Cash Controls: Preventing Theft One Step At A Time

Cash Controls: Preventing Theft One Step At A Time

Cash Controls

Photo Credit: David Carboni

Cash controls in a business start before you ever take a dollar; they begin in the systems you set up.  According to the National Retail Security Survey, the average business loses 2% to shrinkage (theft).  According to the survey that loss totaled $46 billion in 2016. That is not small change.  With such big numbers on the board, you would think that theft prevention is hard or expensive.  The fact is that theft prevention is easy and inexpensive.  As an accounting professional, most of the theft we encounter is stealing by trusted employees in small amounts over a long period of time.  Business owners can detect cash theft early and prevent the theft if the right cash control systems are in place to do so.

Your proper set-up of the point-of-sale system is the first step.  In addition, clear cash handling procedures that make it easy to trace shortages to a single person further tighten up the system.  In combination with prompt day-by-day deposits and regular reconciliation of bank and cash ledgers, these steps can have a powerful impact on theft deterrence, detection, and prosecution.

Point-of-Sale System Set-up

Cash theft prevention starts with the first line of defense, a point-of-sale system.  Paper check systems are far easier to alter or bypass.  Computer point-of-sale systems create an audit trail that leads to far clearer accountability.  Here are the key set up steps you need to complete for the computerized point-of-sale system to work as intended:

  1. Only buy a point-of-sale system with a clear daily or shift/server cash-out report.
  2. You should assign individual user log-ins and DO NO SHARE THOSE LOG-INS. If users can’t be individually identified, then it can be difficult, to impossible, to identify why a drawer or day’s cash is short.
  3. Set parameters around voids and large discounts that require the second party, likely a manager, to approve.
  4. Limit the number of manager level users that can VOID checks or discount items off the bill. If everyone is running around with that authority it negates the point of having limited authorization at all.
  5. Separate your tenders (types of payment). Cash, check, credit cards, gift certificates, and house accounts all need to be segregated.
  6. Set your end-of-day time in the point-of-sale to an hour after you close and ask your credit card processor to align the batch-out with that. If your system is closing out in the middle of your business day the reports are splitting your sales data up in a way that is going to make reconciling a nightmare.  When reconciling is hard people just stop doing it.
  7. Don’t use “open” items. These loosely defined and catch-all type items are often used by the thieves to cover their stealing.

Point-of-Sale Use

Once your point-of-sale system is set up properly you now need to use the system correctly to reap the cash theft prevention benefits.  If you buy the burglar alarm but never turn it on it won’t work.  To reap the rewards of your point-of-sale system try this.

  1. Find your daily cash-out report and use it! This report is what the other steps in the process will rely on and verify against.  Pull the report daily either electronically or in a printed format.
  2. Ring all sales into the system in live time. Avoid a culture of taking cash now and ring it in later.
  3. This should go without saying, but don’t have a side stash of cash sales. Some retailers try to avoid taxes by not putting cash sales in the system.  Unrecorded sales are not only an easy way for theft to occur, but tax evasion comes with some stiff penalties.  Ring it ALL in.
  4. Have staff cash out at end of a shift if possible. This will help identify if your issue is in the a.m. or p.m. or even who is your issue if cashiers have individual drawers or banks.

Cash Handling

CashYou may think of cash theft most when you think of cash handling.  Your strict adherence to these steps will be critical. You’ve come too far to have it fall apart now so document these steps and be sure to follow them.  We should keep to this process no matter how much we trust those that handle our money.  You can also better protect your employees by adhering to the processes.  Employees do not want to be in a position where they would be suspected of stealing.  Theft is more detectable when a good cash handling process is used.  We are able to identify who may be responsible for the theft with as little ambiguity as possible.

The End of Day

  1. Balancing your cash drawer and cashing out should be done as often as possible.  It narrows the timeframe you review and the number of employees who may be responsible if stealing occurs.  It is much easier to sort through a shift than it is to sort through a drawer that 10 employees have been in and out of over the course of 18 hours.
  2. Pulling your end-of-shift report, putting your drawer back to starting cash, counting the cash difference, and verify against the cash-out report all check for missing money.
  3. The cash you are pulling from the drawer for deposit should match the cash-out report without leaving you short of change to return to the drawer.
  4. Put your cash in a locked place with very restricted access. Cash should be grouped and labeled by day and employee.  Envelope systems are a simple easy way to keep cash groupings clear.  If on-site management at all times isn’t possible drop-safes are inexpensive ways to protect cash.  If cash is left under the counter, or “in a safe place” that the other staff has access to, you now have limitless possibilities as to when the theft occurred and who may have taken the money because the access was easy for everyone.


  1. Make deposits the same or next day if possible.
  2. Segregate deposits by day or shift to easily match amounts to daily close reports.
  3. Create a clear chain of responsibility.  You should be able to name who made the deposit.
  4. Report any discrepancy between the deposit and reported funds immediately.


The bookkeeping portion of your process will provide oversight and checks and balances. The bookkeeping should be done by a different person than who handles the cash.  If you have the closer balancing the draw, making the deposit, and reconciling the accounts there is no cross-check of any of the steps and it is very easy for a thief to cover their tracks.  To tighten up your bookkeeping we suggest you try the following steps.

  1. Post your sales data to your accounting system from reports that the point of sale system provides regularly. You can post data weekly but less often than that means there are less frequent checks on the system.
  2. Post your days separately. Don’t lump together multiple days because doing so makes discrepancies harder to see.
  3. When you post your sales and balance them against the payments be sure to breakdown tenders and segregate them. Keeping different payment types separate will help you to reconcile them.  When they are all mixed together, again, discrepancies and theft become harder to detect.
  4. Record the daily cash intake to an undeposited cash asset account. Next, post the bank deposits against the same account.  This ledger for undeposited cash can be reconciled just like a bank account.  Both sides of this reconciliation (cash taken in and cash deposited) should total zero.  When doing this reconciliation discrepancies become immediately evident.  Doing this reconciliation weekly quickly reveals any issues you may be having if the end of day staff or depositor to not alert you.

Why Does It Matter?

When combined the system set-up, system use, cash handling, and bookkeeping steps create an airtight system of theft detection.  Small businesses have many odds against them and the rate at which small businesses fail reflects that.  Good theft detection systems remove at least one of the obstacles.  The survival of your business likely depends on your theft prevention strategy working.

To help you here is a free Cash-out Checklist

No Comments

Post A Comment