"Cash only, thats the way" .... oh really?

The opposite of cash-only is ??

Casino Credit .... the phrase alone has associated images of Robert de Niro giving out massive amounts on a whim, and Joe Pesci collecting it using a variety of not-so-technical collection "techniques".

Well there may or may not have been some truth in that in years gone by, but in the land of regulation and taxes that we all live in these days its nothing like that, anywhere off a Hollywood set.

There's nothing less profitable than a dead punter, what were they thinking?

Why does "credit" exist at all? Surely everyone would be better off with a cash-only casino and no worries about collections, debtors and write offs? Life would be a whole lot less hassle, and does it really make that much difference to revenue anyway?

Well lets put it into context here consider a "cash-only" versus a cash + "other" operation. Who would make more money? I won't insult any ones intelligence by continuing that line of discussion, its the latter, and by an amount greater than you would give credit for (and yes a sleazy little pun was intended)

Cash carries no risk of none payment other than counterfeit (get a UV, do some training and its really not a big threat) or obvious mutilation (a cashier variance). Anything non-cash carries one or more risk of non-payment, in addition to the counterfeit risk. So in terms of very simple numbers, you are on riskier grounds, and require higher staff skill levels and good instincts!

So lets take that apart a bit, WHY is it better to transact both cash and non-cash, i.e. risk-free and risky?

In simple terms it's because the additional revenue exceeds the risk ... really, it does and by a long way!

Lets consider that "other" consists of all kinds of cards, all cheques and forex, and that one way or another, they carry more risk than local cash.

Transaction procedures and policies dictate how much debt is incurred from non-cash transactions, but there would have to be a case for gross negligence (or a death wish) if the value of your debtors list threatened your operations' existence.

Certainly in the vast majority of operations you would be negligent not to do them. So where is the risk and just how bad is it?

1. Cards and Forex: result in little or no debt, depending on the skill (and instincts) of your cashiering staff and how up-to-date your information and procedures/policies are. 
2. Travellers cheques: require authorisation before they are cashed, so you shouldn't suffer any charge backs, but its not impossible if your staff or management aren't up to speed.
3. Personal certified cheques: are not without their own risks, but you'd have to be negligent for acceptance not to be a good idea.

Correct and balanced acceptance of all these transactions will result in increased revenue without anything like enterprise-threatening debt.

 

These particular transactions share a common thread in that default is by far the exception to the rule, when handled correctly. There are pre-transaction authorisations and/or rules which almost guarantee payment. 

You have to be careful and check the small print to make sure you haven't accidentally waived any rights to payment, but with good management you wont be going bankrupt any time soon. That is unless your staff are un-trainable or you have management that will take insane risks with them to meet budget.

So, make sure you perform each of those transactions spot on, don't take any risks, and Bobs your fathers brother, more money in the bank and no significant red ink to be seen.

Now we get out of our payment comfort zone into the realm of "maybe ...." i.e. the element of trust!  

How many punters can you really trust? Aren't being a gambler and repaying debt mutually exclusive?

At lower levels within a well thought-out policy, marginal addition to revenue and profit are positive. Make no mistake, you are climbing the price axis of your profit maximisation curves, but marginal cost and marginal revenues are still separated by a significant, and positive, degree.

So even here you will have a standard deviation or two of comfort IF you do it right. It will be profitable and both you and the client can sleep at night.

Its all in balance because we are dealing with many moderate transactions, there is no major point of failure, and each transaction bears only minor risk (if you do it right).

So we have learnt that spreading risk and ensuring you have the right staff with the right grey matter, following procedures that do not expose you to greater risk of default, and ensuring that you beat any charge backs, will result in a far greater % addition to revenue than to your debtors list.

BUT at the top end, judgement, policy, discipline and a good grasp of the issues is absolutely mandatory because the wrong call could mean a seriously bad day at the office.

That's for the next article ...

CashEfficient.net - more profit, less headaches ...

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