Hotel, Restaurant and Pub Cash Control
Summary of Key Points
Keep firm control and good records of physical cash going through your business.
- This will deter staff from stealing your cash and reduce the impact of any dishonest staff you hire.
- This will reduce the extent of any tax bills or fines from HMRC to zero.
- Count cash more often if you have a problem with cash.
Hotels, restaurants and pubs usually have a significant level of cash takings. Good controls and records are essential for two main reasons:
- They will reduce both the likelihood and extent of shrinkage due to theft from the tills.
- They will enable you to deal with an HMRC enquiry quickly and without penalties.
Records to Keep
Whether you are using keeping your records in a manual cash book or on a computer, you should record:
- Opening physical cash.
- Cash takings and any other inflows of physical cash.
- All payments of cash made from your tills and who they were to. I recommend using sequentially numbered chits bought from stationers to do this, where the person being paid has not provided a receipt.
- Closing physical cash.
Ideally, this will all balance:
Opening Cash + Cash Inflows – Cash Outflows = Closing Cash
Dealing with Imbalances
The occasional small book to physical cash difference is likely, and it is acceptable to write this off to Purchases or another expense account. However, the following differences need more work:
- Large shortfalls – what is defined as “large” will vary from business to business.
- Consistently small shortfalls every time you count cash.
A large shortfall is normally easier to find, probably one or two big withdrawals have not been fully recorded. If you have a consistently small shortfall, there can only be two causes. Either:
- Some element of your system is incomplete. You need to identify this and start recording the missing transactions, or
- There is a thief at work.
In either case, counting cash more regularly is the first step in getting to the bottom of things. If the differences disappear without any change in the system, the most likely explanation is there is a thief who is laying low. If the differences start happening again, see if you can spot a pattern – do they crop up when particular staff are in, for example? Consider putting some form of discreet security in place so you can see how cash is being handled. You can only accuse someone when there is concrete evidence.
Hopefully, you’ll simply identify a certain transaction which hasn’t been properly recorded in your system. If you do, and things settle down with only occasional small differences, you can relax. Count cash as often as you need to count it to avoid book to physical differences!
Physical Cash and HMRC
The likeliest question in the minds of HMRC should they pay a visit to a hotel, restaurant or pub is:
“Can we be sure that all cash being taken is going through the books?”
This is unlikely to be spelled out explicitly by them. If your cash system has a “black hole” – a significant shortfall you can’t reconcile back to physical cash – there is a nasty double whammy for you:
- HMRC will treat this as drawings, even if a more likely explanation is that payments to staff or small suppliers are being made and not properly recorded.
- HMRC also have powers to fine businesses for failing to prepare adequate records.
So poor cash records can land you with a hefty tax bill!