Minimise process of small business cash receipts?

What I do to handle this is to have an account called 'Cash' (what used to be called 'Petty Cash').

When I buy something for the business and pay cash I record that as a debit to 'Cash' and when someone pays cash to the business I credit it to 'Cash'. The actual cash just goes in or out of our general housekeeping money. Then, when I do the accounts (usually quarterly to do the VAT return) I do a reconciliation on the 'Cash' account, if it's more than a few hundred pounds negative I take some cash out of the company's bank account and give it to the housekeeping. It rarely, if ever, gets very positive so I haven't had to do the opposite yet.

Thanks, this is a very good method and I'll use it as much as possible. My current difficulty is that when I get customers giving me these cash amounts part of the payment is for labour and part is for materials I need to purchase, usually with a Visa card, on-line. At present the bank account is often too low to cover the purchase of materials without an anticipatory injection of funds. This is why I need to get at least some of that cash into the bank account for immediate practical purposes. I know there's some leeway with the Visa account, even though I pay it off in full monthly but I don't like to move anywhere near the overdraft danger zone.

If you plan to move money between your personal and business accounts you need to document this extremely well. Expect if you get an inspection, the inspector will also ask to see full details on your joint account and probably your wife's account too.

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Personally I'd try and avoid it, as it (potentially) allows the revenue to start digging around in unrelated accounts. This I assume won't be an actual problem, but the costs of getting the paperwork sorted will still have to be paid for.

This also means you'd better keep all your credit card bills and receipts as you've "tainted" them by using the card for business purposes.

This is of course wrong. When you buy something you should *credit* cash, while debiting a purchases or expense account, and when someone pays cash to the business you should *debit* cash, while crediting sales.

What exactly is the problem? Can't you pay cash into the business account in the same way as you pay in cheques? Why do you feel the need to "launder" the cash through a personal account?

Because I want to be an International crime syndicate boss, silly.

Thanks for the advice. I don't wish to taint the system in any way, so I'll try to avoid wandering from the straight and narrow path.

I knew I'd get it the wrong way round! :-)

As it's a home written accounts package it's not double entry as I'm unlikely to defraud myself. Thus I don't make two entries into the system for a cash purchase or a cash receipt.

Essentially my system is a ledger with all entries in the same ledger but with information against each entry indicating what account(s) it should be posted to. The database it runs in then enables me to produce reconciliation and analysis reports to my hearts content (and my accountant's too!).

I think it's that the money is needed in the personal account to make the purchases of material etc.

Personally I'd dedicate a (new) personal credit card to the business so that it's easier to separate and manage personal and business expenditure.

What I do (as I said elsewhere) is have a personal credit card which is wholly used for business purchases. This makes life much simpler, the company can pay the whole of the credit card bill each month and the credit card statements are simply filed with the business accounts. As long as the purchases are legitimate business expenses there can be no confusion at all.

Yes, thanks, I've done this. It will keep business related purchases separate. So it's just a matter of squeezing those bags of 10p coins through the on-line check-out, using my brand spanking new Visa card. :-)

That's what I thought in terms of lack of confusion. No need for examination of my tainted laundry at all as far as I can see. I still can't come up with a better plan than to hand the incoming cash to my wife and get her to transfer the same amount into the "business" account from our domestic joint account. Just looking for a nice brief title to give to these actions in the spreadsheets. I don't think the "Don Woo Payments" has quite the right ring to it. :-)

"Mike Halmarack" wrote

• Cash to wife : "Drawings" ? * Jt. a/c to Bus. a/c : "Capital introduced" ? [They don't even need to be exactly equal!]

If Ltd Co: Both as changes to "Director's Loan a/c" ?

No, just call it "Petty Cash", as long as it no more than a few hundred pounds plus or minus that's perfectly acceptable.

"Drawings" implies income taken from the business, presumably not what is intended. "Capital introduced" implies money invested in the business, again not what is intended I don't think.

Are you using the words "as" in the sense of "because"? If so, I don't understand:

(1) Why is the fact you're not trying to defraud yourself a reason not to use double entry? Double entry does not purport to combat fraud, the purpose of its mirror entries is to help prevent mistakes and to keep track of who owes whom what. When sales and purchases are always settled immediately, and only ever by one method (cash only or bank account only), and where your business does not need to keep track of monies it owes to suppliers or is owed by customers, then there is little point in using double entry because each income entry (a credit) would always be mirrored by Dr Cash or Dr Bank, and likewise every expenditure entry (a debit) would be mirrored by Cr Cash/Bank.

(2) Just because it's home-written doesn't mean it can't be double entry. Also, just because it's single-entry doesn't mean it can't be used as though it were double-entry. All it would need to have for this is the ability to support combined entries. For instance, when I cobbled together my home-written accounts program more than 15 years ago, specifically to help me as treasurer of my church, and to fit in with the manual practice up to then, it was done in such a way as to make bank reconciliation easy. In principle everything went through the bank account, but often several different things were paid in together on one paying in slip. Therefore the system had to cope with a credit having several different sub-credits. There were also occasional mixed debit/credit transactions, e.g. where some money was taken from a collection to buy tea and milk, so a (say) £39.85 pay-in had to be shown as £45.15 collected and £5.30 spent. Given that you can do this, you can do double-entry (e.g. a credit sale) by mirroring Cr £50 Sales with Dr £50 Customer, and since the balance is zero there's nothing to match up on any bank statement.

Strictly speaking double entry systems don't make two entries either. They make single entry with several sub-entries, and the sum of all the sub-entries should cancel out.

That's not what you said earlier, because you said you would pay the cash into the personal account and then immediately write a perosnal cheque for the same amount to the business.

That's not a bad idea, but probably unnecessary if your accounting system helps you know what's what. In principle it's not even necessary to have a separate business bank account.

Just delete the first "As", the second "as" is because (as I understand it) *one* of the reasons for double-entry book keeping is to help check on fraud.

So an intentional mistake by an employee isn't fraud?

Yes, OK, that's where my business is basically. Purchases are always settled immediately (mostly by credit card) with one minor exception. Sales aren't settled immediately as it's mostly training and consultancy which is invoiced but since there are only two or three invoices per month we simply file the invoices when they are paid and any 'left over' will get chased.

That sounds somewhat like my system except that mine doesn't attempt to do those multiple sub-credits/debits. If I happen to pay for two items with one cheque for example I will just make two entries referring to the same cheque number, though this is a pretty rare occurrence. My main object is also to make bank reconciliation easy as, if that is correct, there's a fair chance that all the other accounts are right (or as close to right as makes no odds).

That's not what I intended to say (or at least not my intended meaning). If the company receives cash it's entered as a credit to Petty Cash. If I buy something for the campany with cash out of my pocket that's entered as a debit to Petty Cash. In general this means that the Petty Cash account ends up with a large debit as we receive little cash but do spend a fair amount. So, occasionally, the company writes us a cheque which gets entered as a credit to Petty Cash. If it was the other way about (I think it's happened once) I write a cheque to the company. However this is only done occasionally, the Petty Cash is allowed to go quite a way up or down before settling it. (I know these 'credits' and 'debits' are the wrong way around to your view but I view Petty Cash as a tin box with money in it and my use of credit and debit is the right way around for this view of Petty Cash)

Quite, but it does make keeping track of things easier if *everything* on the credit card statement is the company's. Occasionally I use other credit cards for company purchases and, if I do this, I just treat it as a Petty Cash item as described above.

Then it won't parse. :-)

That's news to me.

If it's intentional it's not a mistake. Besides, if you want to commit fraud, it's not really more difficult to do so with double than with single entry.

If by credit card, it's hardly immediate, unless you treat the card account as your "bank" account.

Traditionally petty cash is treated as if it were a separate bank account. Real transactions are credited or debited to their proper income and expenditure categories, and if you have double entry technology then their mirrors are debited or credited either to bank or to petty cash or to any other types of surrogate bank you might have (such as a credit card account). Transfers between bank and the cash tin or card company do not affect the trading accounts and are essentially "hidden" unless you have double entry. It seems to me that if you do what you say you do, namely show transfers from cash tin to business bank account as single-entry credit entries, this presents a wrong picture, and you lose the information as to what the money coming in was for. Surely the real external source of the money should show in the books. Or do you have a separate set of accounts for the cash tin?

Yes, it makes things even easier if *everything* in the business accounts corresponds to something in the business bank account. So all credit card purchases would be deferred in the accounts an not show up until you settle the monthly card bill with a business cheque, and then the entry in your accounts would be a super-entry consisting of all the card transactions as sub-entries (or in your case all the card transactions would be entries sharing the same cheque number). Likewise all cash takings going into your personal pocket would be settled occasionally with a personal cheque paid to the business account (and would probably show as lots of entries sharing the same BGC chit number).

Traditionally, petty cash systems intended for petty purchases involve the business advancing money into the tin, but without double entry this is difficult to keep track of, and it's simpler if you can advance the cash personally and have the business reimburse you by cheque in due course.