Cash, Check, or Card? Comparing the Best Payment Methods for Small Businesses 

Paper, plastic, or digital: what’s the best way to get paid? 

For some, cash payment is a no-brainer—a tried-and-true payment method. Exchanging goods and services for cash has worked for ages. 

However, cash is not always the best payment option for a small business. In fact, card payments have surpassed cash payments in many enterprises. Meanwhile, sophisticated online payment methods are growing ever popular with consumers. 

The point is, choosing a payment method for a small business is not that easy. There’s much to consider, not just the payment’s simplicity or popularity. 

This article explores the various small business payment methods. You can also read our one pager to learn how to choose the ideal payment method for your business. 

Understanding Small Business Payment Needs 

Does it really matter how you get paid? 

Well, there’s more to getting paid than simply accepting money from customers. How you receive payments directly impacts crucial aspects of your business, such as: 

• Cash flow 

• Sales volume 

• Bookkeeping and accounting 

• Operational efficiency 

• Brand reputation 

• Compliance 

• Customer experience 

• Growth planning 

• Financial performance 

In many ways, how you get paid is as big a deal as getting paid at all. 

That said, small businesses face unique challenges when it comes to payments. Some of these challenges you’re probably familiar with: 

Mixing Business and Personal Finances 

Small business owners have a habit of mixing business and personal funds. This is called commingling funds, and it’s a very risky business practice. Commingling leads to inaccurate financial records, taxation errors, and increased legal liability (particularly in LLC enterprises). 

The good news is that commingling is entirely avoidable. You simply separate your business and personal accounts. But your choice of payment method can make that difficult. Some payment solutions are tied to personal bank accounts or digital wallets, inevitably mixing business and personal monies. 

Payment Integration Issues 

To ensure smooth transactions, the payment system must seamlessly integrate with existing software, apps, or websites. For instance, the payment method should be linked to your accounting system. That way, every payment gets automatically logged. 

Full integration reduces friction and streamlines payments. However, integrating a payment system with the rest of the business can be a headache. Achieving even partial integration often involves technical expertise and extra costs. 

RELATED ARTICLE: How to Accept Credit Card Payments on Your Phone/Tablet 

Late Payment 

Your choice of payment method can lead to delayed payments. 

Some payment methods are inherently slow. Bank checks, for example, can take days or even weeks to clear. Others simply frustrate customers, causing payment disputes and delays. 

Payment delay is a common and crippling problem among small businesses. Late payments obstruct proper cash flow, derail growth plans, and increase business risks. 

Security and Compliance Concerns 

Payment systems are susceptible to a myriad of security threats. For example, a third of small businesses have fallen victim to credit card fraud. That’s according to a Forbes Advisor poll. 

Fraud is not the only security risk facing business payments. Some payment systems put sensitive customer information at risk of theft. That’s where compliance comes in. Businesses are legally obliged to safeguard payment data by meeting various security standards and frameworks, such as: 

• Payment Card Data Security Standards (PCI DSS) 

• Anti-Money Laundering (AML) rules 

• Revised Payment Services Directive (PSD2) 

• System and Organization Controls (SOC 2) 

High Transaction Costs 

Sometimes, you have to pay to get paid. Such is the case with most third-party payment processing services. Payment processors typically charge a variable or flat fee per transaction. The total cost will depend on the transaction amount, volume, source, and destination. 

These costs will vary, depending on the service provider and the nature of the transactions. 

Cash Payments 

Payment doesn’t get easier than this. The customer simply hands you actual notes or coins as payment. All you have to do is count the money and maybe give out change. 

Cash is a universally accepted payment method—and one that’s nearly as old as trade itself. The use of physical tokens to pay for goods and services dates back at least 5,000 years. It was a huge leap forward from the barter trade system. 

Cash payment has dominated trade throughout most of human history. 

While it might seem archaic, many small businesses still accept cash payments. In fact, cash is still king of retail payments. Almost 70% of Americans prefer paying in cash for in-store purchases. 

The Pros 

• Everyone’s familiar with cash payments 

• No exchange of information between the buyer and the seller 

• No transaction charges 

• Zero risk of charge-back 

• No dependency on technology 

The Cons 

• High risk of loss, theft, and receiving counterfeit money 

• Lacks traceability 

• Complicates remote and international payments 

• Involves a trip to the bank to deposit 

• Inconvenient for large payments 

Check Payments 

A check is basically a written order directing a bank to pay out a specific sum of money. 

Here’s the basic premise of how checks work: The customer writes you a check. You then take that check to the bank. Once the check clears, the payment gets deposited into your account. 

There are also digital versions of paper checks called e-checks. These are written, issued, submitted, and processed electronically. 

Not so long ago, checks were the most convenient way to transfer funds from one bank account to another. But they are not as popular as they used to be. Nearly half of Americans never wrote a check in all of 2023. 

And according to the latest Federal Reserve data, checks accounted for only 7% of consumer payments in 2017 and 2018. 

Still, checks are great for making large payments. They are especially popular in the contracting industries and B2B relationships. Builders, remodelers, plumbers, etc., mostly don’t mind getting paid via check, particularly for big jobs. 

The Pros 

• Widely accepted 

• No reliance on technology 

• Convenient for receiving large payment 

• Generate traceable paperwork 

The Cons 

• Payment delays, as checks take time to clear 

• Can accrue processing fees 

• Risk of bounced checks 

• Collecting, logging, and cashing checks take time 

• Checks can get lost or damaged 

Card Payments 

Credit and debit card payments are the main reason checks and cash feel antiquated. These have essentially won the spot in popularity. In a recent survey, 70% of the respondents said they used card payments most often. And about two-thirds said they preferred businesses that accept card payments. 

There are several types of payment cards. The main ones are: 

• Debit cards: Also known as bank or check cards, debit cards make payments by drawing money from the user’s checking account. 

• Credit cards: A credit card allows the holder to pay for goods and services on credit. 

• Prepaid cards: These are either debit or store-value cards pre-loaded with cash. 

• Virtual cards: Digital or virtual cards are lean electronic versions of regular cards. 

• Contactless cards: These cards are fitted with a near-field communication (NFC) chip for contactless payments. 

Cards tick all the boxes when it comes to payments. They are ideal for large and small payments, remote and in-person payments, as well as in-store and online payments. 
 

The Pros 

• Easy integration with existing software 

• Drive faster payments 

• Highly inclusive and accessible  

• Promote customer satisfaction 

• Automated accounting and bookkeeping 

• Strong security 

The Cons 

• Card processors charge service and processing fees 

• Susceptible to charge-backs 

• Full integration may require technical expertise and additional investments 

• Strict compliance requirements 

FROM ONE OF OUR PARTNERS: 5 Easy Ways to Accept Credit Cards 

Choosing the Right Payment Methods for Your Small Business 

There are dozens of small business payment methods. And all these options differ widely in terms of use cases, sophistication, pros, and cons. Clearly, choosing the right payment solution can be difficult. 

The trick to finding the best payment method for your business is approaching the problem like an entrepreneur. Start by carefully considering these seven factors: 

Business Compatibility 

How well does the payment system fit your business? 

Ensure the payment method is compatible with the existing infrastructure. More importantly, check that it aligns with your business operations and solves your payment pain points. All that starts with a deep understanding of your business needs. 

Convenience and Ease of Use 

A good payment method must be easy to use. Firstly, it should be effortless for customers to make payments. Secondly, ensure it doesn’t frustrate your cashiers or accountants. Seamless payment works both ways. 

Speed 

Go for a payment solution that gets you paid faster. The faster you get paid for goods or services, the better. Prompt payments help sustain your cash flow, business operations, and growth trajectory. 

Also, you don’t want a system that keeps customers waiting for payment authorization or approval. 

Cost and Fees 

Cost is an important factor to consider. Check how much the payment system will cost to implement and run. And also, who pays for it—the customer or the business? 

Some payment systems like cash do not cost a thing. But others, such as online and credit card payments, charge a percentage fee for every transaction. You may also have to pay for subscriptions to various financial services. 

FROM ONE OF OUR PARTNERS: What Are Credit Card Merchant Fees? The Different Types Explained 

Scalability 

Is the payment method flexible enough to scale with the business? 

You want a system equipped to handle any number of transactions and users. A stiff system might limit when, how often, and how much you get paid. That is simply not acceptable in a growing business. 

Security and Compliance 

Assess the payment method’s reliability and safety. Again, safety works both ways—protecting the customers and the business. With digital payments, in particular, look for anti-fraud and data security features. 

On the same note, check the compliance requirements. You must be security-compliant to receive most virtual and card payments. 

Customer Preference 

How do your customers want to pay? 

Keep in mind that not all customers will prefer the same payment method. So to satisfy all customers, you must provide multiple payment options. Give your customers as many choices as possible. Let them choose for themselves how they want to pay. 

Providing multiple payment methods ensures that no one gets left out. 

For some insight on customer preference, check out the EverCommerce State of the Service Economy Report. We asked service-based small business owners how their customers usually pay for their services. The accompanying chart offers a breakdown.  

RELATED ARTICLE: How to Write a Receipt of Payment: Best Practices 

Top Tips for Secure and Efficient Payment Processing 

• Find out your customers’ most preferred payment methods and incorporate them into your business. 

• Automate the payment process as much as possible. 

• Educate your customers and employees on the various payment methods. 

• Audit the security and compliance of your payment systems. 

• Hire a reputable payment processing service provider.