Cash handling policy template: Best practices and procedures

Ensuring secure and efficient cash handling isn’t just about avoiding theft—it’s about preserving trust, accuracy, and your bottom line. In this guide, you’ll find everything you need to implement a robust cash handling policy, from preventing cash discrepancies to streamlining daily reconciliations.

We’ll cover what a cash handling policy is and why it’s essential, how to create a comprehensive cash handling policy, best practices for secure cash management, a sample cash handling policy template you can customize, and the consequences of poor cash handling practices.

What is a cash handling policy?

A cash handling policy is a set of guidelines that defines how cash is collected, stored, and handled through cash deposits within an organization. It safeguards business funds, reduces errors, prevents fraud, and ensures compliance with regulatory standards. If your business handles cash—whether through in-person transactions or donations—a cash handling policy is vital.

Who needs a cash handling policy?

Any business, regardless of size or industry, can benefit from a cash handling policy, whether you handle physical cash, credit card transactions, or both. A well-defined policy helps safeguard cash and improves the overall financial integrity of the business by establishing clear procedures for cash management.

Small businesses need a policy to track daily cash flow and prevent theft or discrepancies, especially when managing business expenses across multiple categories. With limited resources, it’s crucial for small businesses to have a clear structure to monitor cash movements and avoid financial errors or potential fraud.

Retailers rely on cash handling procedures to manage sales transactions, deposits, and reconciliations. These procedures help retail operators record each sale accurately, deposit cash in a timely manner, and catch any discrepancies during reconciliation while maintaining proper accounting practices.

Nonprofits use these policies to handle and track donations. The rules also allow them to record contributions and deposit them, maintaining transparency and accountability to their donors and regulatory authorities.

Restaurants need a policy for tracking tips and cash payments for proper accounting. Tips and cash payments are common in the restaurant industry, so they must be tracked accurately to maintain proper financial records and support fair compensation for staff.

Key goals of a cash handling policy

A cash handling policy has four main goals:

1. Security: Protects funds from theft and fraud
2. Accuracy: Reduces errors and discrepancies in cash management
3. Compliance: Ensures the business adheres to tax and financial regulations
4. Accountability: Defines clear responsibilities for cash handlers and processes

Why a cash handling policy matters

A cash handling policy is essential for protecting your business from significant risks like theft, errors, and non-compliance. Without a clear policy, businesses are vulnerable to financial discrepancies and fraud. A policy safeguards cash assets, ensures legal compliance, and promotes a transparent environment.

Risks of not having a policy include:

• Theft: Cash is vulnerable when businesses don’t have proper internal controls. Whether it’s theft by employees or external parties, lack of a policy makes it easy for cash to go missing. A clear policy reduces the chance of theft by setting strict handling procedures.
• Errors: Without a structured process, employees may miscount cash or fail to record transactions correctly, leading to discrepancies that can impact your budget management and overall financial accuracy. These errors can cause financial losses and be difficult to trace. A policy ensures documentation and reconciliation to catch discrepancies early.
• Non-compliance: Failing to meet IRS requirements or GAAP standards exposes your business to penalties. Without a cash handling policy, you risk not a lack of proper records, which could lead to audits or legal issues. A policy ensures adherence to legal and financial reporting requirements.

A strong cash handling policy’s benefits include:

• Trust building: A solid policy builds confidence among employees and customers, showing that your business is committed to financial integrity and transparency
• Discrepancy prevention: Regular audits and documentation decrease the odds of your operation suffering cash shortages or overages, minimizing the risk of errors and fraud while supporting your expense management strategy
• Improved efficiency: Streamlined processes reduce manual errors and make tasks such as bank deposits and cash reconciliations more efficient, saving time and resources while improving your overall financial management approach

How often should you audit the register?

Audit frequency depends on the volume of cash you’re handling, but regular audits are essential for preventing discrepancies and ensuring accountability. Most businesses audit cash on a daily or weekly cadence:

• Daily audits: Ideal for businesses handling large sums of cash, such as retail stores or restaurants. You should perform audits at the end of each shift to verify cash totals.
• Weekly audits: For businesses with less frequent cash transactions, such as nonprofits, weekly audits are sufficient to maintain accuracy and oversight

Should you use dual custody for large cash amounts?

Dual custody requires two employees to be present when handling large sums of cash, whether it’s being counted, transferred, or deposited. This practice significantly reduces the opportunity for theft and fraud.

When to use dual custody

Dual custody is most applicable in the following situations:

• Cash transfers: For large deposits, such as moving cash from the register to a bank account
• Cash counts: When counting large sums of cash, dual custody promotes accountability

Benefits of dual custody

Requiring two people to be involved reduces the risk of theft. If discrepancies arise related to cash handling, it’s easier to identify the source of the problem because both employees are responsible for the transaction. It also improves overall accountability within the cash handling process, as both individuals are required to sign off on all cash movements, reducing the chances of errors or intentional fraud.

Cash handling best practices and procedures

Here are the key procedures for handling cash securely:

1. Cash acceptance

When accepting cash, verify large bills for authenticity using tools such as counterfeit pens, UV light, or specialized detectors. Every cash transaction should be properly documented with cash receipts, cash count sheets, and signatures from both the person handing over the cash and the recipient.

Record every cash transaction and money order acceptance via a cash register, POS system, or manual logs. This supports transparency and accountability for each transaction.

2. Secure storage

For proper safekeeping, store cash in locked drawers or safes to prevent unauthorized access. Access should be restricted to authorized personnel only. If multiple employees are handling cash in the same area, it’s important to use segregation of duties to ensure no one individual is responsible for all aspects of cash handling (receiving, storing, counting, and depositing cash).

Also, establish a separate petty cash fund for small business expenses, stored in a locked drawer or safe with restricted access. Maintain a petty cash log to track all disbursements and receipts.

Key management should be part of the policy so safe combinations and cash drawers are accessible only to specific, authorized individuals. These access controls should be clearly defined in the policy.

3. Documentation and recording

Record every cash transaction via a cash register, POS system, or manual logs, similar to how you would track and manage expense reports for proper documentation. Each transaction should include specific details such as the amount, date, time, and involved personnel.

When making deposits, be sure to complete and retain all deposit slips for reconciliation purposes. Perform regular reconciliations and confirm that physical cash matches the recorded totals.

Common cash handling procedures by industry

A comprehensive cash handling procedure ensures your team manages cash securely and efficiently from collection to deposit. Here's how to implement it in your business:

• Retail: Assign each cashier a dedicated cash drawer for accountability. At the end of each shift, reconcile the cash and address any discrepancies immediately.
• Restaurants: In restaurants, handle cash from tips separately. Track both cash payments and tips carefully to make sure you account for all cash at the end of each shift.
• Nonprofits: Record donations using receipt books or POS systems. Reconcile regularly to properly track and deposit donations.

Cash handling policy template

Here’s a sample policy outline you can adapt for your business:

1. Purpose

To protect cash assets, reduce errors, and ensure compliance with financial and regulatory standards.

2. Scope

This policy applies to all employees involved in cash handling, including cashiers, supervisors, and managers.

3. Responsibilities

• Cash handlers: Responsible for accepting, storing, and transferring cash accurately
• Supervisors: Ensure policies are followed and conduct regular audits
• Managers: Oversee the implementation of the policy and address any issues

4. Procedures

1. Cash collection: Document all cash transactions using cash receipts and cash count sheets
2. Storing cash: Store cash in locked drawers or safes. Only authorized personnel can access cash storage.
3. Depositing cash: Deposit cash regularly within one business day, in keeping with a deposit schedule based on the amount of cash collected
4. Reconciling cash: Conduct daily audits to ensure cash totals match the records
5. Processing voids: Require supervisor approval for all void transactions, document the reason, and be sure to obtain all authorization signatures before completing the void

5. Compliance

All cash handling activities must comply with relevant laws and regulations, including tax requirements.

Consequences of poor cash handling

According to the Association of Certified Fraud Examiners (ACFE) 2024 Report to the Nations, organizations lose approximately 5% of their annual revenue to occupational fraud. Asset misappropriation, which includes cash theft, represents 89% of all cases. These figures underscore the importance of implementing robust cash handling policies to mitigate the risks associated with fraud.

Risks include:

1. Theft

Without clear procedures, cash is vulnerable to theft, whether by employees or external parties. Internal theft is a common issue in businesses that lack strong internal controls. Employees may take advantage of weak or unmonitored cash handling practices. Additionally, external parties, such as burglars, may target businesses that don’t have secure cash storage or access control systems in place.

2. Financial loss

Discrepancies in cash handling can lead to significant financial losses. Errors in cash transactions, whether from miscounting or improper documentation, often go unnoticed and can accumulate over time. If not caught early, small discrepancies can lead to major financial problems for the business. Inaccurate cash reconciliation also impacts financial reporting, making it harder to assess your business’s health.

3. Damaged reputation

Failure to handle cash securely can damage customer trust and tarnish your business's image. Customers expect businesses to manage their transactions transparently and securely.

If a business is known for poor cash handling procedures or fraud incidents, it can erode consumer confidence and lead to customer loss. Word of mouth and online reviews can quickly spread the news, causing long-term reputational damage.

4. Legal issues

Businesses that don’t comply with regulations may face fines or legal action. For example, failure to adhere to IRS cash reporting requirements can lead to audits, penalties, or criminal charges. Non-compliance with GAAP or other financial standards can also mean legal consequences.

Manage your cash more effectively with Ramp

Staying on top of your cash flow can be tricky when done manually, but automation makes the process much easier. Ramp’s best-in-class finance operations platform offers automation features across accounting, expense management, and accounts payable to help you manage cash more effectively.

Ramp integrates with popular accounting software like QuickBooks, Xero, and Sage Intacct and automatically syncs every transaction to your GL. This empowers you with accurate, real-time financial records that ensure your cash handling is always transparent and traceable—critical for audits and financial reporting.

Whether you're a small business or a growing enterprise, Ramp’s accounting automation software is built to scale with you. Turn your cash handling procedures from a potential risk into a competitive advantage with Ramp.