Your tenant swears they already paid their rent for this month.
You lost half the rent payment as you were getting into your car.
Someone robbed you right after your tenant handed you a thousand dollars.
These are just a few examples of what can happen when you accept cash for rent payments.
Unfortunately, accepting cash payment for rent is a bit like playing with fire. You might get burned.
With this in mind, let’s look at the top five reasons you shouldn’t accept cash payment for rent.
1. It Doesn’t Provide Automatic, Organized Records
Property management software and online payments track every transaction automatically. This makes your life easier and provides an invaluable safeguard. You can always go in and see exactly when something was paid, what amount was paid, and who paid you.
Cash doesn’t offer this critical automated record-keeping. If you forget to create receipts, you may find yourself in unfortunate situations. No one wants to find themselves involved in litigation because they didn’t create proof of a transaction. It is also much more likely to lose physical receipts. We all know how often things fall out of your pocket or get misplaced.
Furthermore, cash payments are the enemy of organized accounting. If you don’t know already, manual data entry isn’t a fun process, and that’s putting it mildly. Not only is it time-consuming, the chance of human error is higher than automated record-keeping that goes hand-in-hand with online payments.
2. It isn’t Secure
Cash is extremely easy to lose or mishandle. You need to find ways to secure your money. If you only manage one or two rental units you might be able to get away with cash payments that you store at your home briefly. However, anything beyond that, and it’s going to be quite difficult to manage.
Cash also makes you vulnerable to robbery. If someone picks up on your routine and figures out when you make deposits, you may be susceptible to theft. And there you can’t track or recover it once it’s gone.
Figuring out how to collect rent, and when and how to deposit cash each month, is a cumbersome process at best. It will take up valuable time and effort.
3. It Makes Accountability Difficult
Let’s say your tenant drops rent off as a cash payment. You open the envelope and count the money. They’re $40 short. There won’t be much you can do in this situation. Your tenant might deny paying less than the agreed amount. All of the sudden you’ll be in a “he-said, she-said” situation.
To avoid situations like this, you’ll have to make sure to always count rent in front of the tenant. This also means payment will always have to occur when both parties are physically available. This may create trust issues and is time-consuming for all involved parties.
4. It’s Inconvenient
With online payments and property software management automating the majority of rent collection, why wouldn’t you utilize them?
Cash payments mean scheduling pick-up or drop times, counting money to make sure amounts are correct, writing up physical receipts and keeping copies, figuring out how and when to deposit money in the bank, carefully securing cash as you carry it around, and more. Cash is cumbersome.
Inconvenience doesn’t quite capture the frustration that cash can cause. It’s time and effort that you don’t need to expend.
5. It Can Enable Crime
If a tenant insists on paying in cash that could be a red flag. They could be involved in criminal activity, so cash transactions are part of how they keep their crime under the radar. It’s important to simply be aware of this. Not everyone who uses cash is a criminal, but if they’re insistent about it, that could mean something.
Cash payments also could allow employees to steal from you. If you work with someone who helps handle your money and they’re in a tough financial spot, they could steal some cash and it would be hard to prove. This happens more often than you would think.
Use Better Alternatives
These five reasons you shouldn’t accept cash show the inherent risk in running your business this way. If you’re a landlord and you still collect cash payments, it may be time to rethink how you collect rent. Online payments and property software management are better options. They reduce risk and make your life much easier. This doesn’t mean cash can’t serve certain purposes, but why wouldn’t you want to make your operation more efficient and effective?
