This is one thing I never understood, especially when people try to use them for small purchases. At my workplace, the store owner has disallowed us from accepting $50 and $100 bills in order to avoid having to check for counterfeits. People get very upset at this policy.
One time, a customer came up to the counter with the items they had picked out. I scanned them all up and then provided her with the total. She then tossed a $50 bill on the counter. I politely explained that due to store policy, I would be unable to accept it, so she'd have to either break the bill elsewhere, or she'd have to provide a different payment method.
In response, she snatched the bill off the counter and angrily said, "Well, I'm never shopping here again." She said this loudly enough that it took aback multiple nearby customers, who began to look on.
After digging in her purse, she tossed two smaller bills onto the counter, which turned out to not be enough to pay for the total (after the cash she still owed $7-8). I explained this to her, and then she snatched the cash off the counter and left. The next customer I interacted with, who had witnessed everything, told me that she'd "go easy on me". Haha.
I understand it can be frustrating to not be able to pay with the money you have on you in the moment, but I wish customers would understand that the store owner sets the policies, not the people working for the owner. Retail workers don't really have any power in that regard, we just work here. Also, I wish they'd understand we are not a bank; even if we did take larger bills, we don't have a million dollars in the register to give you. Usually, we have just enough to get through the week. It's just a nuisance.
I understand the dilemma and initially battled the owners of the bike shops over this issue. My answer is the same reason I would never refuse credit cards over the fees; never inconvenience a customer for any reason that can be avoided. The most important factor in retail is to first get more people in the door. The second most important factor is converting everyone possible into repeat visitors. This is more important than sales, margin, or any other factor. Creating absolutely any easily preventable reason for someone to avoid returning is counter productive. Humans love to complain. It is our favorite past time activity. Word of mouth is the primary generator of new customers. Inconveniencing a customer over something easily avoidable like this is going to be memorable for the customer and anyone else present. Of those people present, you might have generated one or two word of mouth references that could have produced a new customer had everything gone flawlessly. By creating this negative thing to complain about, every person present is going to tell at least a few people about it, and it is much more memorable than any positive recommendation. Running a business is all about taking on the inconvenience and investment to provide value to the end customer. There will always be a small percentage of negative encounters in business. The trick is to do everything possible to limit them to circumstances that can't be avoided. Those that can be avoided should.