Balancing the Cash Drawer
Even with today's modern point-of-sale (POS) systems, you still need a procedure to account for a store's cash receipts. These internal controls are necessary to prevent mishandling of money and to safeguard assets against loss or theft. Not only do strong internal controls promote operational efficiency, but they also ensure reliable accounting records that will be needed come tax time. One of the most common causes of shrinkage or loss in your store is through the mishandling of cash. When investigated, the most common cause comes down to a lack of proper procedures or controls.
The process of counting the money, reconciling the receipts, and balancing the cash drawer creates accountability of the day's transactions. This cash management system can be created at the same time store policies are established. Many of today's POS (point of sale) systems have step by step instructions for closing (also known as balancing) the cash drawer to guide the employee.
Store management or cashiers can pull a sales report at any time during a shift. By adding the beginning cash in the drawer to the daily sales figure, a retailer will know exactly how much money should be in the cash register or POS system at any given time. This is extremely useful:
- To avoid holding too much cash on the sales floor.
- If the store is robbed.
- When a customer complains about too little change.
- For discovering frequent overages/shortages for particular cashiers.
- To remove the temptation of taking cash without documentation from the cash drawer.
How and When to Implement
Balancing a cash register usually takes place at the end of the day or at the end of a cashier's shift. The cash drawer and its contents should be taken to an office or another secluded area to prepare the report. If balancing the drawer after closing, be sure the sales floor lights are off and the door is locked. For many salespeople, they get in a hurry and tend to start closing before the store is actually closed. This is not a safe practice. However, if you have multiple employees in the store, it's possible to close one of the registers during open hours.
Any overages and or shortages should be investigated. Human nature should be taken into account for minor errors and small amounts. By this we mean simple miscounts of change is common when processing a transaction. However, frequent discrepancies could be a sign of employee theft or may indicate further training is required for a particular cashier. As a rule, you want to make sure that no more then $2 is off at night. While it depends on the number of transactions that day (in other words, the more transactions the greater the chance for counting error) the $2 rule is a helpful one.
The starting cash-on-hand is put back into the cash drawer and stored for the evening, while the deposit is prepared for the bank. All credit card slips, terminal reports, and other register receipts can be stapled to the Daily Cash Drawer Report and filed by date.
Separation of Duties
For more accountability, consider using two people to balance the cash register. One person will count the drawer and create the daily cash report, while the other person prepares a bank deposit. Both staff members should sign the report indicating they are responsible for the figures shown. While no system can prevent fraud, this audit trail will help discourage collusion among employees.
At the beginning of the next shift, each cashier should be assigned their own cash drawer. Have the cashier recount the cash in the drawer to verify the beginning balance. If you are a small store with only one register, the cash most likely stays in the drawer overnight. If this is your situation, the procedure is the same.
One last note: since human error is part of the game, make sure you are including discrepancies in your cash as part of your profit and loss statements. Add a line to your profit and loss statements that budget for and show a loss from miscounting. This is another way you can audit and manage the loss.