Cash Tips vs. Credit Card Tips
By on Operations | Last updated on 29 August 2018

 

Tipping in the restaurant industry, especially in the US, is extremely important. It’s as important as having a great head chef leading your back kitchen during a hectic dinner service. If you’re a restaurant owner, you should take tipping very seriously. Not just because tips are helpful to your business but because it also helps your employees earn the wages they need to pay for their cost-of-living.

This being said, it’s helpful to be aware of the kinds of tips your restaurant staff are receiving as a restaurant owner. Just to get the obvious out of the way, any kind of tip is a good tip. Whether it’s from cash or credit cards, either option generally has no benefit or drawback for you and your business. What it all boils down to really is how it affects your employees’ wages, which leads into your employees’ happiness and ultimately your business’ workforce success.

So let’s take a look at how these different modes of tipping can affect you and your staff.

Cash Tips

When we’re talking about modes of tipping in terms of your restaurant staff, cash tips are generally preferred. Why? That’s because cash is fast money. t can be taken home by your staff at the end of the night to use it on whatever expenses they might have. Compared to credit card tips, cash tips are easier to count and split amongst your servers, making it possible for them to bring home tips right after dinner service.

Another benefit of cash tips is that they don’t have to claim all of their tips on their taxes. People are generally taxed on how much they take home in tips, so it’s in their interest to lower the amount they declare so that they’re taxed less. It’s not that we’re condoning people to resort to tax evasion but servers are taxed on how much they take home in tips so it’s in their interest to lower the amount they declare. It’s simply a way of life.

However, even though cash tips seem generally more beneficial, it can pose some headaches for both the server and the restaurant manager or owner.  For the servers, the way tips are pooled or split can mean they go home with less, which could end up being a headache for the manager in terms of keeping employees happy. Another issue could be with the amount that the customers can tip in cash. Nowadays, being cashless is becoming more the norm, which could lead to your restaurant staff being short changed on cash tips. And finally, cash tips will be harder to keep track of should you need to take note.

Credit Card Tips

With the appearance of mobile card readers and digital payment technologies, it has become incredibly rare to carry cash around. This made credit card tips all the more popular for people to use. But what does it mean for your staff exactly?

On the upside, credit cards have helped increase the ability for people to be able to tip their servers. If customers don’t have enough cash handy for tipping the restaurant staff, they can always pay their gratuity via plastic. According to Daniel Post Senning of the Emily Post Institute, “Tipping on credit really opens up the possibility to tip exactly what you feel comfortable tipping,” he continues “I think it makes it more possible for more people to tip—it’s not as easy to offer the excuse, ‘Oh I just didn’t have the right change in my pocket so I didn’t do it’, or ‘I did a small amount.’”

Another good thing about credit card tips is that all transactions are easily tracked and recorded so that you know you’re tipping out to your staff fairly and accurately. One thing’s for sure, transparency and fairness are always welcome in any business with this system.

Seeing as how cash tips are more preferred than their credit card counterparts, there are a bit more drawbacks in receiving credit card tips. One major drawback for staff would be on its timeliness. Since the tip given to your staff isn’t physically present, you as the restaurant manager or owner must check the receipts to determine how much cash each of your servers are owed — which takes time. Your business might also be the type that places credit card tips in the next paycheck — an even longer wait for your staff.

Lastly, one of the bigger setbacks in receiving credit card tips are the credit card fees. Merchants have to pay a small fee to the credit card company for each payment processed. It makes sense that the best place to get the payment for those fees are from the credit card tips themselves, which will unfortunately leave less for your staff to take home in the end.

What’s the best tip for your restaurant?

Which kind of tip would be the best for you and your business? As stated earlier in this article, there is generally no benefit or drawback when it comes to what kind of tip you receive. You could decide to push for cash tips from your customers to give your staff more spendable income by the end of each day or you could decide to go for credit card tips to keep track and stay compliant.

But at the end of the day, no matter what you choose, just make sure that it’s you, your business, and your workforce that comes out the winner in the battle of credit card tips vs. cash tips.