Paying with paper money may be going out of style, but accepting it as payment is still a necessary evil… and a real danger for retail businesses. Unlike credit and even check payments, you have no proof of the cash you have on hand and no way to replace it: once its gone, its gone! Because cash is irreplaceable, good cash handling procedures can reduce the risk of loss — both accidental and malicious.
Here are the six golden rules that will safeguard and streamline your cash handling procedures.
- Make daily bank deposits mandatory — and predictable. Daily trips to the bank are inconvenient and easy to postpone, but the longer you delay making cash deposits, the more you expose your business to the risk of loss, robbery, and employee embezzlement. To reduce this risk, create a written accounting process manual, emphasizing all of the mandatory cash handling procedures that all employees are to follow. Specify when cash is to be deposited at the bank, the maximum amount of cash you’ll keep on hand and who is authorized to remove cash from the store.
- Minimize cash on hand. How much cash you need to keep on hand depends on the volume of your business’ daily cash transactions. Use your monthly cash sales volume history as a guide in determining the adequate amount of cash you need to make change with customers and support any petty cash needs for your business. Once you arrive at an amount (probably between $200 and $1,000), include the specific figures in your accounting process manual and enforce periodic counts to confirm the balance. Particularly during busy seasons, for example, your may need to count point-of-sale drawers throughout the business day (out of sight of customers of course), and potentially make additional bank deposits.
- Limit the amount of change you provide. Place signage at the point of sale stating the denominations of bills you can accept from customers and how much cash (if any) will be issued for returns and price adjustments. Such cash management policies can also encourage customers to use forms of payment other than cash, and can protect you from counterfeit bills.
- Know the people you hire. One out of every 40 employees has been apprehended for internal theft from an employer, according to the Jack L. Hayes 28th Annual Retail Theft Survey. Before you hire any employee, conduct a thorough background check (and perhaps a credit check) so that you are aware of any history of financial misconduct. Contact employees’ former employers to discuss whether they had exposure to tasks that required a degree of trust, including access to sensitive data, cash or similar business assets, and how they handled them.
- Use tools to act as your eyes and ears, and for safekeeping. Video surveillance equipment installed outside of your business and around the point of sale can act as a powerful deterrent against theft. It also ensures you have visual proof to support police reports, and enables you to more easily document cash-related theft for insurance claims if a crime occurs. Tools such as in-store safes and portable fireproof cash boxes also can increase the accuracy of cash counts, with specific amounts verified and placed in the box until the daily deposit is made. A lockable cash box also helps ensure safe transport to the bank.
- Encourage teamwork. Just as you don’t want to lose cash, your employees don’t want to be held accountable for issues related to it for which they aren’t at fault. Design your cash handling procedures with the “buddy system” in mind: Require that at least two employees verify accuracy when they count cash in point-of-sale drawers, and record cash-on-hand amounts once business closes for the day, and before it opens the next morning. If there are discrepancies about the amount of cash on hand, specify the minimum variance allowed (for example, $25) before employees must immediately report the issue to management for investigation.
Strong cash handling procedures are a minimum requirement for running any consumer-facing business. And while it may require some additional time to ensure you have effective cash management processes in place, it’s worth the effort to protect your business from unnecessary financial loss.
With over 25 years in the commercial security industry, Mark Essig is the president and CEO at FireKing Security Group in New Albany, Indiana.
photo credit: lakelandlocal Oxford Lumber 1930s Cash Register via photopin (license)