Is Cash No Longer King?
By Mary Hunt
Is “cold hard” cash becoming a thing of the past? It sometimes seems like that. We can pay for products and services with our phones, credit cards, debit cards, gift cards or even e-transfers. In fact, there are some businesses which will not even accept cash anymore.
In my hometown of Erin, we have a very popular small ice cream store called Bailey’s which only accepts cash. Over the course of a few years, when my kids worked there, they often came home with stories of angry customers who didn’t have cash and couldn’t believe the owner didn’t have a merchant machine. This is becoming a rare experience indeed. But until cash is truly a thing of the past, retailers should have processes in place to deal with cash in the same way as they deal with electronic payments. I have seen too many small businesses treat cash as an exception and not deposit it into the banks as they should. This may be because banks are making it harder and harder for small businesses to deal with their cash by doing things like adding on “cash handling fees” which is ludicrous in my opinion - once upon a time, banks were opened with the sole purpose of keeping our cash safe.
I encourage clients who have retail businesses and accept cash to use a simple formula to determine how much cash should be set aside for depositing. Total Sales for the day less merchant totals (debit/credit cards) and less e-transfers (although I often caution them to have the customer send the e-transfer before they leave with the product) will result in the total amount of cash that must be set aside to balance out the day. Now that cash might end up in their wallet but that doesn’t mean it isn’t owed back to the business. The whole point of this practice is to make sure all cash received is documented and deposited. Thinking of each day’s sales as one big invoice can help - the money received is paying off that invoice. If the cash does not make it into the bank then the invoice remains unpaid. At the end of the year, incorporated retailers are often surprised when they have to claim a large chunk as their own income because they realize those “open invoices” represent the cash they didn’t deposit.
While it may seem like a tedious task to add at the end of the day, consistent and accurate tracking of cash sales in your business will, in the end, save you time and money because your bookkeeper will have fewer questions for you and less digging to do to account for the missing funds.