July 31, 2021

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Cash Reconciliation: What Is It and How to Perform It?

Cash Reconciliation: What Is It and How to Perform It?

Overview

Cash reconciliation takes place mainly at the cash register. This is typically a form with a checklist that employees fill out at the beginning of the shift and the end of the shift. It is an important part of daily procedures for businesses that are running a point of sale and have cash registers as part of their sale of services or goods.

Cash reconciliation is necessary to keep records and analyze the key element that keeps your business running. After all, cash is the most important liquid asset of a business. At the same time, it is important to understand the information collected from the cash reconciliation process. It can help to identify areas that are underperforming and compare forecasted budgets against the performance of different sections.

Cash Reconciliation: What Is It and How to Perform It?

Cash Register Reconciliation Process

There are a number of ways and various tools to help you reconcile your cash register and troubleshoot any discrepancies. The typical cash reconciliation for the cash register process would look something like this:

  1. An employee would come in in the morning and open up the register to count the amount of $100 bills, $50 bills, $20 bills, and so on.
  2. Next, in the cash register reconciliation form, you would write down the counting results. For every business, the amount will slightly differ depending on what they need for their daily operations.
  3. Finally, the employee would total up all the money in the cash register.
  4. After the shift is over and the employee had cash receipts, the employee is going to count all the bills once again, taking into account any checks that were written by customers, and write down the total as well as calculate the difference between the opening balance and the closing balance.

It may happen so that during the busy time, you will have two or more employees working in a small store with only one cash register. In this case, it is important that only one employee is assigned the responsibility to operate the cash register. In addition, the employee closes the cash register at the end of the shift and the employee who takes over opens up the cash register to ensure that everything balances throughout the day and any mistakes and/or fraud are easily traceable.

If you look at the typical cash register form, you will see that most stores start with the exact same amount every single day. Employees are also usually able to print out a register or point-of-sale reading at any time throughout the day, which calculates the taking for the day. This way, the employee can compare the amount shown on the reading to the actual amount of money in excess of what was at the beginning of the day. These two values should be the same.

If the values are not the same or there are some discrepancies, the employee should report it and further investigate. Sometimes, the values will not match due to human error when counting the money, so start by balancing the sum of the payments again. If this is not the reason, a supervisor and manager should be informed. Using special programs that will not only keep a record of cash register opening and closing balances and any variances, but also create helpful reports is a valuable addition to the cash reconciliation process that will save you time and money. Besides control, the manager will always have up-to-date information on cash balances at the cash registers and cash sales.

Causes of discrepancies

Did you ever wonder why the numbers in your reports are not always matching the money in the drawer? We already mentioned some reasons, including simple human error when counting the bills and checks in the register and a more serious reason – fraud. Here are some other reasons to keep in mind when you experience issues:

  • Your cashier gives your customers too much change or does not give enough change.
  • The customer returns have not been handled properly.
  • The cashier entered the wrong payment methods.

With a good cash control process or a tool, you will be able to better control the opening and closing of the cash register box of a business and make sure no errors have occurred when cash transactions were made during the business operations throughout the day.

Besides internal controls mentioned earlier, it is recommended that you conduct regular, independent reviews of your cash register reports in addition to the cashier doing cash reconciliation at the end of each shift. If a lot of payments go through your cash register per day and at the end of the day the amounts often do not match, then such reconciliations can be arranged several times during the day.

Also, the cashier must be separated from the person who is actually going to collect and deposit the daily cash receipts. When turning the cash register money to the collector/bank depositor, both should sign some sort of a receipt or repot for what the amount is. This way, these two individuals will perform a check on each other, making sure the other person does not make an error or steal, which happens in small businesses more often than one would expect.

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Author: Charles Lutwidge

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