, doing a small or quick job taking cash to avoid paying tax where they faced financial challenges and the amount of tax owed was perceived to be small.
Kay Brookes, Partner at Bates Weston comments:
As the public becomes increasingly comfortable with the use of cashless payment methods, the trend for SMEs to accept them will only accelerate. Online bank transfers, direct debits and standing orders, online payment platforms such as PayPal, are accepted by the majority of SMEs as is cash, with card payments accepted by between 55% and 65% of small and medium sized businesses respectively.
When looking at cashflow, there are obvious advantages to bank transfers. Speed of the transfer, a digital record that is easily reconciled with accounting records, a degree of fraud protection, perceived security and satisfying a customer’s preference, are among them.
Tight control of your cashflow comes not only from offering efficient methods of payment like BACS and Direct Debits, but in regular and accurate invoicing, with a system for enforcing your terms. Finance options and scheduling of tax payments should also be considered. To manage cashflow effectively, it is important to have a robust cashflow forecast that is regularly updated.”
Over the past year, managing cashflow has become even more difficult for many SMEs and we have been doing all we can to help our clients with this. If you would like to talk to us about managing your cashflow, please do get in touch.