Imagine at the end of a busy day, you discover that the cash in your register doesn't match the recorded balance. This situation, known as a cash discrepancy, is more common than you might think and can be a significant headache for businesses like supermarkets, retail stores, restaurants, and banks.

What is a Cash Discrepancy?

A cash discrepancy is a situation when your cashier’s drawer doesn't match the balance with the hard cash. Simply put, you find a difference in the cash balance shown in your cash register and the physical cash you hold.

Cash discrepancies are common in businesses where physical cash exchange is common. Supermarkets, retail stores, restaurants, casinos, banks, etc. are common places where you’ll see these discrepancies more often.

Your cash drawer can face two types of discrepancies: Overage and Shortage.

Cash Overage

An overage happens when the physical cash in your drawer is more than the balance shown in the statement at the end of the day. It means you are holding more cash than you should.

It can be due to a cash counting error, theft, mishandling of cash, skipped transactions, or short-cashing your customers.

Cash Shortage

The shortage occurs when physical cash in your drawer is less than the balance shown in your statement. It means you are holding less cash than you should by the end of the day.

Again, there are several reasons for the shortage, including but not limited to theft, system errors, mishandling, counting errors, duplicate transactions, or short-cashed cashiers from customers.

Both these scenarios are challenging and concerning for your business. Either case is disturbing for your cashiers and business’s financial health.

What Causes Cash Discrepancies for Your Business?

Before you create a reconciliation plan, you must know the causes of cash discrepancies in your daily routine. You must place a system in place that identifies these differences and then take corrective measures.

According to a survey conducted by Nucoun among 100 users, the common causes of cash discrepancies have been identified. The survey results show that 40% of cash discrepancies are due to human errors, such as counting mistakes or incorrect transaction entries by cashiers. System errors, including POS machine malfunctions or software glitches, account for 25% of the discrepancies. Additionally, 20% of the discrepancies are attributed to theft and fraudulent activities, which are not uncommon in busy stores and banks. Finally, 15% of the discrepancies are due to the inadequate performance of cash counting devices. The pie chart below illustrates the proportional distribution of these causes, providing a clearer understanding of the primary sources of cash discrepancies.

Human and System Errors

If you run a busy business where large cash handling is a norm, you’ll find human errors quite often. It’s almost inevitable to avoid human errors in any field of work and cashiers are prone to errors even more due to the additional pressure of handling currency notes.

Despite hiring qualified cashiers, you’ll find human errors in their work. You should set appropriate controls in place to ensure these errors remain within limits. If the frequency increases rapidly, you must investigate these incidents thoroughly.

Another common reason for cash discrepancies comes through system errors at Point-of-Sale machines. It could come from the cashier missing a transaction, entering a double transaction, or a hardware malfunction.

If your cashiers are using inefficient cash counting machines, they’ll have trouble counting currency notes.

A quick fix to this problem is to use efficient and bank-grade cash counting machines that make life easier for your cashiers.

Theft and Fraudulent Activities

Employee and customer theft at busy stores, retail outlets, supermarkets, and banks is not a new phenomenon. So, you’d find cash shortages or overages whenever such incidents occur at your business place.

A recent Hays International report states that the average dishonest employee cash value over the past 10 years is $1,100.

Your cashiers could get tricked or face theft from “customers” too. It’s hard to recover cash in such incidents unless you have evidence against the culprits.

Cash Counting Errors

The most common reason for cash discrepancies or mismatched results is cash counting errors. Either the cashier makes a mistake or the hardware doesn’t live up to the expectation.

In either case, it’s your business that suffers from cash shortages or overages. Both these scenarios are harmful to your business’s financial health and reputation.

Hiring qualified and experienced cashiers is the first step to address this issue. The other is to provide them with efficient and smart money counters that exceed your expectations in terms of performance.

How to Do Cash Reconciliation?

You understand that discrepancies are inevitable, one way or the other, you’ll encounter cash handling problems in your daily business routine.

With an effective cash reconciliation plan, you can counter these discrepancies and other challenges.

Set Cashier’s Drawer Limits

You may need several cashier’s drawers for your busy store outlet or any other cash handling needs. It’s of utmost importance to set opening and closing cash limits for each drawer by the end of the day or each shift.

These limits will help you reconcile and identify any differences.

Print the Statement

Ask your cashiers to print statements should you find any errors or differences in the balance by the end of the shift.

You can then use this statement to track credit, cash, deposit, withdrawal, and other types of transactions. It’s an important step in identifying any errors or miscalculations.

Identify Any Discrepancies

Now, you can identify any cash overages or shortages by comparing the cash balances and the physical money counted for each drawer.

Create an effective policy to address the overage and shortage transactions. You should set aside any overages and keep records to address any claims from customers or employees later on.

Similarly, you can set rules for cash shortage limits to be addressed by cashiers and the company respectively.

Reconcile for Discrepancies

Now, you can record any reconciliation transactions for shortage or overage. If you find any other types of errors like checks, credits, coupons, etc. you should record each of them separately.

Make sure your cashiers, supervisors, and other employees are fully aware of the cash reconciliation rules.

Document and Return to Drawer’s Limits

Keep a record of these reconciled transactions for discrepancies in either direction and return the drawers to the closing and opening balances.

Now your cashier is ready to take on the next shift.

How to Avoid Cash Discrepancies? Best Practices for Cash Handling

You have hired qualified and experienced cashiers but you still cannot avoid cash discrepancies. An obvious solution is to equip your staff with the right tools for handling bulk loads of currency notes.

• Set clear policy rules for cash shortage and overage.
• Allocate appropriate allowances for petty cash.
• Set opening and closing balance limits.
• Assign one drawer per cashier for a shift.
• Segregate duties for cash reconciliation, supervision, and transfer to vaults.
• Count physical cash at the end of each shift and make cash drops.
• Invest in the physical security of your business outlet.

A sound plan for cash reconciliation is ineffective if you do not utilize the right equipment. Provide your cashiers with the most efficient and bank-grade money counting machines for faster, reliable, and smoother cash operations.