When it comes to transactions, it may be time to revise the old expression: cash was king. Modern digital payment methods have been chipping away at the monarchy for years, and, particularly in the case of landlords collecting rent, the risks of cash paymentshave become too great.
This may be surprising – it certainly goes against conventional wisdom. Afterall, cash is quick and guaranteed. For landlords, property managers, and owners, that means no bounced checks, no excuses, and a quick deposit. And those benefits are all still true, but the benefits of alternative methods have made the downsides of cash even more apparent. Let’s run through four of top reasons landlords, property managers, and owners should not accept cash payments for rent.
- Cash Payments Leave You Susceptible to Crime
This is really a two-parter. Firstly, cash is unaffiliated and unrestricted. In other words, anyone can take any cash. Beyond literal possession, there are no safeguards that you can point to and prove that a twenty-dollar bill is yours rather than someone else’s. If you’re robbed, whether it’s an actual break-in or a dishonest employee, that money is almost certainly lost. That’s a massive risk.
And it brings us to part two. If you regularly handle cash, you’re likely to become a target. As word gets around that you, as a landlord, are collecting thousands of dollars in cash payments every month around the same time, criminal elements may hatch criminal plans.In a best-case scenario, no one is hurt in a robbery, but that’s unfortunately not always the case. Avoiding cash payments is a way to protect your business, your employees, and your tenants.
- It’s More Challenging to Prove Payments
As a landlord, you should issue a receipt every time you receive a cash payment. Without one, tenants have no direct proof of payment. But issuing a receipt every time is an administrative nuisance, and many landlords regrettably skip this step. It may seem like this only creates a risk for your tenants, but that is not the case.
Let’s say, for example, that a tenant claims to have paid you via cash and they do not have a receipt. The dispute becomes so ugly that a judge ultimately must rule on it. If you cannot demonstrate a history of providing receipts to tenants for cash payments, why should they believe you would have provided the tenant one in this case? The absence of a receipt provides no definitive evidence without a history of receipts elsewhere. If you’re going to accept cash, it’s critical that you take the time (and it does take time) to always create a receipt.
- Cash Rental Payments Are Prone To Accounting Errors
Cash payments require manual accounting data entry. This is actually not limited to just cash but applies to all offline payment methods. At some point, that information needs to enter your accounting system, whether that system is digital like Excel, Quickbooks, or some property management software, or on pen and paper. Regardless, whenever manual entry is involved, data is more prone to error.
Digital payments, in contrast, are relatively immutable. When a tenant submits a payment through an online rental payment platform, the payment is instantly recorded. A good property management software will provide a receipt for both you and the tenant with a timestamp, method of payment, and will update the total amount due on the lease. In fact, many modern property management software platforms will automate accounting processes like Income Reports, Rent Rolls, and Rental Schedules, simplifying your work and eliminating human error.
- Cash Payments Enable Illegal Behavior from Tenants
Because of their anonymous, untraceable nature, cash is more likely to be used in criminal activity. If a tenant is only able to pay you in cash, it may not be a good sign. It is certainly not always true, but a tenant that is only able to procure a cash payment may be engaged in something that puts your rental at risk. For the safety of your property and other tenants that may be living there, it is best to avoid renters that are only willing to pay you in cash.
Wrap Up: Online Payment Technology Has Changed Cash Payments
The above risks have always been there when it comes to cash payments. So why are cash rental payments suddenly falling out of favor? The true story is not just in cash’s disadvantages, but more importantlyin the advantages it no longer holds. The main reasons for accepting cash in the pasthave always been fast payments and guaranteed funds. Checks could bounce, digital payments were slow, but things have changed. Modern, online payment processors move money incredibly quickly, sometimes faster than you could get it into your account if you deposited it yourself. And many offer guarantees or assurances that, once submitted, a payment will not bounce. Accepting rent online is easier than ever and safer than ever, matching the advantages of cash payments while completely eliminating the above risks. For most landlords these days, accepting rent online is the clear successor to the throne held by cash. And as a result, it may finally be time to declare it – the king is dead, long live the king.
