Is Taking Cash in Hand OK – Yes or No?

A pest controller takes cash in hand for a job and pops it into their wallet

Cash in hand work can seem enticing. No invoicing, no lengthy payment terms, and no need to tell the tax man. You probably know at least a handful of people who are conducting “cash only” business without declaring it. They might be getting away with it and relishing in the benefits – for now. In the long run, cash jobs are a bad idea for any building inspector or pest control professional.

By conducting illegal business, you could be exposing yourself to enormous risk in more ways than one. Considering your job is about mitigating risk for customers, you know how quickly risk can snowball out of control.

With that said, here’s more about the pitfalls of cash in hand as payment for work.

Is it common to do work for cash in hand?

It’s hard to estimate exactly how big the “cash in hand” market is. This is because, by nature, the income often isn’t declared.

World Economics puts the figure at approximately 9.9% of Australia’s GDP, or a whopping $147 billion dollars per year.

It’s not uncommon for customers to offer cash, especially if they’re hoping for a discount in return. Of course, it can be tempting, especially if you think you might lose the job if you don’t accept it. Anecdotally, there’s plenty of evidence that the cash job industry is booming. So why shouldn’t you join in?

excited tradie with cash in hand

Is cash in hand work legal?

It’s important to note that a cash job isn’t necessarily illegal or even bad. Cash is legal tender and you can certainly complete a job, send an invoice and receive your payment in cash. You’re not risking prosecution (or other dangers listed below) as long as you record it on your books and declare it as income. That is, you can accept cash for a job but should still do everything through official channels, including correctly documenting it.

However, if you’re thinking of taking cash in hand as a way to increase your income (without the authorities knowing about it) then you’re breaking the law. There are no two ways about it.

To be clear, it’s the cash jobs that aren’t declared and don’t appear in your books that are problematic. Here’s why.

The drawbacks of cash in hand

When it comes to the drawbacks of doing work for cash in hand, there are a few things to keep in mind. Let’s look at our top ones.

Your books won’t balance and neither will your planning

Firstly, if you’re taking cash without issuing receipts or invoices, it will impact your sales management and measurement. Without accurate recording of sales, profits, expenses and so on, it becomes much harder to track your results (among other business aspects).

It also becomes harder to properly manage expenses and payroll, work out the return on investment (ROI) of your marketing efforts, and set appropriate goals for the future. Read about keeping records efficiently to grow your business from strength to strength.

As the leader, you aren’t setting a good example to your staff

Secondly, you’re exposing yourself to risk. If you have staff on your payroll and they’re taking cash payments on your behalf, how do you know they aren’t pocketing extra cash? Then there’s the risk that should a disgruntled employee leave or be dismissed, they could report your business’ cash operations to the authorities.

After going through the steps of getting recruitment right, setting a good example for your employees is part of running a successful business.

Your business can’t grow in value, not officially anyway

Plus, if you were ever to sell your business, not recording cash deals would undervalue it. Potentially, you could undervalue it in a big way. Prospective buyers would pay less for it because you’ve given them no reason not to.

In a similar vein, if you’re not declaring all your revenue on your books, you’ll find that you mightn’t qualify for a loan down the track. Or you might qualify for a lower amount. This might not be a problem now but could limit you in future, particularly if you have plans to expand and grow your business.

lots of cash - australian 100 dollar notes

It’s illegal!

The last – and most obvious – drawback is that you’re potentially breaking the law. Put simply, receiving payment for work you don’t declare is illegal. If you’re caught, there will be penalties to pay. These penalties can be harsh, so it’s always best to make sure you keep any business dealings above board.

This includes simple jobs for friends or family members. Read about this case where not declaring cash jobs led to one tradesman owing the tax office nearly two million dollars.

It’s easy to get caught – and caught out

How would you get caught? The Australian Tax Office has plenty of checks and measures to make sure you’re declaring your income legally and completely. There are ways for the community and customers to report you. If you take a job that’s cash in hand, you could be audited and they can even conduct bank checks.

Importantly, if you offer a cash discount to a customer and don’t declare the income, you might be left with no recourse if something goes wrong. If a customer decides to sue you for bad quality of work or report you to the ATO, you could find yourself in a very tricky situation.

Which brings us to the next question – is your insurance still valid if you’re paid in cash?

Insurance implications

As mentioned earlier, it’s important to draw a distinction between a cash job that’s conducted through the correct process and cash in hand work done “off the books”.  

If it’s done off the books, your insurance likely won’t cover you. After all, the job didn’t even happen in the eyes of the law. That means if you do a pest treatment and later find a customer complaining about their termite problem, you could be in big trouble. Particularly if you also haven’t provided the paperwork required by Australian Standards.

a building inspector's book keeper is trying to make sense of undocumented cash in hand as the business is getting ready for a handover of ownership

Unsuccessful insurance claims could bankrupt you

Firstly, your customer could threaten to report you to the ATO unless you fix any errors. You’ll get in a lot more trouble for doing the cash job than they will for negotiating a cash deal. Secondly, they can sue you for damages. Usually your insurance would cover this (unless you’ve let your insurance lapse). But if you’ve taken cash under the table then your provider may choose to reject claims for jobs completed illegally.

Our insurance case study claims illustrate how easy it is for customer complaints to become formal claims and legal proceedings. The big difference is that if you’ve taken cash in hand off the records you could be far more likely to be found guilty of the customer’s complaint. Then you could be liable for legal costs as well. Not to mention your insurance can’t protect you (help you pay these costs) if you’re dealing in cash in the shadow economy.

Instead of trying to win by taking cash in hand under the table, keep everything above board. You can increase the amount of money you’re taking home by making the most of tax deductions for your business, reducing your business costs, looking at marketing ideas to generate more business, and implementing a whole host of other strategies.

Keeping business above board helps it grow safely

We’d also strongly suggest checking you have adequate professional indemnity insurance and general liability insurance should something go wrong. If you’re wondering how much building inspection insurance or pest control insurance costs, know this – it’s small change compared to what it can save you if a customer makes a case against your business.

Your insurance can protect your business when a customer makes a claim for damages caused by your services. It can also help you pay for legal fees/damages if you’re found to be liable (which can happen even when you follow best practice).

Don’t hesitate, contact us for a quote today.