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Cash Discount?

Discussion in 'Business Fundamentals' started by YardMedic, Sep 13, 2012.

  1. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Hey everyone!

    This is a landscaping situation, but it's very easily a snow removal issue as well. Bid a project of moderate size a couple days ago as requested, and waited on a reponse by email. Just got a question back from the client, "Is there any discount for cash payment?"

    It is the second time this season that someone has done this, and my initial feeling is aggravation because it seems like these folks just want me to do something shady in the eyes of uncle sam. To me, paper trail doesn't make a difference because it goes to the accountant whether paid cash, check, food stamps, or livestock. Anyone see the question any differently? Is this just a sign of the times that people resort to tricky ways to accomplish their goals? And as I said, I asked this here because I could very easily see someone doing the same for a winter contract (knock X dollars off because there's no record of it).

    Thanks for the thoughts!


    Kevin
     
  2. grandview

    grandview PlowSite Fanatic
    Messages: 14,609

    Most of the time if there is cash they will save them the sales tax.Is this a homeowner?
     
  3. Paul D

    Paul D Member
    Messages: 37

    I'd tell them if the hire someone that is accepting cash and giving a discount i.e not reporting the income, they are likely hiring someone without insurance or that will cancel insurance after season has begun and they no longer need to show proof of insurance.

    BTW, GV, No sales Tax in NH.
     
  4. Meezer

    Meezer Senior Member
    from Indiana
    Messages: 291

    I don't understand why it would be be something shady in the eyes of uncle sam?

    The Feds print money. On the paper money that they print it clearly states:

    "THIS NOTE IS LEGAL TENDER FOR ALL DEBTS PUBLIC AND PRIVATE"

    Same here, it all goes to the accountant



    It depends what "their goals" are. A lot of contractors charge their customers an extra fee, surcharge, etc., if their customers are paying with Paypal, CC, etc.,
     
  5. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Thanks guys. The "shady" is my interpretation of motive. I take it as this homeowner thinking my time & expenses are inflated to offset costs of running a legitimate business. Part of me wants to come back with a witty reply about his "incentive" being the best damn wall for the money.

    GV got the PM. I hear ya there! ussmileyflag
     
  6. goel

    goel PlowSite.com Addict
    Messages: 1,079

    We offer 3/10 and 2/15 and N30 The sooner the cash/check/transfer/payment is in my hands the better. Method of payment is irrelivant. Speed of payment is everything. This is for non resi stuff
     
  7. jmac5058

    jmac5058 Senior Member
    Messages: 429

    Just because the note says " Legal tender for all debits" does not make you exempt from paying taxes . Just ask Al Capone.
     
  8. basher

    basher PlowSite Fanatic
    from 19707
    Messages: 8,992

    My response is "that is the cash price, we charge a 3% administrative fee for all credit card purchases or open accounts"

    You know they will remember you did the work if there is an issue, then they tell their neighbor, "offer him cash its cheaper" then the next one writes a check for the lesser amount because "you only charged XXXX this amount, why should I pay more" or they give you cash expect the discount AND a receipt.
     
  9. Meezer

    Meezer Senior Member
    from Indiana
    Messages: 291



    Just because someone gives cash discounts for payment doesn't automatically mean that they aren't paying taxes.

    Offering cash discounts is a very common & legit business practice:


    Visa says, "Merchants may steer customers to an alternative method of payment, such as providing discounts for cash"

    http://usa.visa.com/download/merchants/visa-international-operating-regulations-main.pdf


    MasterCard says, "A Merchant may provide a discount to its customers for cash payments"

    http://www.mastercard.com/us/merchant/pdf/BM-Entire_Manual_public.pdf


    American Express says, "Merchants may offer discounts or in-kind incentives from their regular prices for payments in cash"

    https://www209.americanexpress.com/...s/MerchantPolicyPDFs/Oct2010_US_ RefGuide.pdf



    http://www.foxbusiness.com/personal-finance/2010/03/11/pay-cash-ask-discount/


    http://www.usatoday.com/money/perfi/credit/2008-07-07-credit-card-gas-fees_N.htm
     
  10. basher

    basher PlowSite Fanatic
    from 19707
    Messages: 8,992



    Charge card costs run 3% or better. Offering a 3/5% discount for cash doesn't make the merchant anymore money but it does save the customer 3/5%.

    On a large purchase (like a snow plow) CC costs can run $150/200 dollars nice savings for the customer if the dealer passes that savings along.
     
  11. Plowtoy

    Plowtoy Senior Member
    Messages: 929

    You know, other than day to day purchases, I will ask if there is any discounts for "cash" purchases. I think you would be surprised on how many business will give you a discount if you just ask. I got 10% off a medical bill earlier this year if I paid in full the same day. I planned on paying in full during the phone call anyway, so its a win win situation for both of us. The hospital didn't have to wait for their money, and I saved $100 bucks, granted that wasn't a cash deal (however it was a debit card) it really works out the same. I think giving a reasonable discount for an immediate cash payment is acceptable. It is still necessary to show that money on your books, depending on the client, they may or may not show it on theirs. payup
     
  12. shovelracer

    shovelracer Senior Member
    Messages: 525

    I think the key is not so much paying cash, and no one was talking about tax fraud. The key is being paid immediately. So I would think it better to offer a discount for payment on the spot. Now being paid cash has no meaning if you need to wait or even worse make a special trip over to collect. The advantage to cash is instant resolution, even with a check or CC there is a delay. So perhaps your payment terms are net 10, 5% for payment within 48 hours, late fee on the other side for going +10. You will find the type to ask for discounts are also the type to drag out payment usually. Give me a discount and I'll pay net 30 is more normal on the bastards.
     
  13. Mr.Markus

    Mr.Markus PlowSite Fanatic
    Messages: 5,170

    I offer 7% for pre-payment on seasonals. Don't care how it's paid
     
  14. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Thank you everyone for the different angles. I'm left wondering exactly what this customer intended, as I didn't get his project. It was certainly a bad taste left in my mouth from the last time a guy clearly wanted to pretend the transaction never happened in the eyes of uncle sam. The idea of cash paid right then as some guys have commented, does have some appeal. Interesting! Ok guys... thanks & stay safe


    Kevin
     
  15. lilweeds

    lilweeds PlowSite.com Addict
    Messages: 1,178

    I've been know to barter a bit, and a small cash job here or there, but anything big sets up too many red flags! I have a friend that took a large deposit in beer.
     
  16. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Funny you say that. Another firefighter in my department needed a wall, so he paid me for materials & offered what he thought was fair for swaps to cover my time. I actually made out quite well because what it was worth to him was a bit more than what it was worth to me! I think he paid me 4 full 24-hr shifts... basically 2 weeks of shifts paid back as I needed them!
     
  17. peteo1

    peteo1 PlowSite.com Addict
    Messages: 1,660

    So after you've spent an entire thread bitching about ethics and what not, you're getting your local taxpayers to foot the bill for your services that aren't fire dept business? If I read that wrong apologies in advance.
     
  18. PhilFromErie

    PhilFromErie Senior Member
    Messages: 263

    The formula for determining cash discounts depends on the specifics of your business, I think a accepted formula is between 1/3 and 1/2 of your tax bracket.

    Example: your in the 20% bracket, you give between a 7-10% discount.

    Just kidding......kinda......no really, im just joking
     
  19. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    Certainly not. Taxpayers got the paramedic coverage they paid for. The wall guy filled my place, and no tax dollars were lost or mishandled.
     
  20. YardMedic

    YardMedic PlowSite.com Addict
    Messages: 1,266

    I know what it sounds like. It's like swapping shifts with any other job really. I work for you, you work for me.