While some consumers have fully transitioned to paying with credit cards, many still prefer using cash. This requires extensive management on the business' end, as bills and coins can be easily misplaced and taken.
However, by balancing the cash drawer regularly, retailers can ensure that their on-hand cash matches the recorded transactions.
What is a Cash Drawer?
A cash drawer, also referred to as the till or register, safely stores cash, checks, coins, coupons, and other valuable items at the checkout counter. Employees are typically responsible for counting the contents of their cash drawer at the end of each shift, day, and accounting period to record all transactions.
The retail stores that are responsible for balancing their cash drawers typically include-
- Clothing departments
Balancing the cash drawer is essential solely based on the fact that consumers still enjoy using cash to complete transactions. Even restaurant guests that pay with a card may leave a tip, but that commission is usually taken out in cash at the end of the server's shift.
By taking account of transactions, businesses have a better picture of their overall financial health. It also enables managers to detect internal theft.
To keep books updated and as accurate as possible, companies should balance their drawers at least once every day. However, by counting the register every shift, supervisors can identify and resolve discrepancies immediately.
Steps for Balancing the Cash Drawer
Balancing the cash drawer may look different between small and larger businesses, as bigger companies often need to make more frequent deposits. However, every retailer follows the same fundamental steps.
1. Generate the Point-of-Sale Report
First, employees must run a point-of-sale (POS) report from their software that calculates how much money should be in the register. The report will break down the funds by payment methods, from cash to checks.
2. Count the Cash
Once the report is in hand, it is time to begin counting the contents of the drawer. Workers should start by adding up the cash, then totaling the checks and credit card receipts. Businesses with high volumes of cash should consider investing in a counting machine to streamline this process.
After the totals are calculated, employees must remember to deduct the starting cash balance from the current balance. Many people begin their shift by placing $100 in the register to ensure that they have enough bills for change.
The totals from the POS report and manual counts are then cross-examined to ensure they match.
3. Define and Resolve the Discrepancies
If the POS report and manual counts show different totals, employees should first recount since many discrepancies are the result of human error, such as-
- Misplacing a credit card receipt
If, after recounting the values still do not match, employees must determine what type of discrepancy they are dealing with. There are two primary types of cash drawer discrepancies-
- Overages are when the cash in the drawer exceeds the amount on the POS report.
- Shortages are when the cash in the drawer falls short of the reported amount.
Shortages are the more serious discrepancies, as they could be the sign of stolen or lost cash, whereas an overage typically implies customers were shortchanged. Severe shortages may require a closer look into who was assigned to the drawer during the shift.
4. Record the Transactions
All discrepancies that could not be resolved should be recorded in the profit and loss statement under its own column. Employees should also note the beginning balance, cash, credit, and check sales for easy reference.
Tips for Balancing the Cash Drawer
Balancing the cash drawer should be a quick and easy process that employees can complete within a few minutes. To streamline register counts, businesses should-
Assign One Employee to Each Drawer
The fewer employees responsible for counting the register, the better, as having multiple workers count the same drawer can quickly become confusing and introduce more human error. By assigning one employee to each till companies can avoid discrepancies.
Retailers should even limit the number of employees allowed to access the register to prevent internal theft.
The employees responsible for balancing the cash drawers need to document their counts and sign the report to show accountability for their assigned tasks. While one worker does the physical counts, another could prepare the bank statement.
At the beginning of the next shift, another set of assigned employees should repeat this process to ensure the counts are correct.
Reference Sales Reports
Businesses with POS systems should take advantage of its report functionality, as it can help optimize the cash drawer. POS reports can help retailers-
- Avoid keeping too much cash in the register.
- Avoid shortchanging customers.
- Detect employee theft.
Deposit Cash During the Day
If cash drawers become crowded and hard to manage, managers can deposit cash into their merchant account or personal safe. By making deposits throughout the day, retailers can keep their registers clean and orderly.
Monitor Recurring Discrepancies
While a minor discrepancy every now and again may not be anything to worry about, managers should keep an eye out for consistent shortages. Patterns may be the sign of internal theft, in which case management must sit down with employees to sort out the issue.