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I am often asked about taking cash out of the drawer and how to report it so that we know that where that money came from out of the drawer. So I wanted to discuss managing the cash drawer a little bit more in detail and 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 in cash. So picture this 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? When they’re putting money in. Anytime that you allow for cases of people taking money out of the cash drawer, you are psychologically giving them permission to do that. And a little bit of permissions leads to more and more and more.
Second, a big case for this is that 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 days. It gets really messy and it gives a lot of excuse 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 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. And the best way to do that is to eliminate all possible reasons why someone would have their hands in the cookie jar except to give change to a customer.
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, lets eliminate that. You know the window washers coming, put a check in the cash drawer that’s written out, pre-made, to the window washer for the $10. And when he comes to do the job, have your staff give him the check. You also now have a built-in receipt when that check gets cashed to know that you had that expenditure. It also gives you proof to the IRS as standpoint in case you’re ever audited, that you did pay that expense.
Third, never ever, as an owner, take 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 up, one other tip, remember that when a customer pays by credit card, if you have to give any refund or any adjustment 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 why we had to dip our hands into that cash drawer unless a customer is directly in front of them and getting 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. If I ring a customer up I got a five dollar 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 five dollars off, it’ll 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 might take you a long while to realize it. And if one employee does it and doesn’t get caught, guess what? You’re almost giving permission to other employees to do the same thing.
I find that by grouping the tips and they’re larger and paying them out through payroll. First off, you’re accomplishing the right tax consequences. Secondly, it’s more like a bonus because it’s a bigger number. No one really gets excited about a two dollar tip, a five dollar tip, but if they’re getting $50 in tip, yay. That is something to celebrate. So it makes you as the owner look better in 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. If you do have to have an emergency payment 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 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. Thank you very much and I hope this helps. Have a great day.
At PYOP Accounting, we specialize in working with PYOP and Ceramic Arts Studio Owners throughout the USA. Our industry knowledge is focused on taking the headaches out of accounting and helping you grow your studio’s value using specific metrics for the PYOP industry. Don’t you owe it to yourself to see how we can help you? Schedule a complimentary chat with us today at www.pyopaccounting.com/meet.