Is your business like a leaky bucket?
As a retailer or restaurant owner, you’ve felt the pinch of those credit card fees—2% here, 8 cents there—eating into your margins every time a customer swipes or taps. It’s easy to grumble and think, “At least cash is free. No middleman, no deductions.” But here’s the uncomfortable truth: cash isn’t free. Far from it. It’s a silent profit killer, riddled with hidden costs that most merchants overlook because they don’t show up on a monthly statement. In fact, the real expense of handling cash can run as high as 9% of every dollar you take in. That’s right—nine cents out of every buck vanishing into counting, storing, transporting, and yes, losing it to theft or error. (Tellermate)
In Canada, where retail theft alone cost businesses $9.1 billion in 2024 (The Globe and Mail), clinging to cash isn’t just outdated; it’s a drag on your bottom line. In this article I will unpack why it’s time to rethink cash as the “easy” option and embrace electronic payments—not despite the fees, but because of the net savings they deliver. We’ll draw on Canadian data and global studies adapted to our market to show how ditching cash can slash shrinkage, streamline operations, and boost cash flow.
The Myth of “Free” Cash:
Unpacking the Hidden Toll
Picture this: It’s closing time at your store or eatery. Your team counts the till—bills sticky from handling, coins clinking endlessly. One short $20? That’s an hour of recounting, finger-pointing, and frustration. Multiply that by daily shifts, and you’re bleeding time and money.
Cash’s costs aren’t abstract; they’re tangible and relentless. Here’s a breakdown:
Counting and Reconciliation: Every bill and coin must be tallied, balanced against sales, and verified. This labor-intensive process ties up staff—often your most expensive ones, like managers or owners—at peak times when they should be serving customers or planning inventory. Studies show this alone can consume 40% of cash-handling expenses. (International Center for Law & Economics) For smaller independent businesses, like the average mom & pop shop, the typical counting and reconciliation takes place early in the morning before opening or late in the evening after closing. This time is that could be spent with friends, family, gardening – whatever makes you happy — at this point it’s a quality of life issue. Your life. What’s that worth?
Storage and Security: Cash drawers tempt thieves, both internal and external. Safes, alarms, and surveillance add upfront costs, but they’re just the start. In high-volume, high-risk environments like busy restaurants, marijuana, liquor, and grocery operations, you’re forking out for armoured transport or night deposits to avoid on-site risks.
Transport and Deposits: Hauling cash to the bank by hand? That’s fuel, time, wear a tear on the car, fees or hourly labour for cash-in-transit services. Canadian banks often charge for coin deposits or large cash volumes, turning “free” money into a fee trap.
Theft, Loss, and Fraud: This is where cash truly bites. Counterfeiting, miscounts, employee skimming, or outright robbery—cash is vulnerable at every step. A Payments Canada study found Canadians encounter nearly three times more fraud with cash than credit cards, with cash topping all methods at 22.4 fraud incidents per six months versus 8.8 for cards. For merchants, this translates to “shrinkage”—inventory or cash loss from theft and errors—which hit 2-3% for over 45% of Canadian retailers. Organized retail crime amplified this to a $9.1 billion national crisis last year. (Payments Canada,)
Auditing Nightmares: Cash leaves a fuzzy trail. Reconciliations drag on, audits invite errors, and disputes with banks over deposits eat hours. In cash-heavy spots, it’s nearly impossible to trace “traded” bills (non-cash tenders traded for cash – the most easily perpetrated in-store scam) or spot patterns of loss.
These aren’t hypotheticals. A comprehensive review of payment costs estimates cash handling devours 9.1% of revenue across retail segments, including a hefty chunk for “cash shrink”—theft and unexplained disappearances. For a $500,000 annual restaurant, that’s $45,500 gone—not to fees, but to friction and fraud.
Electronic Payments:
The Automatic Profit Protector
Now contrast that with integrated electronic payments: credit, debit, gift cards, and digital coupons tied to your POS system. Sure, there’s a per-transaction fee—typically 2.5-3.5%—but it’s a predictable line item, not a black hole.
Here’s why electronic payments win:
Automation Rules: Transactions hit your system instantly, no counting required. Reconciliation? It’s baked in—sales reports match bank deposits with a few clicks. No more fuzzy math at the crack of dawn or end-of-shift marathons.
Accuracy and Speed: Every swipe or tap is recorded uniformly, and matched to every receipt and recorded with when, where, and who did the transaction, eliminating miscounts or human error. Gift cards and e-coupons dispense flawlessly, reducing “no-shows” or disputes.
Theft-Proof Design: Digital trails are ironclad. Stealing a card transaction? Good luck—fraud detection flags anomalies in real-time, and chargebacks are rare with proper setup. Unlike cash, which vanishes without a trace, electronic funds are auditable down to the penny.
Scalability and Insights: POS integration means uniform reporting across locations. Spot trends, like peak debit usage, and optimize staffing. Plus, electronic payments often lift average ticket sizes—customers spend 10-20% more with cards. (International Center for Law & Economics)
Canadian businesses already see the security edge. Half perceive electronic methods as safer than cash or paper alternatives. And for larger transactions—common in restaurants—electronic costs plummet below cash when factoring in all variables. (Payments Canada)
The Data Doesn’t Lie:
Cash Fuels Loss, Electronic Fuels Growth
Skeptical? Let’s lean on the numbers, starting with Canada-specific insights.
Payments Canada’s 2025 fraud survey underscores cash’s vulnerability: Its fraud rate dwarfs cards’, driven by tactics like counterfeiting and pickpocketing that hit merchants hardest during handling. Meanwhile, shrink rates tell a stark story. In a Tellermate survey, 27% of retailers reported over 2% loss, with cash handling a prime culprit alongside internal theft. The Retail Council of Canada’s report pegs total theft at $9.1 billion in 2024, much of it cash-facilitated organized crime. (Retail Council of Canada)
Broader studies reinforce this. The International Center for Law & Economics’ review of merchant costs—drawing on Bank of Canada data—shows cash’s “direct” appeal fades when adding shrink. Theft and fraud alone push cash to second-costliest per $100 in sales, behind only unoptimized credit and debit (Check out my 2019 Blog Article on Why Merchants Should Insist On Integrated Credit and Debit). In the GHL analysis, incorporating float loss and counterfeits equalizes or tips social costs toward electronic for most transactions.
The net effect? High-cash environments suffer 2-3x the loss of electronic-preferred ones. A U.S.-Canadian hybrid study by IHL Group found cash costs averaging 9.1% of revenue, with shrink as a top driver—translating directly to Canadian ops where labor and bank fees mirror ours. Shift to 100% electronic, and theft plummets near zero, per fraud benchmarks. Result: Positive cash flow, as fees (say, 2-3.5%) undercut cash’s 9% drag.
Even the Bank of Canada’s 2008 merchant survey—once pro-cash—now looks dated amid rising shrink. Recent acceptance data shows 89% of businesses take cards, up from 2021, signalling the tide turning. Either all of those merchants or wrong, or they’re doing the same math and drawing similar conclusions.
Time to Ditch the Drawer
Cash feels nostalgic, reliable—like that old recipe you swear by. But in 2025, it’s costing you more than it saves. The fees on electronic payments? They’re an investment in efficiency, security, and sanity. Configure your POS right, train your team on tap-and-go, and watch shrinkage shrink while sales soar.
Canadian retailers and restaurant owners: Audit your cash costs today. Run the numbers. 9% vs. 3% isn’t even close. Go electronic, integrate it to your POS, reclaim your margins, and focus on what you do best: delighting customers. Your bottom line will thank you.
About Armagh POS Solutions
Armagh has been serving the retail, restaurant and grocery industries in Canada since 1979, delivering solutions for a range of operators from single-unit small businesses to multi-unit national chains.
We are specialists in touch screen and scanning point of sale (POS) systems for both restaurants and retail stores, cash registers, scales, liquor inventory control systems, and grocery label and wrapping equipment.
With 40+ years POS industry experienced the sales staff at Armagh provides experienced consultants in point-of-purchase management, customer service efficiency, process automation, and restaurant order management.
Armagh’s award-winning Catapult Retail POS Software and Digital Dining POS Restaurant Software are best-in-class, and Armagh is a QIR and Diamond Toshiba Alliance Partner.