I am often asked about taking cash out of the drawer and how to report it so that we know that where the money came from out of the drawer. So, I want to discuss removing cash from the cash drawer a little bit more in detail. I want to first off say, this is going to be more of a public service announcement than a technical way of doing things.
First, I like to eliminate any excuse to take any cash out of the drawer. The only method of taking cash out of the drawer should be to give a customer change who has paid with cash. For example, as a studio owner, if you are looking at a camera that is directly over your cash register and you see an employee go into the drawer, when is the only time you want to see them take money out? It is when they’re putting money in! Plain and simple.
Any time that you allow for cases of people taking money out of the cash drawer, you are psychologically permitting them to do that. And a little bit of permission leads to more… and more… and more. Secondly, a big case for this is there is no tracking at all on what cash comes out of the drawer. Even if you are meticulous about writing little petty cash slips like we used to do in the old day! It gets really messy and it gives a lot of excuses and leeway to employees that lead them into things that you will not want. Some employees will take advantage of things if it’s out there; and, some may not. But the cashier may see another employee do it and; then, one thing leads to another and you’ve got employee theft issues. We want to steer completely away from that as much as possible and prevent any issues of potential employee theft.
The best way to do that is to eliminate all possible reasons why somebody would have their hands in the cookie jar – except to give change to a customer. So first off, I’ll hear answers like, “Well, I have to pay the window washer and I pay him in cash every week. It’s only $10!” All right, let’s eliminate that. You know the window washers coming, put a check in the cash drawer that’s written out, premade to the window washer for the $10. And when he comes to do the job, have your staff give them the check. You also now have a built-in receipt. When that check gets cashed, you’ll know that you have that expenditure. It also gives you proof to the IRS standpoint (in case you’re ever audited) that you did pay that expense. Thirdly, never…. Ever, as an owner take withdrawals (or “draws”) out of the drawer. It again gives your employees psychological permission to do the same thing and we don’t want to do that.
Next step and one other tip: Remember that when a customer pays by credit card, and should you have to give any refund or any adjustments at some point in the future; that should go right back on the credit card. It should not be paid out in cash! Again, we don’t want any excuses. We have to deter any hands into that cash drawer unless a customer is directly in front of them and giving that cash back.
And lastly, a big one is Tips. I strongly suggest that every tip payout go through an employee’s payroll. Again, several different psychological issues here. For example, If I got a $5 tip (I used to own a hair salon), I know what happens, I’ll just pull five bucks out. Even if I didn’t get the tip and all of a sudden, the drawer is only $5 off, it would be okay, and then next week it’s only $10 off. It’s only $50 off. And this leads down a psychological path and depending on how strict of an owner you are, it may take you a long while to realize it and if one employee does it and doesn’t get caught, guess what? You’re permitting other employees to do the same thing. Also, I find that by grouping the tips together; they’re larger. Paying them out through payroll, you’re accomplishing the right tax consequences. Secondly, it’s more like a bonus, because it’s a bigger number. Nobody really gets excited about it if it’s a $2 tip, a $5 tip. But if they’re getting $50 in tips, Yay, that’s something to celebrate. So, it makes you as the owner look better and that they’re getting a bigger paycheck too.
So, do yourself a favor. Look at anything that comes out of your cash drawer and find a way to eliminate that. It will do you so much better and less record keeping, less hassle, and then you won’t even have to ask me how to report those things. And if by chance, you do have to have an emergency outbreak of something that has to come out of that cash drawer; the best way to report it to us is just shoot us an email and let us know. Or even just respond to that monthly email that you get on the first of every month that tells you to tell us if there’s anything important we need to know.
I’m here to help.
CPA with PYOPAccounting.com.
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Image by Charles Thompson