Navigating the Cashless Revolution: Strategy for Bar Owners

Is your bar losing customers because you're not prepared for the cashless payment revolution?

As cash transactions decline and customers increasingly expect digital payment options, bar owners must adapt their operations or risk frustrating guests and losing business while dealing with increased reconciliation complexity.

In today’s episode:

• Learn proven strategies to smoothly transition your bar operations for the digital payment era
• Discover how to optimize your POS system for faster service and better reporting
• Master efficient financial tracking methods for multiple payment streams

Tune in now to future-proof your bar's payment systems and streamline your operations for the modern customer.

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Transcript

Chris Schneider (00:00.874)
In today's episode, discover how the decline of cash is reshaping bar operations forever. Learn why your POS system might be costing you more than you think and master simple strategies to maintain profitability in our new cashless world. Today, we're diving into the critical shift happening in bars across the country as cash payments continue to decline, exploring the technology needed to adapt and sharing strategies to maintain strong profit margins. So something we've seen over the last

five years post COVID is a rapid decline in the amount of cash getting used in most markets. Now, what's interesting is in major cities in larger markets, we've been cashless for years. But what we're really starting to see is that this is now getting the smaller markets, the small towns, the more rural areas, places where still cash was very prevalent a few years ago. We're starting to see a rapid decline in cash in those areas as well. So this isn't a blip. This isn't a thing that happened and is going away.

We have less cash now being spent in our economy than ever before, and that's just going to continue to decline.

Chris Schneider (01:08.994)
And this is especially true when we look at younger generation.

I am a millennial, right? I'm in my late 30s, in case you were wondering. And so I'm kind of on the cusp of people that use cash and people that don't use cash. When you look at Gen Z, they don't use cash at all. When you look at Baby Boomers, I have a lot of friends that are in their 60s and 70s and 80s that still go to the bank every Saturday and get their pocket money for the week.

Now, I happen to be weird and be like someone who is 70 and I go to the bank every week and get my pocket money for the week and I always spend cash. But most people don't. And most people, most of my peers think I'm just weird and old school and act like an old person because I do that. They're just using cards. So the bottom line here is that

cash is going away. What little cash we're getting now will probably be more or less gone in a decade, except for weird people like me that just insist on paying for everything in cash, because we do.

But not only is this affecting the business, the bar, how we have to do operations, this affects our employees. Because the bar industry used to be the industry where you got cash tips at the end of every night. That doesn't happen anymore. And it can happen because as bar owners, we can't have enough cash on hand just to pay out tips all the time. I mean, we could just keep cash around to pay out tips all the time, but it doesn't make any sense. Back in the day, you had more than enough cash sales.

Chris Schneider (02:39.722)
every day to pay out cash tips every night and it wasn't even an issue. Now that's not the case.

Chris Schneider (02:48.546)
So it affects us as bar owners, the decline cash, it our employees and the entire culture around the hospitality industry as well.

Chris Schneider (02:58.958)
And so, bar owners in a lot of places, a lot of these small towns, a lot of the bar owners I talked to, they are struggling to adapt to this new world. And part of that is they're paying a lot more processing fees. Some of the reconciliations in the cash has become more complex at the end of the night. And we're going to talk through these and a little bit on how to solve all this. So let's lay the groundwork here. So we're talking about our modern payment infrastructure, how people get paid.

Like I said, most people are now majority credit cards, not majority cash.

And when we think about that, have to understand that that means that we're paying processing fees on pretty much every transaction that goes on in our bar.

So the lower your credit card processing rate, the better off you are. Now, the processing rate you can get is going to be determined on a lot of factors. But one of the biggest factors on what that processing rate can be is your POS system. If you use a POS system that has integrated processing, some of them allow you to use third party processors. Some of them don't. So maybe you have a POS system and there's

Some of the biggest cloud based ones like the biggest cloud based one ties you into their processing. And that's part of reason. Well, that's that's a big part of toast business model, right? Is that the processing is part of how they make money. There are other companies out there. Spot on comes to mind is one of them that lets you choose a payment process. Now they charge you more for the system when you can choose your own payment processor, but maybe you can save money there overall by getting your credit cards reduced and paying a little bit more for the POS.

Chris Schneider (04:44.888)
Frankly, I think that credit card processing and what you pay for it is a huge component because you can change that a half a percent pretty easily. And if you can change that a half a percent.

on a bar that does a million dollars a year.

It's $5,000 in your pocket as the owner. It's worth looking at. It's worth doing.

Chris Schneider (05:17.422)
So we really have to understand that our POS system is going to be our biggest limitation here on being able to change credit card processors. And there's not much we can do to make people pay cash instead of credit cards. Really, there's not much at all we can do there. But we can try to get the lowest rate possible. The other thing we have to keep in mind as you have more and more credit cards going on, it is incumbent upon us to make sure that we have good network security.

Right? Especially if you think about using, I'm using a handheld POS system, I'm going to table, you're sticking a card in there, that card number is bouncing all over the internet. Is your data secure? And for most parts we don't think about is the data secure, but we really should because we have people's credit card numbers, we have vital information there that is valuable to criminals. So make sure you have your firewalls and stuff in place.

Now, when it comes to the staff side of this, because we do have to make operational adjustments, and the biggest operational adjustment is not paying out tips every night. Like I said, it's impractical to pay out tips every night when you don't have the cash coming in to do it.

So that means now you're paying your tips, your credit card tips are getting paid out on paychecks. And frankly, I recommend not paying every week, but paying every other week. And there's a whole host of reasons for that. And that's for a different episode. But if you're paying your employees every other week,

And all their credit card tips are going there. That's a huge cultural change. There's a huge difference for them compared to getting cash at end of every night. And frankly, it's going to change who works in this industry a little bit. It makes us more normal in the way, right? Most people only get paid every other week. So it's not weird. It's not different than the rest of the world, but it's way different than what people are used to. And I know it with my small town servers and some of my small town clients.

Chris Schneider (07:20.632)
We've had to have this conversation. It's been difficult for people because they want that cash every day and we're not doing that anymore.

Chris Schneider (07:30.806)
Now, the big thing here, though, is that that means that the cash handling procedures for your team and for you as the owner actually get simplified because you're not bringing cash in, paying cash out. Not all that's happening. You're just getting paid cash based on what PRS says for the cash that the servers owe you for what they sold that. So it makes your life easier in that regard.

But again, you have to get your team on board with getting their tips every week or every other week on their paycheck and not cash every night. That is the hardest part here.

Chris Schneider (08:08.161)
And that can take a lot of change management and lot of basically just making people understand what I'm saying. That's how I've always done it when I've had to have this conversation. We get less cash, less cash means X, Y and Z. That means we have to do business this way. Sorry, it sucks. Now, a few final notes for you. Think about the financial impact here, right? Obviously, if we're more cash or less cash and more credit cards, that means more of what we sell as credit card fees apply.

Right? That's roughly 3 % give or take, 2.5, 3%. Depends on the type of card, depends on your credit card process, depends on a lot of things, but 2.5, 3 % is pretty much what you're paying them. So either you need to adjust all your prices up 2.5, 3 % to account for that, or you can pass on that credit card fee to your guests. I know some POS companies make that very easy to do. I am not at all a fan of doing that. I hate adding fees to customer checks at the end. Matter of fact, I'm so old school.

And I know people don't do it this way. I'm a fan of I tell you it's five bucks. It's five bucks. That includes all the taxes, all the fees, all everything. It's just five bucks. If something costs five bucks, it's five bucks.

But regardless of how you do it.

Chris Schneider (09:25.58)
You need to make sure that your prices are working for the system you have set up. You need to make sure that you have ways to monitor that digital cash flow, those credit card receivables that you have, that you're getting paid those and actually work those out in your bookkeeping every week to make sure that you're getting the money you're supposed to. And if you do those things, you can maintain your profit margins because the bottom line here is the shift to cashless payments presents challenges and potentially some opportunities.

But by implementing technology properly, adjusting your operations, and most importantly, effective team change management when it comes to switching people from you get cash tips at the end of every night to you don't get cash tips, you get credit card tips on your paycheck. You can create a seamless experience that protects your bottom line, satisfies your team and your guests.