16 May Should You Pay Contractor in Cash
As a freelance worker or a contractor, you may encounter clients who request that you be paid in cash for the services you render. While a client`s request to pay in cash may seem like an easy way to receive payment, it is essential to consider the factors involved before agreeing to accept cash payments.
Paying in cash enables you to receive the money instantly, but this payment method has its disadvantages. The following four factors should be considered before deciding whether or not to accept payment in cash:
1. Lack of documentation
When you receive payment in cash, there is no formal documentation to prove that you received the payment. Since there is no record of payment received, you may not be able to track the payment if there is a dispute. While cash can be convenient, it makes it difficult to provide documentation that verifies payment received.
2. Tax implications
Another drawback of receiving payment in cash is that the income may not be reported to the tax authorities. When you receive payment through traditional methods such as bank transfer or cheque, there is a paper trail that indicates the source of income. However, when you receive payment in cash, it can be challenging to keep track of each payment, and you may forget to report income when filing your taxes.
3. Risk of theft
Carrying cash around can be risky, especially if the amount is significant. You could be a target for theft, and if you lose the cash, there is no way to recover it. It is much safer to receive payment through online payment methods or by cheque, eliminating the need to carry cash around.
Accepting cash payments can make you appear unprofessional, as it does not follow the standard payment procedures. As a contractor, it is important to present yourself as a professional and reliable individual. Using traditional payment methods will portray you as dependable and trustworthy, which is essential in building trust with clients.
In conclusion, it is vital to consider the above factors when deciding whether or not to accept payment in cash. While cash may seem like a quick and easy option, accepting payment through traditional methods is safer, more professional, and provides proper documentation that can be used for tax purposes. In situations where accepting cash payment is the only option, make sure to keep a record of all cash received and issue receipts for each transaction.