Count and record every day
At the close of each day, count the cash in the till, subtract the starting float, and compare the result to the day's sales report from the register or your sales list. Write the sales total, cash total, card total, any over or short amount, the date and the initials of the person who counted. This single page is the foundation of the whole system.
A pattern of exact matches every day looks suspicious, while small, explained differences look honest. Record differences rather than hiding them.
Deposit what you take in
Deposit cash receipts intact into the business account, preferably daily or on a fixed schedule, and tie each deposit slip to the daily sales record. Paying expenses out of the till without recording them breaks the trail. If cash must be used for a small purchase, write a receipt or voucher, and record the sale gross and the expense separately.
Do not keep a stash of undeposited cash for months. Large unexplained deposits later will raise questions about where the money came from.
Handle tips and gratuities carefully
If employees receive tips, the business may have reporting and payroll duties. Keep a record of tips received by card and any tip reporting by staff, and ask your payroll provider or CPA what applies. Do not mix tips into sales income without a clear record.
Owner-operators who personally receive tips should log them as income as well.
Track cash expenses
Pay vendors by check, card or electronic transfer whenever possible, since each leaves a record. Where you must pay cash, get a receipt with the vendor name, date and amount, and attach it to a cash expense log. For people paid in cash, such as day labor, get a signed receipt and a W-9 or other identification, and ask your advisor about payroll obligations.
Avoid paying personal bills from the till.
Test your numbers for reasonableness
Compare sales to purchases. A restaurant can compare food cost to sales, a salon can compare supplies to service counts, a shop can compare inventory purchases to sales. Large departures from the pattern in your industry invite questions, so look at the ratio yourself first and write an explanation if it is unusual.
Compare your deposits to your sales reports monthly. They should tie after allowing for card fees and timing.
Keep it simple and steady
The goal is a routine you can follow on your busiest day. Use a pre-printed daily sheet, a bank bag with a deposit slip and a monthly reconciliation. A steady routine is more convincing than a perfect system used once in a while. MCC Solutions can set up a simple daily cash sheet and reconcile it monthly for cash-based clients.
Common questions
What if my cash receipts are low in some months?
Document why, for example weather, closures or seasonality. Keep notes and records of events that explain changes.
Should I give customers receipts?
Yes, whenever possible. Receipts for every sale, even small ones, produce a trail that supports the numbers.
Are large cash deposits reported?
Banks have reporting duties for large cash transactions. Deposit what you actually receive and do not break up deposits to avoid reporting, which is itself unlawful.
This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation.