Key takeaways

  • Cash-only businesses have survived into the digital age and may present lucrative investment opportunities for would-be business owners.
  • Traditional cash-only businesses include laundromats, carwashes and vending machines, although there are others.
  • These businesses are often relatively quick to set up and provide fast financial gratification to the owner. Their success and profitability will depend on careful planning, location and market demand, among other things.
  • However, there are drawbacks such as reduced customer base, increased risk of theft and higher potential for IRS audit.

Contributors

China Llanos

Editorial staff, J.P. Morgan Wealth Management

A cash-only business may be a great investment for someone who values a straightforward business model. In some cases, these businesses can be easy to set up or assume the operation of. They may also offer the immediate gratification of cold, hard cash in your hand.

However, we’ve also entered an age where digital payment is the preferred method of many consumers, which brings up the question: Are cash-only businesses sustainable in 2024? The answer is more complicated than a simple yes or no, but there are still many cash-only business models being run in the United States and they’re unlikely to go away soon.

Here's what you need to know if you’re considering investing in a cash-only business or if you already own one.

Popular cash-only businesses

Although many businesses around the world have adopted point of sale (POS) systems that process transactions from credit and debit to Apple Pay and sometimes even services like Venmo and Cash App, the cash-only model has survived and thrived in some specific types of businesses.

Popular cash-only businesses include:

  • Laundromats
  • Car washes
  • Nail salons
  • Vending machines

Some small restaurants and food trucks choose to stay cash-only, too, as do some small businesses that provide services such as haircuts, house painting and landscaping.

Pros and cons of owning a cash-only business

In the digital age there are surprisingly a lot of pros to owning a cash-only business. There are also drawbacks that should be taken into consideration before investing in one of these businesses.

Pros of a cash-only business:

  • Low cost (no credit card fees)
  • Fast setup (no merchant account needed)
  • Money upfront
  • No risk of credit card chargebacks

Cons of a cash-only business:

  • Potential likelihood of fewer sales due to not accepting digital payment
  • Higher risk of theft
  • Cash tracking is harder and can be subject to errors
  • Increased risk of IRS audit

Operating tips for your cash-only business

There’s a possibility that a cash-only business will attract fewer customers, depending on factors like the type of business and its location. If you believe in the viability of the business regardless – and especially if it’s one of those core cash-only businesses that people expect to pay cash to – then that’s a potential downside you may not be overly concerned with. But the extra accounting and risk endemic to cash-only businesses is something you should be well prepared for.

Here are some tips for running your cash-only business in a way that minimizes risk and maximizes profit potential:

  • Invest in POS technology or other software that can help track your transactions and reduce any errors that may occur with manual tracking
  • Otherwise, make sure you have an efficient tracking system and keep all records of sales
  • Research and install anti-theft measures and train any employees on spotting counterfeit bills
  • Put up signage around your place of business that advertises that you only accept cash
  • Think about accepting a peer-to-peer digital payment method like Venmo, which can be fee-free for the merchant and customers, or investing in an ATM for customers who don’t have cash handy. It is important to note that these payments must still be accurately reported. Always consult with a tax advisor to ensure compliance with reporting requirements

Tax considerations

Small business owners who operate cash-only businesses should be prepared to owe just as much in taxes as any other business. And they should be aware that they are at an increased risk of IRS audit, due to the higher probability of error with cash tracking and the general suspicion that cash-only business owners are more likely to hide transactions, thus, it might be useful and important for business owners to maintain meticulous records, use transaction tracking systems, and consult with a professional accountant experienced in cash-based operations.

In addition to normal income reporting, cash-only business owners must also file a Form 8300 for any cash transaction of over $10,000 that occurred that year. This form will include the customer’s information, a description of the transaction and a description of the business.1

Having an efficient cash-tracking system, maintaining relevant business records and seeking out an accountant experienced with cash-only businesses are all things that can help make filing taxes easier.

Bottom line

Cash-only businesses are still going strong in the U.S. and may be a lucrative income source for the right investor. However, there are certain risks to keep in mind when operating this kind of business, including less opportunity for sales and higher risk for theft and audit.

The right investor for a cash-only business may be someone who appreciates a traditional, no-frills business model, and has software or employees that can streamline the cash-tracking and tax-filing process.

FAQs

Do cash-only businesses pay less in taxes?

No. Cash-only businesses have the same tax liability as businesses that accept other methods of payment.2 3

Is it difficult to run a cash-only business?

Running a cash-only business may be more or less difficult depending on how each business owner views it. Some aspects are objectively easier, such as not needing a merchant account to process transactions and not needing to pay credit card fees. Other aspects may be harder, such as tracking the cash transactions and preventing theft. A business investor must assess these pros and cons before deciding if a cash-only business is right for them.

References

1.

IRS.gov, “Form 8300 Reference Guide.” (March 2024).

2.

IRS.gov, “Form 8300 Reference Guide.” (March 2024).

3.

J.P. Morgan Wealth Management, “How to prepare for Tax Day as a small business owner.” (March 2024).

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.