Cash goes missing in businesses when one person is responsible for collecting it, recording it and banking it with no independent check on the figures. This is a particular risk for pubs, bars, restaurants, cafés, salons, retail shops, clubs, leisure venues and any business with gaming, vending, parking or donation machines. Cash handling controls, cash reconciliation and clear cash handling procedures help reduce the risk of missing cash, staff theft, recording errors and unreliable accounts.
In many cash businesses, the owner is not personally present for every transaction.
In pubs, restaurants, salons, clubs and leisure venues, cash often passes through several hands before it reaches the bank. It may come through tills, machines, collections or reception desks before the owner sees the figures.
The owner may only see the figures once they have already been recorded. If the process is weak, the records may look complete, but the owner may have nothing separate to check them against.
The cash taken, the cash recorded and the cash banked should all agree. Cash handling controls are there to make that check possible.
A common risk in businesses handling cash is when machine takings, till reports or daily cash records are handled by the same person who also prepares the banking.
Those figures may still add up, but only because they are based on what that person has entered. Without a second check, there is often no way to know whether what was collected is the same as what was banked.
In such circumstances a second person involved in the cash process can be crucial to reduce the risk of cash going missing
The businesses most exposed to cash recording problems are those where physical cash is handled by staff, managers, volunteers, or site teams before it reaches the bank.
This covers a wide range: pubs, clubs, restaurants, cafés, takeaways, salons, barbers, retail shops, leisure venues, amusement arcades, event venues and any business with gaming, vending, parking or donation machines. Some are still heavily cash-based, while others take most of their payments by card but still handle cash in specific parts of the operation.
In businesses where cash is a smaller part of the overall take, it can be easy to treat it as an afterthought. The owner may assume it’s not significant enough to need a formal process. But if cash is being collected, recorded and banked by the same staff without anyone else checking, a small discrepancy on one day can carry on for months before it comes to light.
Cash takings may not match bank deposits because of timing differences, recording errors, missed transactions, refunds, voids, theft or poor cash handling procedures.
Some of those differences are innocent: cash banked a day late, or a genuine mistake when cashing up. Others need proper investigation. The difficulty is that the owner may not know which until the figures have been checked properly.
Cash reconciliation means checking the cash recorded by the business against the cash received and banked. It’s a basic accounting process used to identify gaps between the records and the bank.
For a business handling cash, that process shouldn’t wait until year-end: the closer to the transaction it happens, the easier it is to work out what went wrong. If a till was short six weeks ago, most of the detail that would explain it has already been lost.
Business owners who take cash should check whether the cash received, recorded, and banked can be verified.
Start by following what happens to the cash from the point it is received.
Useful questions include:
If the same person appears in most of the answers, the process needs to be looked at. The owner should also check how refunds, voids, discounts, petty cash and adjustments are reviewed. These are common areas where records can become unclear. Unexplained differences should be reviewed while the information is still fresh, not just posted into the accounts and forgotten about.
Cash should be reconciled often enough to spot discrepancies while they can still be checked.
For many hospitality, retail, and leisure businesses, that means cashing up daily. For those businesses, waiting until month-end gives too little time to work out what went wrong.
Lower volume businesses may manage with weekly checks, but the principle is the same: the longer the gap between a shortfall and someone reviewing it, the harder it becomes to establish what caused it.
A discrepancy spotted the same day can be checked against till reports, machine readings, staff rotas and refunds. Leave it a few weeks and most of that trail has gone cold.
Cash handling affects the reliability of the accounts because the finance team can only work with the records available.
If cash takings are recorded incorrectly, the revenue figure may be wrong, and refunds, voids and adjustments can push those numbers further out if nobody reviews them. Over time, unexplained differences make it harder to tell whether the business has a trading problem, a staff issue or a weak process. That uncertainty feeds through to management accounts, VAT, Corporation Tax and any conversation with a bank, investor or buyer.
Cash differences do happen in businesses that handle cash. The question is whether the process is good enough to spot them quickly, check what caused them and record what was done.
Cash businesses get more attention from HMRC than businesses that only take card payments. For industries such as pubs, restaurants, takeaways and salons, HMRC has benchmark figures it uses to assess whether reported turnover appears reasonable for that type of business. If your numbers sit well below what HMRC would expect, that can be enough to trigger a compliance check.
If you can’t produce records to support your declared figures at that point, HMRC can raise an estimated assessment and the burden shifts to you to show they have got it wrong. VAT-registered businesses are required to keep records for 6 years, and the same applies to Corporation Tax. If cash is part of your turnover, those records need to be detailed enough to show what was taken, what was banked and how any differences were dealt with.
A compliance check is much easier to resolve when your records can show clearly what happened. Without that, even a well-run business can find itself having to prove something it cannot demonstrate on paper.
Software can help, but it doesn’t remove the need for someone to check the figures.
For example, a gaming machine may produce an electronic slip showing the takings for a period. That gives the business something to compare against the cash collected and the amount banked.
That record is useful, but it doesn’t stop cash from going missing if no one reviews it. If the takings are reported as nil, or the supporting paperwork is missing, the software alone may not be enough to show what happened.
The check still has to happen outside the system.
For a business handling cash, that might mean a manager comparing machine readings with the cash collected, or the owner reviewing a weekly record of takings, banking and any differences.
Without that review, the system may only show there was a problem after the cash has already gone.
Do the same control gaps apply to outgoing payments?
Cash controls are mainly about money coming in, but a similar control problem can appear when supplier invoices are approved and paid.
For example, an organisation with several properties may receive contractor invoices for repairs, maintenance or site work. The person approving the invoice may not have visited that site recently, so they are relying on the paperwork they have been given.
Before the invoice is paid, the person approving it should have something to check.
That might be confirmation from the site manager, a signed job sheet, photos of the completed work or a record of who requested and approved the job.
The same issue can apply in clubs, charities, property businesses and any organisation where the person approving the invoice is not the person seeing the work first-hand. If an invoice is being paid, the person approving it needs enough evidence to know why it is being paid.
A business should review its cash handling procedures when staff handle cash, when the owner is not involved in cashing up, or when cash differences keep appearing without a clear explanation.
It’s also worth checking after a change in the business. For example, a new site, a new manager, a new machine that takes cash, or a different way of recording takings.
Can someone follow the cash from the till, machine or collection point through to the bank?
If there’s a difference, can they see where it happened? If the answer depends on one person knowing the process, that’s a weak point.
Once cash has gone missing, the business is left trying to work out what happened after the event. It’s much easier to check the process before that happens.
An outsourced finance team can help with cash handling controls by reviewing how cash is recorded, checked, banked and reconciled.
That’s useful where the owner is not involved in cashing up every day, or where cash comes from tills or machines across different sites.
The owner may know cash is being taken, but not have time to follow every step after that. They may also not know what checks should be in place.
A finance team can look at the current process and show where it depends too heavily on one person, where records are missing, or where differences are not being reviewed properly.
That could mean checking the cash count against the till report before banking it, saving machine readings with the weekly records, or reviewing differences before the month-end accounts are finished.
In practice, we often find that when we start working with a new client, a process exists, but it relies entirely on one person’s understanding of how it works. When that person moves on or changes role, the process can go with them. That’s usually when the gaps start to show.
At SAS, we work as an outsourced finance team for businesses that need proper finance support, but do not need a full-time in-house team.
We can review the process, help put the right checks in place and make sure the records can be relied on.
How do I know if cash takings are being recorded properly?
Cash takings are being recorded properly when the cash received can be checked against till reports, machine readings, cash records, bank deposits and accounting records.
If only one person controls that process, the business may not have enough to check against.
What businesses need cash handling controls?
Any business that takes, stores, counts or banks cash needs cash handling controls.
This includes pubs, clubs, restaurants, cafés, salons, retail shops, leisure venues, amusement arcades and businesses with gaming, vending, parking or donation machines.
What causes cash takings not to match bank deposits?
Cash takings may not match bank deposits because of timing differences, recording errors, refunds, voids, missed transactions, theft or poor cash handling procedures.
The cause is easier to check when cash is reconciled regularly.
What should a cash handling process include?
A cash handling process should show what happens to cash from the point it is received to the point it reaches the bank.
It should make clear who records the cash, who counts it, who checks it against till reports or machine readings, when it is banked, and who reviews any differences.
The person handling the cash shouldn’t be the only person who can explain what happened to it.
How often should cash be reconciled?
Cash should be reconciled often enough to spot differences quickly. For many hospitality and retail businesses, this means daily cashing up and regular review. For lower-volume businesses, weekly checks may be enough.
What is poor cash handling?
Poor cash handling is when cash is received, counted, stored or banked without proper records or checks. A common example is one person collecting, recording and banking cash without anyone else reviewing the figures.
Can cash go missing without the owner knowing?
Yes. Cash can go missing without the owner knowing if the person handling the cash is also responsible for recording it and there is no separate check against till reports, machine readings or bank deposits.
How can a business reduce the risk of staff stealing cash?
A business can reduce the risk of staff stealing cash by separating key parts of the process, limiting access to tills and safes, and checking cash against the records regularly.
Can an outsourced finance team review our cash process?
Yes. An outsourced finance team can review how cash is recorded, counted, banked and reconciled.
They can check whether the cash records agree with the banking and whether the review process is strong enough.
Can HMRC investigate my business because I take cash?
Yes. Cash businesses attract more scrutiny from HMRC because cash is harder to trace than card payments. HMRC uses industry benchmarks to assess whether reported income looks consistent with the type and size of the business. If your records can’t support your declared turnover, HMRC can issue an estimated assessment. If your records can be followed from the point of receipt through to the bank, and any differences have been noted and checked, you have something to stand on if HMRC comes asking.
If your business takes cash and you cannot easily check that the cash received, recorded and banked all agree, the process needs reviewing.
Team SAS can review how cash is recorded, checked and reconciled, then help put practical controls in place.
If you would like us to look at your cash handling process, get in touch.
Written by Sean Hackemann, Director of Specialist Accounting Solutions. Team SAS provides outsourced finance support, management accounts, cash flow forecasting and finance process review.
