Cash Reconciliation

Cash reconciliation is considered the backbone of any company’s cash flow. A precise cash record in place is necessary for that, and for companies that run retail businesses, cash reconciliation is done daily as cash is frequently exchanged for goods and services.

What is Cash Reconciliation

Cash reconciliation is the regular process of checking and matching the cash amount in the accounting statement to the total amount in receipts and other supporting documents for the money that was spent and received. Additionally, cash reconciliation on a daily basis is essential for ensuring enough cash is available in the company's account balances that are operational in order to cover the needs of the working capital.

For companies that have retail outlets with cash registers, the cash reconciliation process begins at the end of the day after the last sale transaction, or first thing the next morning. The staff will count the cash received from the daily sales several times to avoid error, and the total amount of cash value is reconciled against the record on the company’s Point of Sales (POS) system. Once that is done, the cash is deposited into the company’s account, and the bank-in slip is filed away along with the POS printout.

A business may stop there, but they may also put in place extra precautions to prevent fraud. The company may also adopt a reconciliation method where the cash are separated by the different bills, and a report is made with the number of individual bills that were collected along with the total cash value. Management may require the retail staff to submit the report before they deposit the amount into the bank, and match the report to the bank in slip after the cash has been deposited to make sure the total amount is correct.

Cash reconciliation is considered the backbone of any company’s cash flow. A precise cash record in place is necessary for that, and for companies that run retail businesses, cash reconciliation is done daily as cash is frequently exchanged for goods and services.

What is Cash Reconciliation

Cash reconciliation is the regular process of checking and matching the cash amount in the accounting statement to the total amount in receipts and other supporting documents for the money that was spent and received. Additionally, cash reconciliation on a daily basis is essential for ensuring enough cash is available in the company's account balances that are operational in order to cover the needs of the working capital.

For companies that have retail outlets with cash registers, the cash reconciliation process begins at the end of the day after the last sale transaction, or first thing the next morning. The staff will count the cash received from the daily sales several times to avoid error, and the total amount of cash value is reconciled against the record on the company’s Point of Sales (POS) system. Once that is done, the cash is deposited into the company’s account, and the bank-in slip is filed away along with the POS printout.

A business may stop there, but they may also put in place extra precautions to prevent fraud. The company may also adopt a reconciliation method where the cash are separated by the different bills, and a report is made with the number of individual bills that were collected along with the total cash value. Management may require the retail staff to submit the report before they deposit the amount into the bank, and match the report to the bank in slip after the cash has been deposited to make sure the total amount is correct.

Cash reconciliation is considered the backbone of any company’s cash flow. A precise cash record in place is necessary for that, and for companies that run retail businesses, cash reconciliation is done daily as cash is frequently exchanged for goods and services.

What is Cash Reconciliation

Cash reconciliation is the regular process of checking and matching the cash amount in the accounting statement to the total amount in receipts and other supporting documents for the money that was spent and received. Additionally, cash reconciliation on a daily basis is essential for ensuring enough cash is available in the company's account balances that are operational in order to cover the needs of the working capital.

For companies that have retail outlets with cash registers, the cash reconciliation process begins at the end of the day after the last sale transaction, or first thing the next morning. The staff will count the cash received from the daily sales several times to avoid error, and the total amount of cash value is reconciled against the record on the company’s Point of Sales (POS) system. Once that is done, the cash is deposited into the company’s account, and the bank-in slip is filed away along with the POS printout.

A business may stop there, but they may also put in place extra precautions to prevent fraud. The company may also adopt a reconciliation method where the cash are separated by the different bills, and a report is made with the number of individual bills that were collected along with the total cash value. Management may require the retail staff to submit the report before they deposit the amount into the bank, and match the report to the bank in slip after the cash has been deposited to make sure the total amount is correct.

The Importance of Cash Reconciliation

Enhanced Control

Cash is a high-risk asset which can be easily lost or stolen. Unlike other assets like buildings, equipment, and land which cannot be easily liquidated or lost, something as simple as human errors and accidents can cost thousands in losses for a business if their cash is not properly reconciled. It is an important internal control procedure to ensure all cash collections from sales and revenue are accounted for, accurate, and safely banked into the company’s account.

Catch Fraudulent Activities

A significant purpose of cash reconciliation is to ensure accuracy and catch fraudulent activities if any. There can be incidents of cash theft, and the people responsible for the same can be thieves or anyone from your staff. This serves as a method to help defend victims of fraud, providing the lawyer with detailed records rather than depending on the memory of transactions or dealings.

Businesses can Lose the Following on a Fraud per Year Average:

As per the 2018 report of ACFE to the Nations Global Study on Fraud and Abuse,
5% of the gross revenue will be lost because of fraud.

Another report by ACFE in 2018 to The Nations, small businesses and private companies are at the top when it comes to occupational fraud frequency, which is 42% as compared to non-profits, government bodies, and corporations.

So, in order to make sure no such activity takes place on your business premises, you need to perform cash reconciliation.

Another important thing to note is that fraudulent activities are not limited to stealing cash, but also includes adjusting or manipulating the details in receipts. Aside from cash reconciliation, management should have a proper security process in place, too, like using cameras, for example, in case any evidence of recorded footage is necessary.

Enhanced Control

Cash is a high-risk asset which can be easily lost or stolen. Unlike other assets like buildings, equipment, and land which cannot be easily liquidated or lost, something as simple as human errors and accidents can cost thousands in losses for a business if their cash is not properly reconciled. It is an important internal control procedure to ensure all cash collections from sales and revenue are accounted for, accurate, and safely banked into the company’s account.

Catch Fraudulent Activities

A significant purpose of cash reconciliation is to ensure accuracy and catch fraudulent activities if any. There can be incidents of cash theft, and the people responsible for the same can be thieves or anyone from your staff. This serves as a method to help defend victims of fraud, providing the lawyer with detailed records rather than depending on the memory of transactions or dealings.

Businesses can Lose the Following on a Fraud per Year Average:

As per the 2018 report of ACFE to the Nations Global Study on Fraud and Abuse,
5% of the gross revenue will be lost because of fraud.

Another report by ACFE in 2018 to The Nations, small businesses and private companies are at the top when it comes to occupational fraud frequency, which is 42% as compared to non-profits, government bodies, and corporations.

So, in order to make sure no such activity takes place on your business premises, you need to perform cash reconciliation.

Another important thing to note is that fraudulent activities are not limited to stealing cash, but also includes adjusting or manipulating the details in receipts. Aside from cash reconciliation, management should have a proper security process in place, too, like using cameras, for example, in case any evidence of recorded footage is necessary.

Process of Cash reconciliation

The verification during the cash reconciliation process can also take place whenever a different clerk takes over a cash register. The cash reconciliation procedure is as follows:

Obtain a daily reconciliation form on which to document the cash reconciliation.
List on the form the amount of beginning cash in the cash drawer, which may be broken down by individual type of bill and coin.
Closeout the cash register.
List on the daily reconciliation form all cash collected, which, again, may be broken down by individual type of bill and coin.
Using individual cash and receipts in the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit cards.
Using the cash register, summarize on the form the number of gross sales, voided sales, and charges return to arrive at a net sales figure.
Using the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit card.
Compare the total amounts on the form for cash, checks, coupons, and credit card receipts that are based on individual receipts and that are based on the cash register.
Reconcile the differences between the two columns.
Sign and date the form and submit to a supervisor for review.
As the last step, the supervisor reviews the reconciliation form, as well as any explanations for discrepancies, and approves the form if he or she agrees with it.

Obtain a daily reconciliation form on which to document the cash reconciliation.
List on the form the amount of beginning cash in the cash drawer, which may be broken down by individual type of bill and coin.
Closeout the cash register.
List on the daily reconciliation form all cash collected, which, again, may be broken down by individual type of bill and coin.
Using individual cash and receipts in the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit cards.
Using the cash register, summarize on the form the number of gross sales, voided sales, and charges return to arrive at a net sales figure.
Using the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit card.
Compare the total amounts on the form for cash, checks, coupons, and credit card receipts that are based on individual receipts and that are based on the cash register.
Reconcile the differences between the two columns.
Sign and date the form and submit to a supervisor for review.
As the last step, the supervisor reviews the reconciliation form, as well as any explanations for discrepancies, and approves the form if he or she agrees with it.

The verification during the cash reconciliation process can also take place whenever a different clerk takes over a cash register. The cash reconciliation procedure is as follows:

Obtain a daily reconciliation form on which to document the cash reconciliation.
List on the form the amount of beginning cash in the cash drawer, which may be broken down by individual type of bill and coin.
Closeout the cash register.
List on the daily reconciliation form all cash collected, which, again, may be broken down by individual type of bill and coin.
Using individual cash and receipts in the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit cards.
Using the cash register, summarize on the form the number of gross sales, voided sales, and charges return to arrive at a net sales figure.
Using the cash register, summarize on the form the number of receipts by cash, check, coupon, and credit card.
Compare the total amounts on the form for cash, checks, coupons, and credit card receipts that are based on individual receipts and that are based on the cash register.
Reconcile the differences between the two columns.
Sign and date the form and submit to a supervisor for review.
As the last step, the supervisor reviews the reconciliation form, as well as any explanations for discrepancies, and approves the form if he or she agrees with it.

How Do You Reconcile Petty Cash?

Here are five steps to reconciling petty cash:

The reconciliation process for petty cash starts by counting up the amount of cash on hand at the end of the financial period and using this as the ending balance for the petty cash account.
Receipts are then reviewed and verified as appropriate and complete.
Every receipt is logged as a withdrawal from the petty cash fund. The beginning balance that was carried over from the previous period (day or month) plus any additional cash deposits–less the sum of all withdrawals should be equal to the ending balance.
When discrepancies occur, an investigation is required. Looking for missing receipts, examining who had access to funds, and tracking down undocumented received deposits.
In cases where discrepancies are the result of fraud, additional internal controls are designed to prevent further occurrences.

Looking for an accounting firm to help with your company's reconciliations and other bookkeeping services? Call or email us today to find out how we may be of service to you.

Here are five steps to reconciling petty cash:

The reconciliation process for petty cash starts by counting up the amount of cash on hand at the end of the financial period and using this as the ending balance for the petty cash account.
Receipts are then reviewed and verified as appropriate and complete.
Every receipt is logged as a withdrawal from the petty cash fund. The beginning balance that was carried over from the previous period (day or month) plus any additional cash deposits–less the sum of all withdrawals should be equal to the ending balance.
When discrepancies occur, an investigation is required. Looking for missing receipts, examining who had access to funds, and tracking down undocumented received deposits.
In cases where discrepancies are the result of fraud, additional internal controls are designed to prevent further occurrences.

Looking for an accounting firm to help with your company's reconciliations and other bookkeeping services? Call or email us today to find out how we may be of service to you.

Every SME Can Become Large

InTune Outsourcing - Creating Financially Driven Businesses and Entrepreneurs.

Show Me How

Every SME Can Become Large

InTune Outsourcing - Creating Financially Driven Businesses and Entrepreneurs.

Show Me How