From XU Magazine, 
Issue 29

Is Cash still King?

Tradespeople are notorious for working in a cash economy, but what is the real cost to their businesses?

For the longest time, tradespeople have operated in a cash economy.

Whilst cash is absolutely a legal form of tender, we all know it is illegal not to declare it at tax time. 

In 2015 the New Zealand Inland Revenue Department (IRD) surveyed tradespeople and found that 25% of building & construction work being completed, in Auckland alone, was under the table.

This triggered the launch of the “under the table” campaign, which is still running to this day. 

Jump over to Australia and in 2017 the Australian Taxation Office (ATO) audited 10,000 businesses, and recouped over $200 million in undeclared cash earnings. These businesses were a mix of beauty services, cafes & restaurants, and tradespeople.

Both the ATO and the IRD give business owners a chance to dob themselves in, before they get caught. 

They both promise lighter penalties to those who own up to their wrongdoing, and to me, that should be a good indication of how seriously this is treated.

“But they will never catch me”, I hear you say?

These days, everything leaves a digital trail, so even if a job is paid for in cash, there is some kind of digital record to offset it. 

Whilst doing some research, I found some good examples of how businesses get caught not declaring their cash:

• Businesses depositing undeclared cash into bank accounts.

• Purchasing materials with credit or a bank account but using these materials for a cash job.

• Paying employees with undeclared cash, but the employees lodge their tax returns and declare the income. 

• Specifically for tradespeople, paying subcontractors with undeclared cash, but that subcontractor is declaring their income. 

• Purchasing large assets using cash.

It makes sense, tradies go on-site to do a job, the customer leaves cash on the fridge, tradie pays their subbie with the cash and pockets some for themselves. The cycle goes on and it’s been this way forever.

These days more and more people no longer carry a wallet, let alone cash. So unless your clients also operate in a cash economy, cash may not be convenient for them.

I know personally, if a tradie did some work at my house and wanted me to pay cash, they probably wouldn’t be getting paid. Not because I don’t want to, but I would be lucky to find a 20 in an old purse.

So if cash is an inconvenience for the customer, the best solution is to provide more payment options.

The pros for the customer, work may be done quicker or cheaper. 

I am sure we have all heard “Pay cash and I’ll knock a bit off for you”.

But the cons, there is no proof of work. Either to cover themselves when something goes wrong or to use when claiming property in their tax return.

In 2017, 77% of tax evasion in Australia came from cash-in-hand wages, so not only are these businesses jeopardising themselves but also putting their employees at risk. 

Paying employees cash exposes businesses to a higher turnover of staff.

At some point, everyone looks for stability in a job. Employees will go looking for the entitlements they are missing out on, like paid leave and superannuation or Kiwi Saver. 

The business then has to go through the process of re-hiring, which is never a small feat and is a costly exercise.

And how do you tell your staff where to be, who the client is, what needs to be done, just the general organisation when there is no record of the job. 

Overall, none of this information is being tracked anywhere. 

Maybe in someone’s head.

Paper trails are hard enough - but no paper trail at all, there is no possible way of accurately understanding if these businesses are profitable. 

To get a bank loan at a minimum you require a P&L and balance sheet.

Some even require a projected forecast into the future to ensure you will be able to maintain the repayments.

If a business cannot provide this, there is no way they will be getting that new ute.

Even insurance becomes harder. Insurers require turnover, employee numbers, and specifically for tradespeople, they would also need a record of the subcontractor payments. 

If a business has not declared their full revenue to try and save a quick buck, they will run the risk of being underinsured. 


A profitable business is an asset in itself. 

But it is only as valuable as the proof that can be provided. 

If the business owner decides it is time for retirement having a profitable business, that is all above board is an easy sell. 

A profitable business that is under the table… Well, let’s just hope they know the right people who are willing to take on this liability.

And lastly, I know this is a bit PC, but they really are only ripping themselves off. 

We pay taxes so the roads we drive on are pot-hole free, the school our kids go to has good facilities and when we get sick, we can go to the hospital. 

So how do you know the real cost to the business? You don’t. 

I get it, the thought of setting up a legitimate business is daunting and it just seems easier to run cash.

But it is not worth the risk. 

All it takes is a good business advisor or accountant, some education and, in my opinion, 3 basic softwares - Xero, a receipt capturing software and, NextMinute.

Why leave it there?

To find out more about NextMinute

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