A lot of smaller businesses, especially those who are retailers will use out of till payments and petty cash payments. These payments are of course just as important to account for as any other payments, and there are a few different ways of doing so.
It's always best to pay for business expenses with cheque or credit card. Of course, there are times when this is not an option; so how should a business keep track of these out of till payments for invoices?
Any sort of till includes the option to perform "cash out" transactions. These transactions are then deducted from the daily sales totals. They generally look something like this:
Daily sales - $1000.00
Cashout transaction (invoice payment to Acme Office Supplies) -$100.00
Total cash at end of day - $600 EFTPOS - $300 Total banked - $900
One way to handle these out of till payments is to account for these expenses as you keep your records of the daily cash draw and sales. For example:
Opening balance: $300
Daily sales: $1000
Payment made of $1000 to the cash draw (as in, this is where the cash is at the end of the day)
Acme Office Supplies invoice paid $100 from cash draw
This leaves us with a balance of of $300 + $900.
You would then bank the cash take for the day ($600) in your business' bank account and transfer EFTPOS transactions to this account as well. This leaves our cash draw at the standard $300.
This is actually simpler than it may sound and using Quickbooks or MYOB to handle your small business accounting will make it even easier to handle.
These systems not only make it easy to track daily transactions and totals, but can also help you to identify the whereabouts if missing funds. In many small businesses, the till and the accounting system are not closely linked enough to catch these problems until it is to late - don't let this happen to you!
Now, if we take the daily business totals above as our example and assume that $50 was missing from the till at the end of the day, this would be immediately apparent when going through the day's transactions. However, how can you be sure that this $50 wasn't for a cash out transaction to pay an invoice? Implementing a simple procedure can help to ensure that these inconsistencies can be identified and tracked quickly.
What you need to do in the event that a cash out payment needs to be made towards an invoice, the invoice itself must be placed into the till (you can put it in the same place where you keep EFTPOS receipts) and make a note of the cash out transaction. Most tills and POS systems will let you print a receipt for cash out transactions.
Simply staple this receipt to the invoice and total it along with everything else at the end of the day. The invoice payment will then show up as a cash out transaction on your end of day receipt. File this receipt along with your end of day receipt and EFTPOS receipts and keep these records organized by date. In the event of any inconsistencies found in your accounting system, you will then be able to quickly retrieve and examine all of the relevant documents. Don't forget to separate the invoice from the cash out receipt so that it can be entered into your accounting system with all of your other accounts payable.
If managing your books is proving to be an ongoing nightmare, you might want to check out our website - http://bookzkeeper.com.au - to find out more about our Accounting Survival kit for Small Business. It's the answer to your small business bookkeeping headaches. It was created by Alycia Edgar, a practising accountant and small business owner with a busy practice in Australia, encompassing a large number of small businesses as clients.
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