Cash management - accounting principles and new regulations

Many companies have to deal with cash receipts, cash expenditures, receipts, and the like on a daily basis. In other words, with cash register management. Let's think of the many supermarkets, bakeries, or other retail businesses.

Have you ever had an audit in house? If you get sweaty palms at this term, you'd better check in advance whether you have fulfilled your obligations. But when is cash management obligatory? And what does cash management mean?

This is what awaits you today:

• New regulations in the area of cash management
• What does proper cash management look like?
• Cashbook obligation with the income-surplus calculation
• Means of recording in cash management - cash register systems
• Retention and submission of records
• Cash inspection - how do I behave correctly?
• Conclusion

New regulations in the area of cash management

Anyone who runs a cash-intensive business must be well versed in tax matters. Otherwise, the tax office could quickly come knocking and carry out checks. At least, this has been the case since 2018. The recent past shows that stricter controls are definitely the order of the day. This is based on the "Law for Protection against Manipulation of Digital Basic Records". Let's take a look at the law for this:

Since the end of 2016, the law provides for individual record keeping. This means that all business transactions must be individually recorded. In addition, these must also be kept for an appropriately designated period of time. In 2018, the tax office was allowed to carry out unannounced checks for cash register inspection. In this process, cash register data is read out and subsequently evaluated. The new procedure has persisted to this day and entrepreneurs must expect such checks.

From January 2020, another regulation will come into force. Thus, all electronic recording systems must have a security device. This must be certified and technically tested. The components of the system are the security module, a storage medium, and a digital interface. The background to this is that all records cannot be changed afterward. Once logged, they remain securely stored in the system.

In addition, when using electronic cash registers, customers must receive a receipt of the payment transaction. Although this is already integrated into most companies, it has not been mandatory until now. If a company receives such an electronic cash register, it must be registered and reported to the relevant tax office. And this is the correct number and type. However, the type of cash register management remains unaffected by the change in the law. Thus, the entrepreneur may continue to operate open store cash registers. A combination of the open store cash register and the electronic cash register is also permissible.

What does proper cash management look like?

Cash receipts and cash disbursements must be recorded daily. This regulation is correspondingly new; previously, exceptions were accepted by the tax authorities. Now the daily recording of income and expenditure is mandatory. Even if the cash transactions only make up a small part of the sales. Bookings of the cash turnovers could be taken up so far therefore also still on the next day or after the vacation.

Cash management with individual records

The individual business transactions are divided in each case into the revenue, the content of the transaction, and the name of the company. Generally, in some industries, cash receipts must be itemized. For example, in the hotel and accommodation industry, in car repair shops, in restaurants and catering establishments, for all freelancers and craftsmen, as well as in the cab industry. Entrepreneurs comply with basic aspects of various obligations here. Thus, hotel operators are subject to the obligation to register, so that guests must be identified. Car repair shops must comply with their warranty and aftercare obligations.

Exceptions to the individual recording of cash registers

For retail establishments that sell low-value merchandise, individual records of business receipts are not required. After all, the individual products are sold in indeterminate numbers and to unidentifiable persons. This refers to retail stores that sell food or stationery, for example. Market stalls or tobacco stores also fall into this category. However: business expenses, private deposits, and private withdrawals must still be treated in accordance with the individual recording requirement. The exception applies only to cash receipts.

Changes must be recognizable

An individual or collected record may not be changed under any circumstances. This would make the original content no longer traceable. As a general rule, however, all changes must be traceable. If, however, entries have to be changed, the original content must remain traceable. In addition, it must be recognizable when the change was made.

Cashbook obligation for the revenue and surplus account

The revenues and expenditures of an enterprise are determined in some enterprises by revenue surplus account. However, these are then not obliged to keep a cash book. The reason: Within the EÜR there are no stock accounts and therefore no cash account.

Nevertheless, there are companies with EÜR that have to comply with the cash record obligation. This is especially true for cash-intensive businesses. They must have a detailed account and a precisely kept cash book. The reason for this is that revenue in these cases is derived exclusively from cash transactions. Thus, these revenues are also the basis for the sales tax calculation. For this calculation, precise records are required. The record-keeping requirement for cash accounting therefore also applies here.

If businesses with EÜR do not keep a cash book, receipts must of course still be kept. If you use a cash register, you will end up with consecutively numbered receipts in your hand. And what happens if I do not have receipts? Then the tax office is entitled to estimate the amount of cash receipts. Estimates on the part of the tax office are not necessarily made in favor of the entrepreneur.

Means of recording in cash management - cash register systems.

If you want to comply with the principles of proper accounting you have to make changes after posting traceable. If the choice should fall on an EDP bookkeeping, then you must install a safety device. This will detect changes or deletions and prevent the operation. Changes are to be logged with the indication of the date.

The cash management with cash report

At this point, we are talking, among other things, about an "open store cash register". This means that no cash register (electronic cash register) is used here. In practice, the seller accepts his customer's money and puts it into the cash register. The customer receives his change. At the end of the day, the cash register is checked. Here, only the cash contents are counted. Subsequently, a cash report must be created.

How do I create a cash register report? After the close of business, the cash balance is determined. The total is entered in the cash report as the initial amount. Since the previous day's closing balance must now also be included, this is deducted from the current day's cash balance. Proof must now be provided in the form of a receipt if private withdrawals have been made or money has been taken to the bank. If a voucher is missing, the user must prepare his own vouchers.

Last but not least, a counting log can help to confirm the accuracy of the information. The person keeping the cash register must sign (with date and name) the count. The time of the count must also be indicated.

The cash management with cashbooks from templates.

Cash register records can also be made using cash register books. These are integrated into certain programs from various providers. However, it is important that these comply with the legal requirements:

• All business transactions are traceable in view of their origin and development.
• All business income, all business expenses, deposits, and withdrawals are recorded.
• All business transactions are documented and orderly

The entries are made on the same day and at the latest on the following day and in German. It is important to list the gross amounts in euros. Incidentally, blank lines in the cash book are not permitted. Neither are entries made in pencil or illegible entries. Changes must be signed off.

Cash management with the help of cash registers

So-called computerized cash registers have become popular in recent years. These electronic cash registers automatically record all income and expenses. At the same time, they have different memories so that individual sales can be stored in different locations. At the close of business, the respective memory locations are retrieved. The cashier only has to print this out. The so-called Z-receipt, the end-of-day receipt with a printout of the zeroing counter, is then printed out. The following information can be found on the daily report:

• Company name
• date
• Time of the call
• Consecutive Z-number
• Customer number
• Reversal bookings
• Returns
• Payment methods
• Withdrawals
• Merchandise or division reports
• Other evaluations or financial reports

Cash register management with PC system

PC-based cash registers have unlimited memory, depending on the size of the hard disk, of course. This is convenient if the company wants to store all entries for years. This also happens in practice and is often used.

Retention and submission of records

Transactions are predominantly carried out via a cash register if the sales are generated by constantly changing customers. However, payments happen not only in cash but also by credit card or SEPA direct debit. These transactions and records must also be kept for a certain period of time. Generally, this is a period of 10 years. Retention is either as an accounting voucher or as other records.

Cash records

The individual recording of goods is not necessary if the products are of low value. However, cash register strips, sales slips, receipts, and other supporting documents must be kept.

Note

If results are entered into a cash book on the same business day, many entrepreneurs do not think of keeping note slips in this regard. However, this would be useful if cash deficiencies were uncovered by an audit. By means of notes made, the entrepreneur may be able to understand how it came to the correspondingly chalked up result on day X.

Digital records for cash transactions

Records of cash transactions created by the data processing system must always be available and viewable through the retention period. It should also be possible to evaluate the data by machine and read it easily.

Cash inspection - how do I behave correctly?

In the meantime, entrepreneurs must expect the tax office to suddenly appear at their door at any time. And even unannounced! These can accomplish completely individually a cash audit, which can be called Kassen-Nachschau (Cash inspection). To the tax office, this law change is to make it possible that discrepancies can be clarified faster. But how do I behave if an auditor suddenly knocks on the store door?

First and foremost, the auditor should of course be treated in the same way as customers are treated on a daily basis. After all, these people are only doing their job. But: In any case, ask to see the service card and make a note of the inspector's name and contact details. Entrepreneurs have the right to this in any case and it should be exercised. And now?

Ask the auditor for some patience. On what grounds? Without the consent of the tax advisor, you do not want to give out box office data. You can inform him about the visit of the auditor and ask whether he could be on site for the cash inspection. Of course, since these are unannounced inspections, it takes a bit of luck if the tax advisor is supposed to be on-site half an hour later.

If the tax advisor does not have time, you have to let the auditor access the cash register. He will make printouts and evaluate the data when he reads the cash register. You should keep exactly the same printouts that the auditor takes with him. Why? If the auditor finds any deficiencies, it is easier to react to them because you have the same documents.

Watch out for scams!

Good to know: A cash inspection does not cost any money and the auditor is not allowed to demand fees for possible tax arrears payments. Should he do so, inform the police immediately. Auditors sent by the tax office do not ask for money. You can otherwise assume that it is a fraud. Unfortunately, such cases do occur in practice and many people still fall for them.

Sources of errors in the cash audit

If the tax office finds errors in the cash management, it may estimate the income and expenses. If the extent of the deficiencies is small, however, it will not immediately come to the extreme. Typical errors should nevertheless be known in order to avoid them:

• Cash movements are accidentally recorded twice or incorrectly.
• Receipts are lost
• Entries without vouchers
• Private withdrawals without a receipt
• No timely recording of cashbook transactions
• Illegible entries
• An end-of-day receipt is not kept (applies to electronic cash registers)
• Hard cash was forgotten to count (also called coinage)
• Incoherent high cash balances over several months
• Negative cash balances
• Unreadable data files
• Important records were missing or not kept on time.
• Cash balances were always shown rounded up or down.
• Cash register software is not certified

If errors are found, of course, it always depends on the individual case. Those who do not keep proper cash books can, in the worst case, be threatened with criminal tax proceedings. Other sanctions are also conceivable.

Conclusion

Keeping a proper cash book is mandatory in Germany. According to new legislation, the tax office may carry out unannounced checks. It is therefore well worthwhile to deal with the issue of compulsory cash books and proper cash management at an early stage. In this way, mistakes can generally be avoided and audits can be survived. The type of cash accounting that best suits a company can be decided on an individual basis. However, the EDP variant is now widespread and established.