Chartered accountant and journalist
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What the cashless society offers accountants

The primary method of paying for goods and services that has been around since 500 BC is under threat of going the way of the dodo. Nick Levine examines how this will affect the people who count the cash.

3rd Mar 2020
Chartered accountant and journalist
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Cashless society creates opportunities for accountants
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The use of cash is rapidly falling. According to the banking trade body UK Finance just one in 10 transactions in the UK will involve coins and notes by 2029.

Consumers now tend to use contactless cards when buying smaller goods in shops and complete a growing number of transactions online and through smart devices with apps such as Apple Pay. The benefits for consumers are clear: they don’t need to worry about being caught without cash or losing it and can complete transactions more quickly. Yet accountants are the people who are likely to benefit most from the switch from cash to electronic payments.

Bhimal Hira, partner at specialist hospitality accountant Jeffreys Henry, comments: “We have seen a significant shift in cash takings in the hospitality sector. Cities such as London are becoming more cashless, with card tenders representing as much as 90% of total sales across our hospitality clients.” 

This shift to cashless has benefited the firm as well as their clients, according to Hira. The costs involved in handling cash are lower and both sides save time on daily cash-ups and reconciliations.

Accountants who can bring those transactions into their ledgers electronically can reconcile them more quickly and produce more up-to-date management information. As well as reducing the time spent on manual processing, this bedrock of solid data provides a foundation for more value-added services.

No more cash reconciliations

Cash reconciliations have historically relied on manual audit trails built up from cheque book stubs, till readings and, for some small business owners, scraps of paper. Processing that lot takes time and is prone to human error, making it one of the professions knottier recurring tasks.

Manually reconciling cash transactions to banks may have been a rite of passage for trainee accountants. But aside from confirming balances for internal and compliance processes, what other value does this task deliver?

With automated cash reconciliations in place, this time can now be devoted to teaching trainees how to use technology to better serve businesses. New entrants to the profession will still need to reconcile digital transactions, so the new approach won’t undermine their understanding of the fundamentals of accounting. 

Being able to master digital payments tools such as GoCardless and Stripe, and integrate them directly into core accounting software packages will allow tech-competent accountants to complete client tasks efficiently. But the discipline will also instill a mindset of continuous improvement. 

Pain-free compliance

Cashless transactions are making compliance easier for accountants by eliminating manual data entry and categorisation errors and generating near-complete digital audit trails. Retail and hospitality businesses often have to account for cash differences from occasional thefts from casual workers, but these losses go away with electronic payments.

Since Making Tax Digital for VAT became mandatory for VAT-registered businesses in 2019, the proportion of transactions taking place digitally has increased rapidly. Though many accountants grumbled about the implementation, by making it easier to file returns digitally, HMRC expects that higher-quality data will mean it has to make fewer enquiries. There is even an argument to be made in the longer term for HMRC to classify cashless businesses as being less risky than those which take cash. 

Advisory and funding opportunities 

The reduced use of cash has accompanied by a decline of banks on the high street. Since 2015 more than a third of UK branches have shut down, and this trend is likely to increase - for example with the recent announcement that HSBC intends to cut its global workforce by 35,000.

There will always be a need for less sophisticated businesses to deposit takings and draw out cash. For now, this need has been filled by the Post Office, which has partners with 28 UK banks to provide these services.

The disappearance of so many bank branches from local high streets has opened up an opportunity for accountants to provide services that were previously provided by banks - and that the Post Office network is unlikely to fill.

Katrin Herling, CEO and co-founder of Funding Xchange, an online funding platform that lets businesses compare loans from different lenders, says: “While the banking relationship remains important, it isn’t surprising that businesses are turning to their accountants for funding advice, given that they are consistently rated as the most trusted business advisers. They can help SMEs better manage their working capital, the instance of late payments and even plan for expansion.”

There are many standalone finance providers on the market, such as Iwoca and MarketFinance, but comparison platforms such as FundingXchange or Capitalise.com will give accountants a more complete view of the market to advise their clients on the most suitable option.

While the opportunities for accountants to embrace the cashless society are compelling, they also need to stand up and represent the views of those more vulnerable in society who still rely on cash for budgeting and transactional purposes.

Replies (5)

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By leon0001
05th Mar 2020 10:16

Well, this won't help my sole trader client who sells flowers for cash outside various cemeteries.
He uses the previous day's takings to buy today's stock at market.
He keeps a diligent record of transactions.
He usually pays our fee in cash when he is in our area.
His circumstances are not likely to change until he is 66, a few years from now.

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By johnjenkins
05th Mar 2020 10:21

Sorry Nick. There is no way there will be a cashless society. True, cash is coming out of a lot of business transactions and that is why the banks are saying cash is less used. How would they know? They only know what cash passes through the banks. They have no idea of what cash passes from one hand to another. How many establishments have "cash only" signs?
Unlike years ago when cash was banked, bank charges have limited this. A lot of people still like to be paid in cash.
As far as processing transactions is concerned it will make no difference. Instead of paying cash people pay by debit or credit card so the amount of transactions will be the same. In conclusion I would say that there will be a distinct difference in people that use the banking system, those that will use crypto currency and those that use cash. Finally there will always be some sort of "barter system" to bypass paying tax, unless, of course the tax system becomes common sensible and less complex..

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By dgilmour51
05th Mar 2020 11:31

As #johnjenkins notes, the cashflow that evades the banking system has very much held steady.
There are aspects of anonimity in cash that people still like - I don't necessarily want my wife to see in the joint account exactly what I paid for her prezzie etc.
Sweden is cashless - and every transaction incurrs a £1.50 charge from my bank. Though this is extreme it underscores that the cashless society is NOT a free ride - somebody somewhere is coining it.
Neither do I want HMG/HMRC etc. necessarily to know what I spend my money on. I can all ready hear the catamites of Herr Dr. Goebels saying "If you have nothing to hide ...".
Effectively it is tantamount to charging me for having access to my wages - a proxy tax levelled by the finance industry.
And eventually it can put the accounting industry into a position of irrelevance as auto-electronic flows negate the need for either book-keeping or opportunity for fiscal optimization in any significant form.
Be careful what you wish for.

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By Marlinman
05th Mar 2020 11:50

I can't see a cashless society ever happening. I would always carry cash in case the anti fraud people at the bank block my card. They often do this if they think there has been unusual activity on my account. This would cause big problems if I'm overseas with the horrendous cost of phone calls to unbock it.

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Replying to Marlinman:
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By johnjenkins
05th Mar 2020 14:39

I fully agree with you. In this day and age of scams galore you can quite easily be left penniless.

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