Cash Management Mistakes By Cash n Carry Stores & How to Avoid Them
Cash Management & Cash n Carry Businesses
For successful cash management of your retail business, it is important to follow specific procedures for cash flows at the start and end of each business day. There are two types of closings you need to make to keep your cash in hand and system cash in sync and streamlined. Choosing the right retail management system is important, and equally crucial is following regular practice of cash closings.
Many retailers, especially those running cash n carry stores, face issues in cash management because of certain wrong practices. Let’s first have a look at what functions are performed and how cash is handled during the closings, we will then focus on the mistakes that can negatively impact the cash management at your store.
POS TILL CLOSING OR SHIFT CLOSING
Cash and carry businesses, generally speaking, have long hours. The workday at a cash and carry store is usually about 12 to 14 hours. This is the reason the sales throughout the workday happen in shifts. Each cashier while starting his/her shift receives the opening cash and closes the shift by leaving opening cash for the next shift.
The following actives are carried out at POS Till:
Receiving of opening cash: Opening POS cash or cash float is the amount in the cash drawer at the beginning of the shift. The purpose of the cash float is to keep some cash handy to make change for customers who visit the store early in the day and prefer to pay in cash. Sometimes, cash is received multiple times during the active shift
Skimming cash: In businesses like cash and carry stores where the customer footfall and the number of invoices is much greater than other businesses, cash from cash drawers is skimmed during the active shift when your drawer cash exceeds a certain pre-defined amount. Skimming precaution is taken to avoid the chances of theft. Such cash is handed over to the owner or the manager to stash it in a safe place or deposit it in the bank.
Like cash received during the active shift, skimming of cash can also happen more than once during the active shift.
Closing the POS Tll and leaving opening cash for the next Till: POS or cashier closing takes into account all the shift opening balance, cash sales, and skimmed cash. The cashier who closes the POS will count the cash drawer cash, hand over the amount to the manager or the owner, and leave some cash as the opening balance for the next shift.
DAILY CASH CLOSING OR SHOP CLOSING
At the end of each business day, shop closing or day-end closing is carried out to determine your total inflows and outflows of the day. Regular day-end closings ensure that there are no discrepancies in the accounts and cash in hand matches with the system cash.
The following activities are carried out in the day-end closing:
Report of all POS Functions: all sales and returns carried out during the shifts are totaled.
Expense Management: All expenses made during the day like shop expenses, vendor payments, entertainment expense is accounted for.
Tallying of Inflows: All inflow in the bank through credit sales are tallied and accounted for.
Tallying of cash-in-hand with System Cash: All cash including opening cash, cash sales, and other received cash is tallied with the actual cash in hand.
Opening Cash for the Next Day: After leaving some opening cash for the next day (to serve as pos opening cash) the rest is submitted to the bank or stashed away.
CASH MANAGEMENT MISTAKES
Now that we have taken a look at the various activities that are performed during the POS and shop closings, let’s learn about the mistakes that retailers normally make in cash management and how we can avoid them.
Manual POS closing
The biggest mistake that cash and carry stores make is not properly closing the POS Till in the system and manually handing over the float to the next shift. Some of the problems that manual pos closing lead to are:
Chances of Human Error
When you manually close the till and hand over the cash for the next shift, there is always a chance of human error. Over and undercounting of sales cash can happen. Moreover, since the opening cash is also received manually, errors in accounting for the opening cash or correct count can also happen. sometimes, cash is received multiple times during the shift such errors will then be carried forward from shift to shift distorting the exact cash flow picture.
Skimmed Cash can be Missed
As mentioned above, in businesses with multiple shifts, like cash and carry stores, cash skimming is a common practice after a certain amount collects in the cash drawer. If cash closing is done through a system, the cashier can record the skimming or cash via the cash skimming button on the pos closing screen. While skimming through the system, the cashier can also get a printout of the skimmed cash and get the receiver’s signature on it. Moreover, the date and time of skimming or receiving additional cash during the shift is also automatically recorded in the system.
If the cash is not skimmed through the system, the cashier may fail to account for the skimmed cash thus creating an erroneous cash situation at the end of the sift.
Manual Recording of Credit card and other Modes of Payment Sale
Another wrong practice is to manually account for credit card sales. What happens is that the sale amount is recorded and counted as the amount received but since no actual cash is received, the system and physical cash never tally.
To avoid all the above-mentioned mistakes, make sure to perform regular shift and day-end closings through the system. Avoid manual cash management.
Also check: Five Ways to Secure Your POS Against Theft
Day-End or Shop Closing
POS closing mistakes are carried forward
Since the day-end closing is carried out at the end of the day and includes the report of all POS sales & returns, all mistakes made while doing manual POS closing are carried forward to the Day-end closing.
Inflated Cash Out-Flows Due to Negative Vendor Payments
The inventory turnover in Cash and carry businesses is usually high and thus frequent vendor payments. One of the biggest mistakes that retailers make is to make vendor payments in cash without first receiving cash in the system. If vendor payments are made in cash, the system will show minus cash inflows and inflated outflows. And the end of the day report will show negative cash not tallying with the cash in hand.
The right way to manage vendor payments is to first receive the amount from the owner/head office for making vendor payments and enter that amount in the system. Once the amount is entered only then enter the GRN on cash and receive stock.
Similarly, all extra day-to-day expenses should be entered into the system to have a better idea of your daily sales and profit and loss.
It is easy to see how manual cash management can show an incorrect cash picture. Regular shift closings through the system, keeping track of vendor payments other expenses, and daily Day-End closings can help you keep your system and physical cash in sync. Proper cash management through the system can save tons of time that is wasted while doing month-end cash reconciliation.
Do you perform POS Shift closing and Day-End closing through the system? Do you perform closings regularly? Let us know in the comments section below.