Understanding Cash Discounts
Cash discounts provide a way for your company to recoup most of the costs from credit card fees. You'll need to raise your prices slightly and advertise the card price, but offer a discount to customers who pay with something besides a credit/debit card. (You can advertise this "cash price" as long as you're also advertising the card price). This article will explain how cash discounts work, why we've chosen this approach, and whether offering cash discounts is right for your company.
How Cash Discounts Work
When using cash discounts you're giving customers the choice to pay the full card price with a credit/debit card or pay a smaller cash price with a check, cash, bank transfer, etc. We've tried to work these discounts into Trash Flow as seamlessly as possible. When a payment with a cash discount is entered Trash Flow will automatically add a second transaction tied to it: a negative charge labeled Cash Discount in customer history. In the example below you'll see that the customer's balance is $37.63, but Trash Flow has calculated the payment due from the customer as $36.50.
Here's how Trash Flow arrived at those numbers.
| Card Price × Percentage Discount = Cash Discount | 37.63 × .03 = 1.13 |
| Card Price − Cash Discount = Cash Price |
37.63 - 1.13 = 36.50 |
Finally, here's what that payment looks like in customer history. Something to keep in mind when running financial reports: a cash discount acts like a credit in customer history, but it's technically a charge for a negative amount. That means they'll be included when running a posting report with Detailed Charges checked.
Why Use Cash Discounts Instead of a Credit Card Fee?
Laws vary from state to state but Visa/Mastercard prohibits merchants from adding a credit card surcharge. Some businesses add one anyway and simply hope no one notices or files an official complaint. Since Trash Billing must account for laws in all 50 states, and because trash pickup is sometimes treated as a utility (like electricity, or water/sewage), we don't have the leeway to charge customers extra for using a credit card. Cash discounts are allowed because you're charging everyone the same price but offering a discount to users who pay with something besides a card. Below is a sample statement showing the card price and cash price.
Are Cash Discounts Right For My Business?
You should consider several points when deciding whether to use cash discounts.
- For you to increase your revenue Cash Discounts require you to raise your rates and advertise them. That price will appear on all bills. If you're in a particularly competitive market this may not be feasible.
- You'll see a rise in customer calls asking for an explanation of the different prices. Some people might be upset at having to pay a higher price if they use a card, though more and more customers understand how credit card fees affect the bottom line of a business.
- Customers with an existing bill may send you a payment for the full amount even though Trash Flow wants to discount the price. Always record the payment for the full amount the customer is giving you. You can choose whether to check "skip cash discount" when adding that payment or allow Trash Flow to give the customer a small credit.
- The decision isn't easy to undo. You would have to change the discount percentage under Business Information back to 0, and likely revert your rates to what they were previously. This will lead to calls from customers confused as to why their rate rose slightly, then went back down. It also leads to a situation where customers have a bill in hand advertising a discounted price.
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