Cash Payment for Rent: A Bet Not Worth Taking

“Cash is king”. We’ve all heard the phrase, and in theory, and many ways it rings true. But when we start talking about the literal and physical exchange of U.S. legal tender as a means to run your business, the kingship of this traditional payment method starts to fade.

While collecting your dollars and cents the old-fashioned way might seem like the most straightforward, no-frills, best approach, there are actually significant disadvantages when it comes to smooth business operations. For accounting, legal, and time management purposes, it’s important to understand the downfalls of collecting cash for rental payment

Lack of Accountability

Picture this. You wish to afford your tenants the option of using cash to pay rent. This poses an obstacle to the collection process (which is, in itself, a significant downside); however, to remedy it, you have set up a drop box near your home or office so that both parties don’t physically need to be present for the rent to be turned in.

Fast forward to the count and you’re off. You re-count over and over and come to find that the payment from one tenant was short by $100. As uncomfortable as it may be, you contact the tenant and alert them of the shortage, only to have them deny all culpability. They claim to have turned in the full amount. And now you’re at an impasse.

This is not a desirable situation for any landlord or tenant to be in. But when you don’t have a solid system to hold both parties accountable, disputes such as this can be near impossible to settle.

Issues with Accounting

Here in the 21st century we are living in the age of automation. Technology moves at lightning speed, doing work that would take us humans hours, in mere seconds. And not only does tech move faster, but oftentimes better and with increased accuracy.

The accounting side of your property management business is no different. When you are manually documenting the transfer of funds over and over again, at different times, rates, and from different parties, human error is bound to creep in. Especially if there is but one record-keeper, it can be difficult to ensure accuracy.

On top of that, when accepting cash as payment, in some states you are legally required to provide a receipt at the time of payment. This presents another obstacle for your business flow, as you won’t be able to accept payment on the fly or in the field. Additionally, generating one-off receipts haphazardly can create the stuff of bookkeeping nightmares.

Security Exposure

The very things that make cash so convenient – it's size, transferability, physical nature – also make it extremely vulnerable. If you are a landlord with a large portfolio and you accept cash payments, this would be no small chunk of change in your charge. One would have to carefully consider not only the safety of such money in transit, but also the storage and protection.

Some of the worst news when it comes to cash theft is that there is no way to track it. Once the money is gone, it’s gone. Again, these characteristics make individuals with large sums of physical cash a particularly attractive target for theft.

Time Intensive

When it comes to the increased amount of time it takes to collect cash for rent, things start to add up quickly. From counting money in front of both parties, to writing manual receipts, to extra trips to the bank, it’s easy to see how the theory of cash convenience isn’t quite so true in practice. Not to mention all transfer activity must then be manually recorded for your accounting purposes after the fact.

It is for these reasons and many more that most landlords today have switched to an online rent payment method. And rightfully so. Here at Innago, we believe that your business is too important to take the immense risk of accepting cash as payment for rent. There are plenty of online alternatives out there, and a little research will show that there is one that is the right fit for you.

Not only can an online platform give you peace of mind when it comes to accountability, security, and your recordkeeping, but it can improve and streamline your business in ways you never thought possible. Take it from us. There's only one way you can win with cash and so many ways to lose. And that sounds like a bet that’s not worth taking.