You should always have some cash on you.
Did you grow up hearing that, too?
Cash can be easy, it’s convenient, there’s no technology that can go wrong with it.
It’s also a pain to account for it as a business owner. There’s not a digital trail like there is for other payment methods. I cannot tell you how many times we’re cleaning up a business’s books and have no way to figure out what happened to hundreds (or thousands) of dollars in cash.
Here are some tips for dealing with cash to make it a little easier.
Go Cashless
Seriously, don’t take cash. It’s your business, and you can decide.
Reasons to consider going cashless:
No missed deductions: if you use cash and don’t save the receipt, don’t get a receipt, forget about it, or your bookkeeper doesn’t know about it, you’re missing out on recording expenses in your business which are also tax deductions.
It’s easy for cash to “disappear” in small amounts. Remove the temptation.
You save a lot of time you’d spend tracking and counting cash.
Cashless is more accepted now than ever, helped along somewhat by the pandemic. A recent Pew Research Center study found a sharp upward trend in the number of people who don’t use cash at all. In general, you won’t get much pushback.
This is a bit of a controversial idea. Many countries are working towards a cashless society, while some cities are banning cashless stores because it’s less accessible. You’ll have to make the determination if it’s right for your business.
Count and Deposit Cash Daily
If you do accept cash in a brick-and-mortar setting, establish tight processes for managing it. The method we find works best is to count and deposit your cash daily.
Essentially, the goal is to keep the same amount on hand at all times, depositing everything that you bring in above that amount.
First, make sure you are entering all of your cash sales in your POS. At the end of every day, count your cash. It should add up to the base amount (kept in your safe & drawers) plus the amount received that day. The amount received should match your POS reports.
Then you simply deposit the amount received. The deposit will match the POS report, and your cash on hand stays the same. You may have to make notes for over/under issues, if you occasionally have off counts. That’s it.
Note that you shouldn’t use cash to pay for any expenses, which would mess up your counts.
This process makes it easy to follow what happens and allows you to catch any issues early. It also saves you from doing any more complicated cash tracking.
Set Up Cash Tracking
Does the above method not work for you for whatever reason? Maybe you do spend cash, or you like to be more flexible with what you keep on hand. In that case, you still need to count your cash daily, and there’s an extra step of tracking the ongoing balance.
A trusty spreadsheet works well for this. You need to log all the things that happen with your cash on a daily basis and verify the ending balances.
Each row of the spreadsheet will be a new entry:
Additions from that day’s sales (should match cash received number in your POS)
Cash expenses
Deposits to your bank account
Anything else that affects cash
Set up a calculated column which will keep a running balance based on your daily entries to be verified by the cash count.
Where do you stand on taking cash?
If you do, make sure you have processes in place so it doesn’t get out of hand.
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