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Cash management: Retail tips that can bolster profitability

Do not allow cash draws from the register by managers or employees

In a perfect world, a company can manage its product inventory to ensure it has goods on hand, but not too many that bills become hard to pay.

Allowing employees to cash their cheques or take draws out of the cash drawer not only violates the previously mentioned rule, but it also gives too much access to the business’s cash on hand.

Use the cash drawer for customer-related transactions only. This is the best way to track where money is coming from and where it is going at the end of the day. This leaves no opportunity for money to go missing.

If the balance in the cash drawer is off at the end of the day it should be clear where the money went. Owners should only be focused on customer-related transactions that occurred that day, not the draws taken from the register.

Keep petty cash separate

The more unrelated sales activity happening in the cash drawers, the more potential there is for theft and/or mistakes. If a business employs a full-time bookkeeper or other accounting staff, perhaps consider using them to manage petty cash. Another consideration is using pre-paid credit cards for petty cash expenditures.

Audit the cash drawer daily

Someone should be responsible to balance the cash drawer each day and review the activity reports to audit the over/under. Owners should create a policy for the amount the cash drawers are allowed to be over/under and have the person auditing the conflicts research any violations.

A closing form should accompany each closed cash drawer so the auditor can balance the reports. Having someone in charge of auditing the cash drawers makes it easier to audit the ledger, in addition to cash flow, as it allows mistakes to be fixed immediately.

Company owners should invest the time now to implement these procedures and integrate them into a business software system, which can help document and manage cash drawer amounts, balances, discrepancies, as well as which employee was at the register at all times.

Inventory: More cash with the right amount of inventory

When it comes to inventory, most business owners realize inventory is their biggest asset, and having too much of it can place strains on cash reserve. In a perfect world, a company delicately balances five areas of inventory management to ensure it has goods when the sale arrives, but not too many that bills become hard to pay.

Business software tools allow every department to access accurate inventory levels—from service and delivery trucks to different stores and service locations.

Stocking too much inventory, even if it is a popular item, can affect cash flow. By delicately balancing the following five key metrics, a company can ensure its inventory management remains efficient.

  1. Inventory levels and accuracy: This is the practice of ensuring the right product is on hand and the right quantity is constantly moving so it does not become overstocked.
  2. Item fill rate: This is a measure of how quickly a client’s order is fulfilled after purchasing from a supplier.
  3. Cycle time: This is the time between a customer’s order and fulfilment.
  4. Inventory turnover: How quickly any one product is being replaced.
  5. Gross margin: This is the total sales revenue minus cost of goods, divided by total sales revenue as a percentage.

Successful owners know these metrics help gauge whether or not their business is managing inventory efficiently. Unfortunately, many small businesses do not track their inventory at all or do so using manual processes (e.g. inventory cards).

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