Cash Discounts

Status
Not open for further replies.
J

jeff43222

Senior Member
Location
Minneapolis, Minnesota
I just got a call from someone looking for a few things done right away (light fixtures, dimmers, etc.), and when I told her my hourly rate, she said it was higher than she expected and was wondering if I offered a discount if she paid in cash.

Every now and then I get calls from people who are looking for the cash discount, and I assume the implication is that if they pay in cash, it stays off the books, so I then don't have to pay taxes and can pass the savings on to them.

I told her I do everything strictly by the book, so it doesn't matter if she pays by cash or check, but I got to wondering if people looking for this cash discount are worth dealing with at all. My feeling that is if they are looking to be dishonest in one area, maybe they aren't the sort of people I want to deal with at all.

Anyone else have experiences with this?
 
Re: Cash Discounts

IMHO, follow your feelings....
My feeling that is if they are looking to be dishonest in one area, maybe they aren't the sort of people I want to deal with at all.
Click to expand...
 
Re: Cash Discounts

Some people are just looking for a better deal. Let's face it, they can write you a check or get the cash from the bank. The difference is that if you accept cash at a discounted rate than it's simply more money in their pockets. I don't think that they care if you report it or not.
 
Re: Cash Discounts

Originally posted by jeff43222: I assume the implication is that if they pay in cash, it stays off the books, so I then don't have to pay taxes and can pass the savings on to them.
Click to expand...
I have no facts to offer, but I'll offer instead an other possible explanation. This is the "assume people are good, until they prove otherwise" way of looking at it.

If you don't have to take a risk of processing a check, and don't have to worry about what to do if it bounces, then you are happier, and are willing to share in the happiness by giving them a price break. You also don't have to worry about the "I'll gladly pay you Tuesday" factor.

Many businesses do offer a discount for cash. A business has to pay a fee to credit card companies, when they accept a credit card for payment. If you pay them in cash, it saves them that fee. There is, if you will forgive the unavoidable pun, a "cash value" to getting paid in cash. You get to decide how much you stand to save in the long run, as a percentage of your fee, by accepting payment in cash. You get to decide whether to pass any part of that possible savings on to customers who pay in cash. You also get to record the transaction in your books, just like any other job, and continue to feel honest yourself about the way you are running your business.
 
Re: Cash Discounts

I hadn't thought about it that way, but that's probably because I don't take credit cards, and I've only experienced one bounced check so far, and it was an honest mistake (he notified me and made amends before I even knew the check would bounce).

Accepting cash doesn't really provide me any benefit, so I have no reason to provide a discount. Every now and then people pay me in cash, but the only people who have suggested discounts have asked about them before any work was done.
 
Re: Cash Discounts

I give people a break who pay cash. Heck, I give people a break who want to write me a check on the spot. Not much but getting paid right away has it's advantages.
 
Re: Cash Discounts

I think in the dentist's case, the cash discount is probably in the 2-3% range, and that's probably because of the credit-card charges. My dentist has a sign prominently posted at the front desk that says discounts are given for same-day payment.

People who ask contractors for discounts are probably interested in more than 2-3%.
 
Re: Cash Discounts

Reminds me of a story where a tradesman was asked if he gave a discount to his friends. The reply, "I would, but all my customers are my friends!"

[ December 19, 2005, 10:48 PM: Message edited by: rattus ]
 
Re: Cash Discounts

I have worked some very sweet deals for cash.You would be surprised how cheap i had a pool built with good old cash and another time got a house slab poored.Never hurts to suggest good old green stuff.
 
Re: Cash Discounts

Jeff, just look in the local phone book and see how many of the more reputable and successful contractors offer cash discounts. I didn't see any in our yellow pages. If it was a good idea I think more people would use it. As you stated I find people offering cash are looking for someone doing side work off the books for 50% the going rate.
 
Re: Cash Discounts

I took a look through the yellow pages and found the same situation here. My thinking is that if cash discounts were a legitimate practice, someone would be advertising them.

What you said about people looking for the 50% discount for off-the-books side work was what my gut was telling me.
 
Re: Cash Discounts

Cash discounts are legitimate practice. It is the failure to report the cash as part of your monthly revenue that would be illegitimate.

If I were an independent contactor, I might consider giving cash discounts. But I don't think I would advertise the fact. But that's simply because I don't think it would bring in new customers. At best, it would make a current customer happy. That is the important thing, to make them happy so that they are likely to come back to you or to tell their friends about you.
 
Re: Cash Discounts

I like going to my companies supply house when i need things for arround the house. I get the company discount, and then a cash discount on top of that.

In my current work, giving a cash discount is not an option. The jobs all pay per contract schedule.

I have a gut feeling that this customer is not trying to suggest side work, but rather has been watching alot of tv or reading books that suggest a good consumer always asks for a discount. In reality, it can never hurt, and it may pay off. Alot of frugal people will ask for a discount or extra service, even if they dont expect one, just because it may pay off.
 
Re: Cash Discounts

The last time someone wanted a cash discount, it was a case where, after I told the guy over the phone what my hourly rate was, he asked if I would do the job (install a couple of light fixtures) for $50 cash. I declined.

As a one-man shop with relatively low overhead, my hourly rate is on the low side of the spectrum already, and most people pay it without giving me any grief. I have no interest in getting into a negotiation on price every time I do a job, so I give my best price up front. The only time I give out discounts is if people deserve them. As an example, a carpenter I know recently swung a couple of lucrative kitchen remodels my way, and he needs electrical work on his own house this spring. I won't be charging him my full rate.

If I give out a discount just because someone asks for one, I'm sure word will spread that my actual rate is less than what I say it is, and people will then feel free to negotiate with me on every job. Since I'm not selling used cars, my hourly rate is not an "asking" price. If business slows down, I may find myself modifying my rate, but so far than hasn't been a problem.

In this particular case, the caller was a referral from a real-estate agent I know, and when I said I did things strictly by the book and don't offer a cash discount, she quickly gave me a story about how she'd check her schedule and get back to me. I have a feeling the "check her schedule" bit actually meant "I'm going to get someone else" because she said she needed the work done before Christmas. I told her I could do it today or Wednesday, and I doubt she really needed to check her schedule.

[ December 20, 2005, 02:51 PM: Message edited by: jeff43222 ]
 
Re: Cash Discounts

Cash discounts are legitimate practice. It is the failure to report the cash as part of your monthly revenue that would be illegitimate.
Click to expand...
So true! IRS looks for those types. Supply houses offer cash discounts 2% net 15 or some other schedule. Take advantage of the supply house's discounts. It's extra cash (profit) in your pocket.
I tend to agree what has already been said. Your customer was looking for a "side job price."

I quoted a job at $2500. Customer said I could get it done for $600. I said go ahead, but make sure the guy pulls a permit, and you have a written contract.
 
Status
Not open for further replies.
Top