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accountant advice

Balancing a cash drawer

Balancing a drawer isn’t a big worry for some small-business owners; as long as there is money in the drawer, they’re good. To others, there is the constant worry if that is the correct amount of cash in the drawer. Many don’t worry about balancing the drawer until year end or until there is an audit.

The fact of the matter is that inappropriate handling of cash is one of the leading causes of theft or loss. Five bucks here or there may not seem like a lot of money, but by the end of the year you could end up with a drawer that is hundreds of dollars short. Ask yourself: “Do I do payouts?” “Does my employee always bring back the proper change?” “Does yesterday’s ending drawer match today’s starting drawer?” If your answer to any of these questions is “I don’t know,” you likely don’t have the proper protocols in place to protect you and your employees.

If you have a modern point-of-sale system, it is likely that a lot of these problems can be easily solved if you start using the system properly, but for the sake of this explanation, we are just going to assume that this is a regular old cash register. Lets get a couple of notes out of the way first:

Office safe:  If you have a large cash business, an office safe is an absolute must. It’s important that you have a cash limit on the drawer. Once you hit XXX amount of cash, you must transfer the excess into the safe. Depending on the store and volume, that could be anywhere from $500-$2000. There are many reasons for this, but the most obvious is theft; it is just low hanging fruit. A decent fire proof safe will run you between $200-500 and would be a lovely tax deduction!

Payouts:  Don’t do it, but if you must, there is typically a payout feature on the register or POS. If you are going to insist on using it (and if you have a lot of these, I am going to insist you not) make sure you use the button. If you don’t, then it will look like an over/short at the end of the day. If you have a lot of payouts, consider using a service such as Expensify that will handle all employee reimbursements.

Beginning & ending balances; Your drawer should have a beginning and ending balance that should always be achieved. You should try and make sure there is a nice blend of cash to make change with at the beginning and end of the day. Typically, you will want to have about $200-500 in the drawer. If you’re a seasonal business, you can increase the balance in the busy season, then bring it back down to the lowest amount you need.

Start of day: When a cashier starts their day, they should verify last night’s ending draw. As stated previously, this should be the same amount every day, $200. Once they have validated the amount, they should make sure to open a till on their POS if there is a Point-of-Sale.

End of Day: This is the important part of the day. Look at the register Z-Tape or End of Day report. This report goes by many names, but contains information similar to the following:

Look at the tender type, and pull out the exact amount of cash, in this example $276.00 (if there is change, take it out too, slacker). Pull it out, and count the remaining cash. In this example it should be $200. If it isn’t, go back and count the cash again. If there is still a difference, you have an over/short. If you have over $200 you’re over, and you short-changed someone; if it’s less, you are short. It’s not the end of the world unless this continues to happen.

What to do if I have an over/short: You want to have your drawer remain at $200 for the next person, so you are going to take/add from your deposit in order to make sure your drawer is at its ending balance. Make a note for the deposit, that there was an over/short, so whoever is doing your bookkeeping isn’t looking for it.

Once your discrepancies are resolved, make out a deposit slip for the exact amount, and put it in an envelope. Put that envelope in a deposit bag. If you have a cash register, scan the z-tape to your bookkeeper, you shouldn’t need to do anything if you have POS unless your bookkeeper is a luddite.

What now?

It’s important for the sanity of whomever is doing your bookkeeping that you deposit that money in a timely fashion. Just make it part of your closing procedure to have the manager/closing person deposit the funds into the night drop (all banks have this; ask your banker about it) on a daily occurrence. If your bank isn’t nearby, you can decrease the number of bank trips, but for the love of all that is good, keep the deposits separate. If there is a difference it is painfully difficult to figure out if all of the deposits are mixed in.

Standard operating procedure: Closing

Your opening/closing register balance is: _______

Go to the report screen and find the sales summary for today. Find the line under Total Collected called CASH.

1. Count out that exact amount of cash from the drawer (to the penny) and remove it from the drawer and place it in an envelope.

2. Now cash the remaining amount of cash in the drawer. It should be the same amount of cash that you had when you opened the drawer. If you don’t have the exact amount you started with, you are off. Count again, and if you are still off see step a below a, otherwise, you can skip to step 4.

  1. There are a couple of reasons why you might be off, you might be over or short. Check to see if there were any payouts (there should be a receipt in the till), if there were go to the next step, otherwise, skip to the last step below.
  2. Find the receipt, and put it in the pile to be scanned to the bookkeepers office. Label it “PAYOUT” and the date. Finally, pull the exact amount from the envelope and put it back in the drawer, and now you should have the balance you started with. If you don’t, it’s likely that the person who had the payout did not give you the change back. Get it back, put it in the drawer and you should be all set. If they did give the change back and you are still off, proceed to the next step.
  3. You have an over/short. If you have too much left in the drawer, you are over, and you likely shorted someone their change, if you have less than the starting amount in the drawer, you are short. Let your manager and the bookkeeping office know the difference, and then pull the amount from the envelope and put it back in the drawer. At the end of the night the drawer should have the starting balance.

3. Fill out a deposit slip for that specific amount of money and place it in the envelope. On the envelope, label it with the day and your name. Put the envelope in the night drop bag and put it in the bank’s night drop slot, or leave in a secure place for your manager to deposit.

Standard operating procedure: Opening

Your opening/closing register balance is: _______

1. Open up your drawer and count the money. It should be exactly the amount of money is above. If you are unaware of this starting balance, ask your manager. If the balance is correct, you are good to start your day, if it is off, proceed to the next step.

Look at the deposit slips from last night. There should be a carbon copy with the amount deposited. Then go to the report screen and find the sales summary for yesterday. Find the line under Total Collected called CASH, those two numbers should match, unless there was a payout or an over/short, both of which should be recorded. Here are the different circumstances:

  1. Payout issue: If the Total collected cash matches the total deposited, but there was a payout yesterday, they forgot to put the cash back in the till. Let the manager know. You will have to pretend that that payout is on today’s register, the steps for which you can find in the SOP closing guide in step b.
  2. Over/short: If there is no sign of a payout, it’s likely the person was over/short yesterday and either ignored it or counted the cash wrong and thought it was right. You will have to pretend that the over/short is on today’s register, the steps for which you can find in the SOP closing guide. Let the manager and bookkeeper know.

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