Nationwide Payment Systems

The Penny Problem Is Real: What Businesses Need to Know Now 

The end of the penny, cash rounding, POS compliance, consumer transparency, and the ripple effects for retailers, fintech, and payment systems.

Presented by Allen Kopelman, CEO — Nationwide Payment Systems-Host of B2B Vault: The Biz2Biz Podcast 

Guest: Kyle Hatfield, CEO and Co-Founder of Centsless

As Seen in B2B Vault

AI OVERVIEW

In this episode of B2B Vault: Biz to Biz Podcast, host Allen Kopelman sits down with Kyle Hatfield, CEO and co-founder of Centsless, to talk about a surprisingly big issue hiding in plain sight: the end of the penny and what that means for businesses, consumers, point-of-sale systems, and compliance. 

What sounds like a small change could create major problems across retail, hospitality, accounting, tax reporting, software platforms, and customer trust. Kyle explains why simply adding a rounding toggle to a POS system is not enough, why businesses may face legal and operational risks without a true compliance trail, and why a fragmented state-by-state approach could create a mess for multi-location merchants. 

This conversation is a wake-up call for business owners, POS providers, software companies, and fintech leaders: the penny may be disappearing, but the problems it leaves behind are just getting started.

A Tiny Coin With a Huge Business Impact 

Most people hear “they stopped minting pennies” and think it is no big deal. 

But as Allen and Kyle discuss in this episode, the ripple effects could be enormous. 

Once pennies are no longer readily available, businesses that accept cash still need a way to: 

• calculate totals fairly.  

• provide correct change.  

• account for rounding differences.  

• maintain audit trails.  

• show transparency to customers.  

• protect themselves from disputes and lawsuits.  

And that is where the real problem begins. 

Kyle and his team at Centsless have made this issue their central focus, building a solution around what he calls a “boring fintech” problem — boring in the sense that it is not flashy, but absolutely critical. 

Why the End of the Penny Creates a Real Operational Problem 

Allen framed the issue perfectly: even if cash usage is lower than it used to be, businesses still need to know how to handle cash transactions correctly. 

Think about what happens at checkout: 

• a total comes to $57.83.  

• the customer hands over cash  

• the system must determine how much change is due.  

• the receipt must show what happened.  

• the accounting system must record it correctly.  

• tax reporting must still make sense.  

• refund and tip logic must still work.  

That is not a small issue. 

Kyle explained that while the Treasury can stop minting pennies, which does not automatically solve the rules around how rounding should work in the real world. That gap between policy and execution is where risk lives. 

Why a Simple POS Toggle Is Not Enough 

One of the most important takeaways from this episode is this: 

A rounding feature by itself does not equal compliance. 

Kyle pointed out that many point-of-sale companies may offer a quick rounding logic toggle. That can help a merchant round up or down, but it does not solve the bigger issue: 
Where is the compliance trail? 

Businesses need more than a button. They need documentation and records that can show: 

• how rounding was applied  

• when it was applied  

• in which jurisdiction  

• whether it was neutral or biased  

• how it impacted refunds, cash in, and cash out  

• whether it affected taxes or tip payouts  

Without that audit trail, a merchant could still face: 

• customer complaints  

• accusations of unfair rounding  

• litigation exposure  

• accounting issues  

• tax reporting problems.  

That is why Kyle argues that a compliant rounding infrastructure matters far more than a simple feature switch. 

The Risk of State-by-State and Local Fragmentation 

This is where things get even messier. 

Kyle explained that many states are already introducing legislation, but the rules are not lining up neatly. Some proposals differ on: 

• whether rounding is mandatory or conditional  

• whether it happens before or after tax  

• whether rounding must always go down  

• whether criminal penalties apply  

• how businesses must disclose the practice  

That means businesses could face a nightmare scenario: 
different rules in different states, counties, cities, or even transaction types. 

For multi-location businesses, this could become chaos. 

A merchant with stores in multiple states may have to manage: 

• different rounding rules  

• different disclosure requirements  

• different accounting treatments  

• different legal risks  

Allen made a strong point here: if the federal government does not establish a clear standard, businesses could end up stuck in a patchwork system that is nearly impossible to manage at scale. 

The Hidden Impact on Sales Tax, Accounting, and Reporting 

This episode did a great job surfacing something most people will overlook: 

rounding does not stop at the register. 

It flows into: 

• POS reporting  

• accounting software  

• QuickBooks and ERP integrations  

• tax calculations  

• refund workflows  

• labor and tip payouts  

• audit reviews  

Kyle explained that even if the subtotal and sales tax are calculated first, a rounding system still has to clearly document the final cash amount and how the difference was handled. 

That matters because if the numbers do not reconcile properly, it could trigger problems with: 

• sales tax reporting.  

• internal audits  

• external audits  

• tax filings  

• merchant reporting accuracy.  

This is why the penny issue is not just a checkout problem. It is a back-office problem too. 

Why Restaurants and Tipped Businesses Could Face Extra Headaches 

One especially interesting part of the discussion was around restaurants and cash-paid tips. 

If a restaurant pays out tips in cash, but pennies are no longer practical to use, how should those payouts be handled? 

Kyle explained that this forced his team to start thinking beyond the register and into the back-of-house workflow. If a cash tip payout has to be rounded, that creates another set of concerns: 

• fairness to employees  

• wage theft accusations  

• documentation requirements  

• consistency in rounding practice  

This is a huge issue for: 

• restaurants  

• bars  

• hospitality businesses  

• salons  

• service businesses with cash tip environments.  

For those industries, the end of the penny could affect not only customer-facing payments, but employee compensation workflows too. 

Why Consumers Could Get Angry Fast 

Allen made a very practical observation: 

this issue could easily turn into a viral customer relations mess. 

All it takes is one person believing they were shortchanged by a penny or two, filming the interaction, and posting it online. 

And that creates a new problem: 
frontline staff are left to explain a policy they did not create and may not fully understand. 

Kyle pointed out that even a one- or two-cent difference can upset customers if they think the rounding system is unfair or biased toward the business. 

That means merchants need: 

• clear policy  

• clear signage  

• clear receipts  

• clear staff training  

• clear documentation  

Because if consumers do not trust what happened, the pennies become bigger than pennies. 

The Real Cost to Business: Pennies Add Up Fast 

A major moment in the episode was Kyle sharing an example from a Midwest company that estimated a nearly $4 million annual loss if it continued rounding down on every transaction just to play it safe. 

That gets your attention fast. 

Because no business is simply going to shrug off millions of dollars in losses. 

As Allen pointed out, businesses will try to get that money back somehow: 

• higher prices  

• pricing adjustments  

• fee changes  

• reduced margin tolerance  

That means the cost of poor rounding policy does not disappear. It gets pushed somewhere else. 

So, while the penny feels tiny, the financial consequences absolutely do not. 

What Centsless Is Actually Building 

Kyle described Centsless as a neutral, compliance-focused solution designed to help businesses handle cash rounding in a fair and defensible way. 

He emphasized that the goal is not to be flashy or disruptive. 

Instead, the company is focused on being: 

• practical  

• transparent  

• compliant  

• easy to implement.  

• fair to both businesses and consumers  

That is why he calls it a “boring fintech” solution. 

But this kind of boring is exactly what merchants, POS companies, and enterprise operators often need most: 
something that works, tracks what happened, and reduces interpretive risk. 

Kyle noted that their audit compliance trail can include dozens of data points, including timestamps, jurisdiction details, overrides, refunds, and transaction-level records. 

That kind of infrastructure could become extremely valuable if litigation, audits, or regulatory scrutiny increase. 

What Business Owners Should Do Right Now 

Kyle gave some practical advice for businesses that handle cash. 

Here is where merchants should start: 

1. Ask your POS vendor what they offer

Find out whether they have a rounding feature at all. 

2. Ask what sits behind it

A toggle is not enough. Ask: 

• Is there an audit trail?  

• Are there timestamps?  

• Are there jurisdiction markers?  

• Can you defend the logic if challenged?  

3. Start customer education early

Signage, policy language, and clear communication can reduce friction later. 

4. Think about refunds and edge cases

How are rounded transactions handled if a product is returned? What about tips? What about cash payouts? 

5. Watch for state and federal changes

This is evolving. Merchants need to keep up with what their state may require. 

This is one of those issues where waiting until the last minute could create more stress and more cost. 

Why This Matters to POS Companies, Fintech Platforms, and Payment Providers 

Allen repeatedly brought the conversation back to the software and payments side of the issue, and rightly so. 

This is not only a merchant problem. 

It is also a problem for: 

• POS software companies  

• terminal manufacturers  

• fintech platforms  

• accounting system providers  

• payment companies  

• embedded finance businesses  

Why? 

Because merchants are going to ask: 
What is your plan? 

If the answer is vague, incomplete, or not defensible, that could become a real competitive weakness. 

This is especially true for providers serving: 

• restaurants  

• retail  

• convenience stores  

• grocery  

• hospitality  

• cash-heavy businesses.  

• multi-location operations  

Kyle’s message was clear: 
the market needs a real solution, not a patch. 

The Federal Question: Will There Be One Rule or a Hot Mess? 

Allen voiced the concern many business owners are probably already thinking: 

Will the federal government step in and make one solid rule, or are we headed for fifty states and thousands of jurisdictions doing their own thing? 

Kyle’s answer was cautious. 

From his conversations, it sounds like federal efforts may provide broad safe-harbor language, but not necessarily the detailed execution rules businesses need. If that remains the case, the market may be left to figure out the implementation on its own. 

That could mean: 

• more legal ambiguity  

• more inconsistent practices  

• more pressure on software vendors  

• more compliance burden on merchants  

And that is exactly why this issue deserves more attention right now. 

Final Thoughts 

This B2B Vault episode is a perfect example of why business owners need to pay attention to policy changes that seem small on the surface. 

The penny is tiny. 

But the business consequences are not. 

This issue touches: 

• operations  

• customer experience  

• point-of-sale systems.  

• payroll and tip payouts.  

• sales tax.  

• accounting  

• legal exposure  

• consumer trust  

Kyle Hatfield and the team at Centsless are taking on a problem most people are still ignoring. And if they are right, businesses that prepare early will be in a much better position than those who wait until the confusion hits the register. 

If you accept cash, run a retail or restaurant business, build POS software, or work in fintech, this is something you should be following now — not later. 

As Seen in B2B Vault