I know. Cash transactions are an inherent part of your business, and you just accept the fact that your cashiers will make occasional errors when making change.

If there is more money in the cash register at the end of the shift than there should be (your cash receipts journal will indicate this), you have cash “over.” If you monitor this account on your financial statements and during your company’s last reporting period, net overages are greater than shortages, it will appear as a negative amount under “expenses.” This amount will either have a minus sign in front of it, or be surrounded by brackets.

Few business owners and bookkeepers pay much attention to this account, since it is generally immaterial in relation to total expenses, or as a percentage of gross revenue. This is especially true when cash is “over.” This could be costing your business more than you think – especially small businesses. I will explain in a minute.

I have lived in Kitsap County my entire life, and my commute and nature of my job requires me to travel extensively throughout the Puget Sound. While attending high school and college, I worked for six years as a retail grocery clerk. Back then, “scanners” were still in the development phase, and fast food restaurants didn’t have pictures of hamburgers on the keyboard. Where I worked, accuracy at the check stand was key in maintaining customer confidence, and all clerks were trained on how to properly count back change.

Just about every day I engage in a cash transaction at the espresso stand, convenience store, movie theatre, or restaurant. Every now and then, I am handed a wad of bills and coins and the employee will say, “Nine dollars and thirty-six cents is your change.”

“Are you sure?”

“Well, that’s what the cash register says.” They think to themselves. I just smile and walk away.

Are your employees trained to count back cash? I am not talking about fanning the bills and coins and saying “nine dollars and thirty-six cents,” but rather starting from my total of $10.64 and counting back up to $20.00. If your employee handed the customer too much change, how many do you think are honest enough to say, “You gave me too much change.”

Like the proverbial leaky hot water faucet, or poorly insulated window, this problem could amount to significant dollars over a period of time, especially if you are adjusting shortages through “sales.” A modest ten dollars a day becomes $3,650 per year. You get the picture?

Have you ever experienced this? After counting back the change, the customer says to your clerk, “I handed you a fifty.” If the cash register is already closed, this puts you, your customer and employee in a “no-win” situation. It’s their word against yours, and sometimes it’s easier to pay them the additional change than to further embarrass your employee by closing the till and counting the money right then and there.

The mysterious purple paperclip.

As I mentioned earlier, if your business more often experiences cash “over” than “short,” you may potentially have a serious problem. How likely is it that a customer will not notice that they have not been given the proper amount of change back? Therefore, cash “over” should rarely occur, if at all. So how does this happen? Here is one reason.

“Skimming” can be described as the removal of cash prior to its entry into the accounting system. According to Joseph T. Well’s book, “Occupational Fraud and Abuse” (1997), skimming sales account for 64.2 percent of all skimming schemes. Here is how it typically works. Your employee sells a pack of cigarettes, mocha, or a dozen doughnuts. He has become really good at counting back change, so instead of entering the amount in the cash register, he merely hits the “no sale” key (I see this as a consumer several times per week).

Everything else is business as usual, except for the fact that the transaction is not entered into the accounting system. This employee is very clever. Near the end of his shift, at a time where there will be no other co-workers around, with his back to the surveillance camera, he will wait for that moment where he can discretely cash in on his bounty. But to avoid tipping off the boss (since you read this article), he has to take everything that wasn’t entered into the cash register. Therefore, he has to have some sort of device close by which allows him to tally the total amount skimmed. A note pad with dollar figures would be too obvious. You know that extra slot in the cash register just to the left of the pennies, nickels, dimes and quarters, full of colored paperclips, rubber bands and push pins? These all make for a crude, but effective abacus. Other devices include crossword puzzles, M&M’s, and checkstand displays.

The problem becomes apparent when the money is skimmed, but the employee for whatever reason is not able to take the cash. Cash over. Bingo!

“Voided sales” are another form of skimming, although more risky since there is a record of it in the accounting system’s cash receipts journal.

What can you do?

• Before you even hire an employee, check their references.
• Train all employees to properly count back change to
  the total amount of cash or check the customer tendered.
• When the cashier takes currency from a customer, they
  should put it on top of the cash register in plain sight
  until the transaction is completed, and the customer is
  satisfied with his change. Only then should the bills be
  placed in the cash register and closed.
• Check your cash receipts journal regularly for an
  unusually high number of voids or refunds.
• Make it a policy to keep the cash drawer clear of
  everything, except for cash.
• Establish a policy where the consumption of food
  and beverage at the checkstand is prohibited.
• Keep the area around the checkstand neat, clean,
  and free of clutter.
• Post a policy at the checkstand that if the checker
  does not give the customer a receipt, the customer
  receives a free mocha, doughnut; discount coupon,
  or other nominal item.
• Consider investing in surveillance cameras. Emphasize
  to your employees that this is for their safety, and not
  a matter of distrust.
• If you own a restaurant, account for all numeric Guest
  Checks, and compare the total of Guest Checks to the
  daily cash receipts journal.

   Espresso shop owners can take a beginning and end of day inventory of coffee cups to compare the relationship of cups consumed to the sales journal.

Establishing these policies will not eliminate the potential for theft, but they can certainly reduce the likelihood. In addition, some of these will enhance your customer’s perception of your company’s professionalism!

(Editor’s note: Chris Mutchler is a Certified Public Accountant and a Business Development Specialist with the Firm of Southard, Beckham, Atwater and Berry, CPA, PS. in Port Orchard. He is a speaker at their Businesses Getting Results programs and can be reached at (360) 876-4491, or cmutchler@sbabcpa.com).