Bank and Cash Management: A Practical Guide

Cash and bank tracking is the easiest and most neglected part of pre-accounting. It's easy because there is only one rule: every time money moves, a record is created.

It gets neglected because no one forgets to issue an invoice, but everyone forgets to write down the 30 liras that left the cash register.

Set up your accounts correctly first

Define as many accounts as you actually have sources of money. Four types will suffice:

• Cash: Cash on hand. If you have branches, open a separate cash account for each branch.
• Bank: Each bank account is separate. If you have two accounts at the same bank, both are separate.
• Credit card: Company cards. A debt arises at the time of expenditure and closes when the statement is paid.
• Payment system: Virtual POS and online collection providers. If you do e-commerce, this account is essential.

The first step of setup is to enter today's balances. If this isn't done, every subsequent figure will be off.

A transfer is not an expense

This is the most common conceptual mistake. When you deposit money from the cash register to the bank, the money is not leaving the business, it's just changing location. If you record this as an "expense," your expenses will look higher than they are, and your profit will look lower than it is.

The distinction is simple: if it is between your two accounts, it's a transfer, if it's going to a current account or an expense, it's a payment.

The same logic applies to income: money coming from a customer is a collection, money you withdraw from the bank to the cash register is a transfer.

Where do cash discrepancies come from?

You count the cash in the evening, and it doesn't match the figure in the system. The reasons are almost always these four:

• Unrecorded small expenses. Courier, meals, stationery. Insignificant on their own, but the total at the end of the month is surprising.
• Personal expenses paid from the cash register. If you don't separate the business cash from your pocket, no report makes sense.
• Processing the transfer unilaterally. An outflow from cash was recorded, but the inflow to the bank was not.
• Processing a collection to the wrong account. The money arrived at the bank, but was recorded in the cash register.

Bank reconciliation: once a month, ten minutes

At the end of the month, open your bank statement and compare it with the transactions in the system. What you are looking for are the differences between the two lists.

Generally, the missing items are: bank fees and transfer charges, automatic payment orders, POS commissions, and blocked amounts. These are processed into your account without your knowledge; unless they are recorded, the balance won't match.

How does it look in Qolay.App?

On the accounts screen, cash, bank, credit card, and payment system sit in separate tabs; you see the current balance of each at a glance. Inter-account transfers are done from a separate screen, so transfers and payments never get mixed up.

If you want to process an expense record and its payment in a single step, check out the article on single-step payment with expense records; it lifts the burden of double-entry bookkeeping.

Frequently asked questions

Should I define my personal account as well?

Do not define it. Only business-owned accounts should enter the business records. If you made a payment on behalf of the business from your personal account, treat this as a separate record.

When should I record a credit card expense?

As an expense on the day you make the purchase; and as the closure of the card debt on the day you pay the statement. The two are separate transactions.

I have a foreign currency account, how do I track it?

Keep the account in its own currency; treat the exchange rate difference as a separate item. Mixing foreign currency and local currency transactions in the same account renders the balance meaningless.

Should I check daily or monthly?

If you work cash-heavy, close your cash register every day. A monthly reconciliation is sufficient for the bank.

When cash and bank are kept accurately, all other reports become reliable. When they are kept inaccurately, none of them work.

You can open a free account on Qolay.App and define your accounts with today's balances.