In the previous blog, I discussed how you would document the receipt of cash due to sales. Follow those recommendations and you will have the coverage you need if the IRS comes knocking at your door. What that article did not discuss is how to document cash going out. That’s what I want to discuss here.
Cash can go out of your facility, your farm, your lab, your bakery, for all kinds of reasons. You have regular monthly bills to pay such as rent, utilities, supplies, sales tax etc. For many of these, you will get a receipt when you pay the bill such as when you buy supplies at a retail store. Likewise, when you make an appointment to pay your sales tax in cash, or go by the electric company to pay that bill in cash, you will receive a receipt showing what you paid. Your landlord may give you his banking information, and ask you to make a deposit to his account for the rent each month. You should receive a receipt for that transaction as well, on which you can notate that it was for payment of rent for a given month. These are fairly straight-forward; you will use these receipts to reconcile the cash in your safe.
For those items where you are not automatically given a receipt, you need to create one. Create a vendor invoice and be sure it has the following information on it (I’ve created this form for you to download below):
- Your company name, address, basic contact information
- The date
- The vendor’s name, address, contact information
- Who you are dealing with (your contact person with the vendor)
- Description of the product purchased, (i.e. 454.5 grams Blue Dream, 4 T5 grow lights (model #), 10 2-pack peanut butter cups)
- Have a check box to indicate that you received testing (if applicable).
- Cost of each item
- Total amount due
- If the invoice is paid, indicate how (cash, check, money order), the amount you paid, and have your vendor sign and date the invoice, indicating his acknowledgement that he was paid.
The last issue is how to store these items. I recommend that after you have made a cash payment from you safe, you put the receipts and invoices into a separate file until they have been entered into your books and you have reconciled the cash in your safe for cash coming in and cash going out. Once you have recorded the transactions and your cash has been reconciled, file the invoices in a vendor file for that vendor. For the vendors where you spend only occasionally, the receipts and invoices can go in a miscellaneous file. Files can be paper or electronic, the process is the same.
The next blog will review how to reconcile the cash in your safe. Stay tuned!