Most people would agree that small business cash management seems simple; yet somehow it is also one of the most frequently neglected or mishandled items. You’re probably thinking, “Who cares; petty cash is immaterial, right?” Well, for a small business or store front, this could be a significant part of your entire operation. For example, think about running a single location frozen yogurt shop. All your sales are processed onsite through a cash register and if product stock is not managed timely enough to go through a formal AP process, your COGS and G&A expenses are largely running through the register as well. I’d say that pretty much sounds like the heart of your business, and opportunities for error should be minimized. Here’s how to run a cash register.
Have a Set Bank for your Cash Registers
First things first, you want to have a set bank (beginning and end shift amount) for your registers. This will help you reconcile the cash activity and minimize cashier mistakes by eliminating unnecessary reliance upon cashier intellect. The amount should be sufficient for maintaining smooth operations but shouldn’t be so large that it encourages theft or the desire to run large purchases through the register. Having a set bank will also be a very clear indicator of overages and shortages in the register balance. This allows you to hold employees accountable and investigate discrepancies in a timely manner to reveal potential error or theft.
Match the Daily Revenue with Your Daily Deposit
Second, as an extension of petty cash management, you should match the revenue recorded for the day to what was actually deposited in the bank account. This should be any excess cash beyond the set bank less general expenses paid from the register. To make sure all outflows are properly captured, require all business expenses to be approved and supported by sufficient documentation of the purchase (i.e. – a printed itemized receipt). If you notice that the revenue recorded is greater than what was actually deposited in the bank, determine whether the cash register was over its set bank that day. If it was, this is good news; the money is still with the business. If not, there is a reasonable probability that someone stole the money.
Document Cash Handling Procedures
Finally, make sure you have thorough written documentation for cash handling procedures and require your cashiers to complete a hands on training program. Let it be known from the beginning that overages and shortages are unacceptable.
Petty cash management is an important process in many businesses. For more help implementing best practice techniques, contact TGG Accounting today.Written by: Andrea Murray TGG Accounting