As a business owner, you are likely to be in the position of taking cash payments for goods or services. Given the propensity to handle cash payments, understanding how to manage and record cash receipts is a crucial part of your daily operations. Whether you’re running a cozy café, boutique salon, small dental practice, or a quick service restaurant, handling cash efficiently and having a good receipt tracking process are essential for record management and, ultimately, for the health of your business. With that in mind, let’s discuss methods for managing cash receipts and how the power of artificial intelligence can simplify the process.
Cash Receipts Matter
First things first, why should you bother with cash receipts? It’s simple: cash receipts prove you made a sale, ensure that your cash flow and profit are correct, help minimize theft and catch fraud, and are critical for auditing purposes. According to Kiplinger financial experts, small business owners are 2.5% more likely to be audited with an even higher risk if they are a business with high volumes of cash transactions, i.e., coffee shops, salons, restaurants, etc. And if you are audited, you need to be sure you have a foolproof receipt management process to track receipts regardless of the payment type.
Cash Receipt Qualifications:
To be considered adequate, a cash receipt must include:
- The date of the transaction
- The amount of the transaction
- Description of the service of product
- The quantity sold
- The name or company of the payor
- Whether the payment was made by cash, check, or some other method
- The signature of the payor
- A unique number to identify the document
💡Pro-tip: Train Your Team
If you have employees who are handling cash, training them is non-negotiable. They should understand the importance of accurate cash handling and be familiar with how to create a cash receipt, understand the reasons why it is important, and be provided with standard operating procedures. Without an SOP and adequate training, accountability management can be a difficult task.
Record Every Transaction
The mantra here is “record everything”. You should have proper documentation that captures transaction details every time cash changes hands. This includes receipts for sales, refunds, and any other cash inflow.
How do you record cash transactions? Well, you can go old school with manual data entry and bank reconciliation processes, or you can automate bookkeeping with accounting software to level up your game.
Old School:
- Generate a cash receipt (one for accounting records and one for customer)
- Make the entry in the cash receipts journal
- Make the equal and opposite entry in the sales journal
- Record the cash sale in the expanded cash receipts journal
💡Pro tip: Leverage AI-Powered Accounting Automation
With the risk of small businesses being audited, using automated accounting software, like Docyt’s AI-powered accounting platform is highly recommended. It’s a lifesaver for time-strapped business owners and, by far, the best way to ensure you are audit-ready.
Reconcile and Review Regularly
No one loves to review and reconcile, but it is an essential bookkeeping task and the only way you know where your cash flow stands. What you need to decide is how you want to manage this process.
Old School:
Manually reconcile cash receipts with every bank deposit slip, bank account transactions, and daily sales records. These are all crucial for having a clear understanding of your company’s financial health and help identify discrepancies early.
💡Pro tip: Use technology!
If you can use a POS system to generate receipts for cash sales, perfect! If not, cash receipts can be easily managed using receipt scanning software, like Docyt, that can scan, digitally organize, store, and track receipts. And that is just the beginning; Docyt is more than receipt management software or an app to track receipts; it’s an AI-powered automated accounting platform that can fully automate bookkeeping from beginning to end (including automated revenue reconciliation and accounting), and you can focus on the things most important to you!
Closing Thoughts
Effective cash management is more than counting money; it’s about ensuring the financial integrity and future of your business. By implementing these practices, not only do you keep your finances in check, but you will also gain valuable and comprehensive insights into the performance of your business and have defenses in the event of an audit.
Take the time to decide what system works best for you and your business. Here’s to your success in the exciting journey as a small business owner!
