How to Track and Document Cash Payments for Local Service Businesses
Handling cash payments can feel like a headache, but properly tracking and documenting them is essential for keeping your bookkeeping accurate and your business running smoothly. Here’s a simple process for local service businesses to make cash tracking manageable, whether you’re a solo operator or running a larger company.
When dealing with cash payments, it’s essential to prioritize security. Make sure all cash drop locations, like envelopes or safes, are stored in a secure, locked area to prevent theft or loss. Only allow trusted employees to handle cash, and consider having two people verify amounts during collections and deposits for added accountability. Take the necessary precautions to protect your business and maintain accurate records without unnecessary risks.
Why Tracking Cash Payments Matters
The most important information to track is:
Who the money came from (the customer).
The amount paid.
This ensures you can easily match cash payments to invoices and deposits later. The way you document cash depends on how you handle bank deposits:
Separate deposits: Each payment is deposited individually.
Bulk deposits: Multiple payments are combined into a single deposit.
If you’re making bulk deposits, be sure to note which customer paid what amount—this step is crucial for keeping your records straight.
Recommended Processes
For Single-Owner/Operator Businesses:
Keep it simple with an envelope documentation system:
Envelope system:
Dedicate one envelope for cash payments.
Each time you receive cash, write the amount and the customer’s name on the envelope. Think of the envelope as a mini-bank, with the front serving as your transaction log.
Record deposits:
When depositing the cash, confirm the total amount.
Write the total on the envelope, snap a picture, and send it to your bookkeeper.
This ensures they have all the details needed to reconcile your books accurately.
For Larger Companies with Employees:
If you have employees collecting cash, here’s a process to keep things organized:
Daily cash collection:
At the end of each workday, cash payments are dropped at a designated location (e.g., a safe or secure box) in your office.
Morning reconciliation:
The next morning, an administrative assistant counts the total cash.
They compare it to invoices marked as "paid by cash" from the previous day.
Identify discrepancies:
If totals don’t match, the admin should follow up with field staff to resolve the issue.
Discrepancies could result from missed invoice updates or incorrect payment methods. Addressing these mistakes quickly helps staff stay mindful of proper procedures.
Prepare for deposit:
Once confirmed, the total cash amount is placed in a secure location for deposit.
The admin sends a detailed record of payments to your bookkeeper to ensure everything matches in the books.
Final Thoughts
Whether you’re running a solo operation or managing a team, creating a consistent system for tracking cash payments will save you time and reduce stress. By keeping accurate records and staying organized, you’ll not only make your bookkeeper’s life easier but also have a clearer picture of your business finances.
