What Is Cash Reconciliation? A Complete Overview

Reconciliation isn’t just recommended — it’s a required task for any business that handles cash in order to complete the month-end close process. But it also provides a variety of other important benefits that can help your business maintain proper financial well-being.  

In this guide, we provide an overview of cash reconciliation and explore tools and resources you can use to help automate and streamline the process. 

What Is Cash Reconciliation?

How Is Cash Reconciliation Performed?

Cash vs. Credit Reconciliation

Why Is Cash Reconciliation Important?

Tools and Resources for Cash Reconciliation

Discover the Power of Total Recon

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What Is Cash Reconciliation?

Cash reconciliation is the process of comparing two sets of financial records — records such as POS transactions versus the amount of cash collected by cashier or by till. This process, regardless of industry or geographic location, is necessary in order to complete a business’s financial close at the end of the month and to accurately record revenue and ensure cash accountability.

How Is Cash Reconciliation Performed?

This is a general guideline of the typical cash reconciliation process:

1. Gather appropriate documentation. This includes everything from your point of sale/property management system (POS/PMS), bank statements, cash drops, and receipts. 
2. Ensure all transactions have been recorded appropriately. Whether you have automated accounting software or manually enter data, it’s important to ensure everything is documented in the appropriate place. Each cash tenders should be posted to the POS and a record for each cash drop should be recorded to allow for reconciliation.
3. Compare transactions. Look at each cash tender transaction and ensure that the totals by cashier or by till, match the total amount of cash collected by the cashiers.
4. Look for any errors or mismatched information and investigate discrepancies. This can include typos, duplicate entries, missing data, or unusual transactions. Keep outstanding items, such as checks that haven’t cleared, in mind. In some cases, data can even be spread across multiple business days. 
5. Manage over/shorts. When an over/short occurs, it is important to document it and follow-up with an investigation. If cash is missing, the cashier responsible should be held accountable to ensure complete cash accountability across the organization.
6. Generate journal entries to be pushed to the general ledger. At the end of the reconciliation process, you will create formal accounting records that detail the specifics of cash collected versus cash posted and any variances; these will then become part of the general ledger.  

Cash vs. Credit Reconciliation

Though the reconciliation processes are similar, there are some distinct differences.

Credit card transactions involve automation or manual gathering from card processors that are reconciled against the POS/PMS.

While reconciliation involves transaction matching, it also includes something called the “exception audit” — meaning that items will not match 100% since there are two sides to the process: payment (what the credit card company reports in terms of daily transactions) and audit (what the PMS/cashier reported for the day).

Credit card reconciliation also needs to account for transaction/processing fees.

Why Is Cash Reconciliation Important?

Unless you’re a completely cashless business or organization, cash reconciliation is required to complete the month-end financial close and to ensure cash accountability in operations each day. Doing so not only allows you to ensure financial accuracy, but it’s essential for risk management, compliance, shrinkage, and fraud detection. It also demonstrates transparent and ethical business practices.  

Tools and Resources for Cash Reconciliation

If you’re still using spreadsheets for reconciliation, have you considered upgrading your process to save time and embrace efficiency? Look for a software platform that offers automation and transaction matching, which will help reduce errors and save valuable business hours.  

You want a solution with customized reporting and detailed insight so that you have full visibility into your cash transactions. And it’s also important to find a system that seamlessly integrates with your PMS/POS and provides a user-friendly interface.

Discover the Power of Total Recon – Cash Reconciliation

If you’re looking to streamline your accounting processes or upgrade your existing technology, consider Evention’s Total Recon – Cash Reconciliation solution, which automatically reconciles your cash transactions overnight while enabling full compliance with detailed reports for a complete audit trail. Plus, it works with a cash recycler or as a standalone option! If you’d like to learn more, just request a free demo and we’ll reach out to schedule a time to talk.