There are some that want perfection, so how to we get perfect history? We go back and reconcile each day. It is important to mention that there are other ways to fix your cash clearing and it is a good idea to fix it properly. So how can I really go about this and what options do I have.

Painting a picture: You have 1 year of activity, and have come to your first year end. You realize that you have not done a deposit journal entry all year and have not reconciled the cash clearing account yet.

First things first: “take a breath, we can get this under control”. This is not an insurmountable problem. If we forgot to make some entries, we make the entries. If things don't add up, we double check them and find the mistake, or if we turn away from cash clearing perfection we adjust things back to correct. There is always light at the end of the tunnel.

Cash clearing reconciliation is the reconciling of recordings of the flow of money that comes into your company. Here is that flow

• You make sales and the tendered amounts are placed into the 1020 (Cash Clearing) account.
• At the end of day you count your cash, reconcile the monies taken in by doing counts and comparing that to the sales recorded in your system.
• Then you make a journal entry to deposit the money in the bank. It comes out of 1020 (Cash Clearing) and goes into the Bank (Usually 1010).
• Then you reconcile the 1020 account against its control measure. This is another way to say that you check to see that after the deposit it “clears” out to 0. That's why it is called a cash clearing account.
• Then you reconcile the monies deposited within System Five to the bank against the bank statement.

Tendered monies must be really important to our business if we reconcile our activity after each task. In System Five we use the POS Transaction report to reconcile monies taken in for the day. We reconcile the cash clearing account by checking the balance of the cash clearing account against the $0 amount by reviewing the balance sheet. We reconcile the bank using the bank reconciliation reporting in System Five.

Start by opening up your deposit book and entering every one of the deposits to your bank account. Please make sure that the date is the date the deposit was for, not the date it cleared the bank.

Ex: if I made a deposit for monies collected 
January 31st, 2010, but the money cleared the 
bank on February 5th, 2010 I would need to date 
the transaction for January 31st, 2010.

I would recommend doing deposits for the first month, and then going on to the subsequent steps until we have finished of and closed the books for the month.

If we were closing out POS Transaction reports each day we should see a POS transaction report for that day. The information on this should match our deposit. Then when we look at the GL activity for the 1020 (cash clearing) account we should see that the year to date (YTD) total comes to $0. if not we then have to find out what the discrepancy

The specific process to finding a difference in that day would be to do a line by line comparison of the transactions on the POS Transaction report for that day against the GL account for that day until you discover the difference.

• Export the transaction tab of the POS Transaction report to excel
• Export the GL activity for the same period to excel
• Sort them the same and do a comparison until you find all of the discrepancies.

You may find that a transaction has been voided, deleted, or changed. It may have been re-dated, or even had the values changed. Sometimes instead of doing a return clerks have been known to go back and remove the item from the original invoice. On a cash invoice the difference on the invoice is then automatically given back in change. Looking into all transactions is important.

TIP: If you notice a date on the Transaction tab of the POS Transaction report that does not match the date of the report, you may have found the problem. Someone may have back dated or post dated a transaction and thereby its tender.

The first thing to remember when deciding how to fix an issue is recognizing the primary purpose of System Five. To record the activity that actually happened. This often requires you to find out what really happened and adjust the entry to match the actual activity. If you don't know, you may have to do some research. System Five allows you to track down certain information, but sometimes you will have to come up with the answer outside System Five.

Once you have identified the discrepancy record it on the transaction in System Five. If for example a transaction had been accidentally voided, re-enter the transaction.

If you can not find the discrepancy there are alternatives you can pursue. If you have or create a Cash Clearing Holding Account, you can make an adjustment to get the cash clearing account to $0 for that day, and now the Cash Clearing Holding (1021) account will hold the balance. The benefit to this method is that you can see how far you are out by reviewing the 1021 account, but still be able to see exactly which day new problems happen.

What do you mean new problems? Well, lets say your cash clearing account is in check and has been for the last 30 days, but the previous year is a mess. If a transaction for $50 is voided in the last 30 days I can go back to the last day I was at $0 for the end of the day, and the next day is out $50. The day out $50 is the day my voided invoice is in. If a transaction for $50 is voided 6 months ago it is a different story. I can go back to 30 days ago and I am out. But previous to that there is a mess, so all I really know is that one of those transactions over 12 months has the problem.

So do you want to review 1 day worth of transactions or 365 days worth of transactions to find the problem? There are other methods, but this is an extremely useful way that doesn't require you to have advanced accounting and System Five skills just to figure out the problem.

Reconciling the Bank is the final step that verifies that you did all your deposits correctly. In doing the bank rec you will find out if your bank rec adds up to the actual balance of your bank account. If it matches your bank statement and all days come to $0 in the cash clearing account, and we have matched up our deposits to the activity for the day (POS Transaction report) then we can close this period.

• Here is a link to a search for the bank rec topic: click here for search
• A good article on handling Bank Rec Problems bank_rec_problems

In the sections above there is a paragraph that starts off with the bolded phrase What do you mean new problems?. It describes how getting every day to $0 makes reconciling future problems easier. So what if we we don't deposit every day, what if we deposit every week. See topic below…

This section runs like an FAQ for problems that you might be having with cash clearing reconciliation. In the end you can also look at it as, what am I missing, because each section describes a way to do things that actually records what you actually did, or suggests changes to the way you are doing it.

It is not such a bad thing to deposit weekly as long as you come to $0 every deposit day. It is also good to have that be the same day of the week, so you always know when that is. It is also good to make sure you always deposit 100% of the amount collected. But this doesn't always happen.

The cost of depositing weekly, but doing everything else right is that when something goes out you have to compare 7 days worth of activity instead of 1. This can work though as long as the volume is not too high. What might work better though?

Since you only deposit once a week, you should only have to create a deposit journal entry once a week. As a technician, and accountant I agree with you. Here is the catch: the amount in the 1020 cash clearing represents the total amount in the tills at this time. What that means is that if you take that money out of the tills and put it somewhere else, you have not recorded that entry. If we do close the end of the day and reconcile the days activity, and do put that money in the safe that is really similar to doing a deposit except that the money goes to the safe. The account for the safe on your GL would usually be called “Cash on Hand” and it could be 1025 or another available 1000 level GL account.

The deposit could look just like the bank deposit, and would clear out your cash clearing account to $0 each day if properly entered. This would allow us to step us up a notch closer to 100% Perfection. Then at the end of the month our deposit to the bank would take the money out of “Cash on Hand” (1025) and put it into the bank. Now that is much cleaner, but still allows us to deposit every week.

This is not for everybody, but is one step that can take you 1 step closer to having control of your cash clearing account. Remember: if it doesn't come to 0 then it isn't really a cash “clearing” account.

If you decide to keep money back for other purposes like coffee and donuts, or more noble things that is OK. You just need to properly record this. Most companies have a petty cash account to track petty cash and expense it appropriately. If you keep cash for bills etc and pay them, then that cash needs to go to petty cash, or cash on hand. Please see section above for information on using cash on hand.

The total tendered amount for the day needs to go somewhere, it really is just a job of knowing where it goes.

When your float is constantly changing it makes it may seem difficult to reconcile your cash clearing account. To take care of the needs of your float, you may find it useful to have its own account. If I create an account 1035 (Float) and I have a $200 float that changes to $225 I do need to take action. If I do my deposit and ignore the float difference there will be $25 left in my cash clearing account. If I include the float difference in my deposit the cash clearing account will come to $0 and the float account will increase to $225.

If you don't do your deposit journal until the next day that again is OK. It is just that you need to correctly enter the activity from the previous day. If my staff handed in their cash drawers then that needs to be recorded with the date that they handed them in. Even if you don't count them till the next day, and do the journal entry at the end of the week.

The journal entry for removal of cash from the till needs to be dated for when it was removed. As in the sections above, we just need to know which account to put that money to. Cash on Hand is a common account for this as it represents the safe that the money is usually deposited to.

Please don't be offended by this, but the answer is and always is “CLOSE IT ANYWAY” if you can't find a problem and fix it, please don't mess up and ruin your next day. This is particularly important if the problem is only that the POS Transaction report is not reporting the correct values due to an error in recording the amounts actually used on the transactions.

Does this still sound scary? if so, please consider this. If your POS Transaction doesn't add up; if it is out by a wildly huge number; and if your deposit brings your 1020 account to $0; then you only need to know that the cash clearing comes to $0. The fact that the cash clearing report missed recording a value, double recorded a value, or glitched out and posted a ridiculous value will not effect your books. You reconciled and are OK. You can sort out the problems with the POS Transaction report at a later time.

If there are real problems being referenced by the errors in the POS Transaction report but you can't figure it out, you still close the report. You can always go back and make adjustments. There are ways to minimize the effect of these adjustments on your next days POS Transaction reporting as well

If you have a non POS machine that does not have a cash drawer, you can do the cleanup at that station. When you do your end of day and make sure everything adds up, you make sure you uncheck this terminal. This filters out the activity from this terminal.

WARNING Using this separate terminal to figure out your reporting is great, but if you don't close all the terminals together the terminal will be out of Synch with the others tomorrow. That means that once you get everything right, you re-do the report, but include the back office terminal previously excluded. Now we close the end of day.

But…. You may be raising your hand to raise concerns about your report being wrong. This is not the case, the next time you want to come back and see or print the report you just uncheck the back office terminal, and you get your nice report.

This is a tough one to answer. Maybe I should differ to your accountant. If your account sees that you recorded that you deposited $200 when you only deposited $100, they will not be able to accept the information for reporting purposes. This is a very bad practice. In the end you must always enter the amounts you actually count and actually deposit.

This may seem obvious when reading this, but here is a common scenario:

When the cash is counted it doesn't match exactly to 
the penny to the amount reported as collected on the 
POS Transaction report. Then when the deposit journal 
entry is made the amounts from the POS Transaction report 
were used [rant: This is BAD BAD BAD]. Since it is a small amount and probably just 
due to someone giving the change back, you may not worry 
about the discrepancy. And look, the cash clearing account 
balances, you might even think "I must be doing this correctly because cash clearing balances". 

This all works until the bank reconciliation happens and what is recorded in System Five doesn't match the bank statements. In my example above the difference should have gone to cash over short because small differences in cash like this can be explained by wrong change given, rounding in the customers favor, and more. That is not what I want to get across here though. The important thing is ENTER THE ACTUAL NUMBERS, NOT WHAT THEY SHOULD HAVE BEEN. This is one scenario where doing it right really is important.

There is a proper way to enter the cash over short for the cash amount. The main thing to remember is:

Cash + Over Short = The amount you should have collected (usually retrieved from the POS Transaction report)

Example cash only deposit:

Where:

• 1010 is the bank account
• 1020 is cash clearing
• 6150 is cash over short
• DB means debit entry
• CR means credit entry

1010  Cash              99.75 DB
6150  Cash over/short    0.25 DB
1020  Cash Clearing    100.00 CR