Cash App & Venmo, NOT for Businesses
Updated: Feb 27
In October 2013 and September 2016, Cash App and Venmo were born. They were both initially created for peer to peer use. However, over the years, business owners have begun to use the applications for paying employees, vendors, and receive payments for goods and services.
Both applications are great as peer to peer lending tools. They are intuitive, easy to use, and perfect for splitting restaurant checks, reimbursements, and other personal expenses. Venmo in particular is exceptionally savvy because they laid on top a social currency to where people can not only do peer transactions, but can also let the world know what they are paying for.
Cash App + Venmo = Extremely Problematic for Businesses
Venmo actually prohibits this and wrote a blog that states on their website that if they should find out someone is using the app for business, they can reverse the payment. This puts business owners in danger of losing both the payment and the item sold.
We get it - "It's just an app to exchange money between people. How much harm can it do to a business?". Not too much harm honestly, just complications within businesses. Here's why:
1. Large Transactions
Any person that pays more than $600 in one transaction (in a calendar year) has to be issued a 1099 form. Which summarizes the total payments that they received for tax purposes. Cash App and Venmo lack the reporting tools to help one do that in an efficient way.
2. Lack of Documentation
Cash App and Venmo do not allow people to attach documentation invoices, contracts, and receipts so that we can see what services were actually paid for. This could become a very big problem later on in case of fraudulence and scams. There is no way of having proof and pulling in the company (Cash App and/or Venmo) cannot guarantee of getting something like that back without the evidence.
3. Not QuickBooks Friendly
When a transaction comes in or out using these applications, it simply just states "Venmo" or "Cash App" with no other details as to who it's coming to or coming from who. This gives your accountant a hard time to classify without reaching out to ask the nature of the transaction.
Alternatives for Businesses
So at the end of the day, because it's not secure and not easy to track, we advise people to stay away from peer to peer apps when it comes to sending and receiving payments in a business. For business purposes, there are a plethora of tools in technologies people can use to accomplish the same ends to electronically pay vendors. The best of which: Bill.com.This is a system that allows people to electronically pay vendors and it gives all the details needed to link transactions and prove business operations.
Here is a video of a further explaining why these two applications should not be used for business use!