Cash Handling 101
Obviously it’s much more convenient when a client is paying for your services with a card or their digital wallet, or ahead of time, but there is still a small pool of clients that wish to pay in cash. There are several aspects of accepting cash payments that you need to consider such as reporting that cash income to the government or how much money you will need on hand in order for your business to run effectively. So if you handle a lot of cash at your location, we’ve got a few suggestions for you.
Be Transparent About Your Payment Policy to Customers
It’s important to be straightforward with your clients about your payment policies. Not doing so can significantly impact the clients’ experience at your establishment. Whether you do or don’t accept cash, offer special payment methods, or a minimum must be spent on a card, whatever you policy may be, let customers know up front.
You can do this by posting your payment policies on your website, your social media pages, including them in your confirmations, and clearly displaying them at your front desk. Let your clients know prior to performing services so they can come prepared beforehand. Answer all questions to avoid any confusion about your preferred payment policies.
Log Every Transaction
No matter the size of the transaction, record it. Small transactions maybe a hassle to record but they do add up quickly and can create major bookkeeping issues for you. Luckily a nabooki journal will give you a clear picture of the services you performed that day for you to keep track of what you charged for.
You are required by the IRS to track every business transaction and then report them on your tax return. By not recording low-value transactions, you run the risk of inaccurate accounting records which can lead to filing your taxes incorrectly.
Avoid this by making sure the is a line for every cash sale in your ledger. Describe what it was for, the value, and the date, NO EXCEPTIONS. Look into using accounting software to make your life easier.
Save All Receipts and Bank Statements For Your Records
If you think that you only need a ledger to manage your finances, you are mistaken. It is important that your documents line up with your records when handling cash so make sure to keep all receipts and statements linked to your sales and expenses.
Stay organized by creating some sort of management system: filing hard copies or even scanning and storing on your computer. Whatever works for you and your business, just remember to be consistent!
Set Up a Petty Cash Fund
When you run a business, there are going to be small purchases each day that will need to be made, it just comes with the territory. While using a business credit card might seem like a good idea, it’s not always the best option. This can lead to an overdraft situation and/or more credit card debt.
It might be wise to set aside a petty cash fund for some of these necessary small business purchases. Petty cash transactions will still need to be tracked and recorded accurately. Keep petty cash transactions separate from all other business transactions.
Keep Your Cash In The Bank
With all that cash on hand, it may feel like your access to business income instantly. No more waiting for credit cards to process or checks to clear, right?! Well, your impatience has created a whole new series of problems for your business such as cash being stolen, lost or damaged. Keep your cash free from harm by making bank deposits regularly to an account that is used for business sales ONLY.
The cash that will be kept in your drawer or onsite should be balanced each day. Always begin the business day with a base amount, something appropriate for you client size, so that you will be able to make change if needed. Add the end of the day, subtract your base amount from your drawer and deposit everything else into your bank account. Yes, I said everyday.
While the paper or plastic debate continues, you will know how to efficiently and legally manage all the cash payments your business receives.
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