Credit cards and mobile payments make it easier than ever for shoppers and businesses to buy and sell goods and services. Even as these payment methods displace bills and coins, however, roughly 59% of Americans say that in a typical week they pay for some purchases with cash, according to a 2022 Pew Research Center survey.
As a business owner, you’re surely happy to see your cash drawer fill as you rack up sales. Yet, all that (cash) money can—but doesn’t have to—mean more problems. With the right procedures in place, handling and processing cash transactions for your business can be seamless. Here’s what you need to know about cash drawers and how you can manage the important task of balancing them quickly and easily.
What is a cash drawer?
A cash drawer (or cash register till) is a dedicated compartment within a cash register or a stand-alone component in your point-of-sale (POS) system used to hold paper money, coins, and checks.
Typically, the drawer is divided into slots for keeping various denominations of paper bills (such as singles, fives, 10s, and 20s) separate, with smaller compartments for different coins. Some businesses also use the cash drawer as a secure place to hold credit card receipts and gift cards.
Depending on your setup, the cash drawer may be opened through the POS software running on the cash register or by a key. Cash drawers are often easily released, either manually or through the POS software, from the cash register for counting.
Why should you balance your cash drawer?
Cash drawers are central to many retailers’ cash management systems and documenting cash flow. Balancing your cash drawer helps prevent, identify, and correct any cash shortages or any other discrepancies resulting from miscounts or other mistakes, so you can keep accurate records of your cash sales. If there is a shortage, going through the balancing process enables you to reconcile any differences between sales receipts and money in the drawer. It can also ensure there is enough cash on hand to make change for customers.
Cash differs from other methods of payment in its tangibility: cash payments need to be counted, change made, and bills and coins safely stored until they can be deposited at a bank. And at any of these touchpoints, mistakes can be made, with money potentially lost or even stolen.
Routine and well-thought out cash handling procedures safeguard against error and theft while sharing accountability among all staff who are responsible for handling cash. Errors in cash handling and theft mean your business loses money, while inefficient cash handling systems increase the amount of labor that must be devoted to handling and reconciling cash to minimize discrepancies. Both situations affect your bottom line.
Although cash transactions may make up a smaller proportion of your total sales than debit or credit card transactions, they are still an important part of your business’s financial picture. Internal controls such as balancing the cash register drawer are, therefore, essential to your cash management system.
How often should you balance a cash drawer?
To maintain an up-to-date, accurate picture of your brick-and-mortar business’ books, it’s generally recommended that you balance your cash drawer at least once per day.
Many businesses, especially those with only one register, do this at the end of the business day. If you have multiple cash drawers and/or work shifts, you may want to balance each drawer at the end of each cashier’s shift.
Best practices in balancing a cash drawer
You can support the smooth and efficient execution of balancing a cash drawer with these best practices:
Establish an appropriate beginning balance
This is sometimes called a “float.” It ensures you have enough cash to facilitate cash transactions throughout the day or shift. To minimize security risk, set a starting balance that is a maximum amount that is sufficient to make change for customers. Determining the appropriate starting balance for a cash drawer will depend on the size of your business, the average value of a sale, and the typical number of daily cash transactions. Refer to your business’s historical sales data to help with this process.
One employee per drawer
Assign one employee per cash drawer. Having multiple employees using a single drawer increases the likelihood of errors or theft and dilutes accountability for overages and shortages.
Make cash drops
If your business has a high volume of incoming cash, you may find yourself with too much cash in the register during the shift. Move excess cash from the drawer to your safe (called “cash drops” or “safe drops”). These are typically done during slower periods of the shift to avoid negatively affecting service.
Secure counting location
Have a secure location for employees to count cash at the beginning and end of the shift.
How to balance a cash drawer
- Count drawer at the start of a shift
- Get a sales report at end of a shift
- Count physical cash
- Reconcile any differences
- Record cash transactions
- Return starting balance to drawer
While balancing the cash drawer may seem time consuming, once you and your employees know and practice this process, it can be a fairly quick and simple task—leaving you with a nice and tidy cash register ready for your next business day or shift.
Follow these steps to balance your cash drawers.
1. Count drawer at the start of a shift
Plan for an appropriate opening balance for each cash drawer, using best practices as a guide. Depending on the size of your business, you may have more than one cash drawer in use over the course of the day or shift. Have each employee count their drawer after signing in for their shift to ensure it matches the planned opening balance.
2. Get a sales report at end of a shift
Most cash drawers used in today’s retail environment are connected to a POS software system, which can generate a sales report of customer transactions as well as for transactions across a single shift or day.
At the end of the shift or business day, pull a sales report from your POS software. These reports will typically include a breakdown of all store credit, credit, debit, gift card and cash transactions, among other details. Shopify’s POS software offers intuitive cash tracking features that create historical records of all cash transactions and provide daily cash drawer reports while facilitating the cash drawer balancing process at the end of a shift or business day.
3. Count physical cash
Remove the cash drawer from the cash register and take it to a secure location for a physical count. If you’re dealing with large sums of cash you may elect to provide your employees with a counting machine for bills. Account for the beginning cash float and any cash drops that were made during the shift if they were not recorded through your POS software and included on the sales report. This process is often overseen and double-checked by a manager.
4. Reconcile any differences
Once you’ve counted the current cash balance, subtracted the starting balance, and added any cash drops made during the shift, your total cash should match the cash sales listed on the sales report. If you have an overage or shortage, recount the cash. If you still cannot reconcile the discrepancy, review the POS report to see if you can find the answer there.
It’s common to have slight shortages or overages, and often they are the result of simple human error such as making incorrect change or using the incorrect payment method, say processing cash sales as a credit card (which may have a processing delay, so the money doesn’t necessarily post immediately). Develop a policy for how you will address these discrepancies, and make sure to clearly communicate this plan to cashiers as part of your overall cash management system.
5. Record cash drawer transactions
The final cash tally and any overages or shortages are often recorded alongside card transactions, refunds, and gift cards redeemed for the day. Depending on how you manage your bookkeeping, managers may record basic sales data (such as purchases, cash on hand, and returns) on a handwritten daily report that is attached to the printed POS report and shared with the bookkeeper for data entry. Alternatively, they may add these numbers directly to bookkeeping software, for example.
6. Return starting balance to drawer
Be sure to return the starting balance to the drawer for the next shift, and you’re done!
Balancing a cash drawer FAQ
What does it mean to reconcile a cash drawer?
Reconciling, or balancing, a cash drawer refers to the process of counting cash on hand at the end of a shift or business day and reconciling it against the sales recorded by the POS software for that shift or day. The cash on hand in any particular drawer should match the cash transactions recorded by the POS software.
Why is it important to balance a cash drawer?
Balancing your cash register drawer is a necessary business task and an important aspect in monitoring your business’s day-to-day financial picture. It’s also a way to safeguard against the loss of cash through human error or employee theft.
What should I do if the cash doesn’t balance?
If on first count your cash doesn’t balance, count it again. If you still cannot reconcile the discrepancy, review the POS report to see if you can find the answer there. Develop a policy for how you will address cash discrepancies, and make sure to clearly communicate this plan to cashiers as part of your overall cash management system.
Can I trust a POS for cash balancing?
Yes, modern point-of-sale (POS) software systems (when configured and used properly), will provide a precise accounting of the shift or day’s cash transactions, often included within a more comprehensive sales report that breaks down all incoming transactions.
Who should balance a cash drawer?
Each cash drawer should be handled by a single employee during the shift or business day. This employee is responsible for counting the cash in the drawer at the beginning and end of their shift to ensure an accurate opening and closing balance (checking that the cash from the drawer matches sales). This process is often overseen by a manager.
