How to handle cash in a business

business.gov.au describes cash as useful for low-value items, or where other payment methods are unreliable, and notes that some customers prefer it for privacy. It is also frank about the drawbacks: cash is easier to steal while it sits outside the bank, and payment mistakes are more likely.

A card payment is recorded by the card provider and the bank whether or not anyone records it in the business. A cash payment exists in the books only if someone records it. Accurate records of every cash and electronic transaction head the ATO's list of tips on common record-keeping errors.

• Put every cash sale through the register or point-of-sale system, or a numbered receipt book where there is no register.
• Offer a receipt with each sale. business.gov.au calls it good practice to offer receipts at the time of sale, whatever the amount.
• Keep the drawer closed between authorised cash movements. Record the reason whenever it is opened for a sale, refund, float change, cash lift or cash out.
• Don't alter or delete recorded sales; fix a mistake with a void or refund that is itself recorded, with its reason. The ATO gives electronic sales suppression tools as an example of changing records in a way its rules don't allow.

When one person takes the cash, counts it, records it and banks it, a shortfall can be covered in the records and nobody else would see it. Splitting those jobs means each person's work is checked by someone else's.

In a very small business one person may do several of these jobs. Then the owner taking on the checking roles, even briefly each week, gives some of the same protection.

• Bank regularly. business.gov.au's advice is to avoid letting large amounts of cash build up, which lowers the theft risk.
• Lift cash from the drawer to a safe during busy days, with a slip recording each lift.
• Keep the safe locked, with as few people holding keys or codes as practical.
• Use a fixed float for each drawer, so the expected cash is easy to work out.
• Keep staff's personal money out of the drawer and away from the count.

• Paying bills out of the takings. Use petty cash, kept separately, so the takings can be checked against sales without adjustments.
• IOUs, loans to staff or cashing personal cheques from the drawer.
• The owner taking cash from the drawer without a record. It still needs recording, and which owner's account it goes to depends on the business structure, a question for your accountant.
• Mixing petty cash and takings in one container, so a gap in one can be covered by the other.
• Opening the drawer without a sale, or voiding sales, with no reason noted.

• Cash up every drawer at the end of each day, from the opening float through every recorded movement.
• Match each banking to its deposit on the bank statement. The ATO's tips call for cash sales to be checked against outside records on a regular cycle, whether that is daily, weekly or monthly.
• Count drawers or the safe now and then without notice.
• Keep a running record of each drawer's shortages and overages, and look at it monthly.
• Treat any figure that won't add up as a prompt to look for the error, as the ATO's tips also advise.

Handing cash duties to staff, a manager or a bookkeeper doesn't hand over the responsibility for the records. The ATO says the business owner is accountable for understanding the record-keeping obligations, and keeps primary accountability even when the duty is given to someone else.

Keep the register reports, cash-up sheets, safe lift slips and deposit records together for each period. These are the business's income records, and business.gov.au expects them to be kept, in most cases for 5 years.