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Unreconciled Cash Balance

Unreconciled Cash Balance


A client runs a pub through a limited company and has poor controls over the cash in the till in that he pays suppliers etc from the till cash. This has resulted in a difference between recorded sales and the cash entering the business (after accounting for credit card payments and receipts from suppliers who were paid in cash). I am assuming that he takes cash out for herself but he denies this. I have indicated to him that if HMRC rock up and audit they will assume the difference is his takings and charge him penalties for unpaid NIC's etc.

However at year end this amount is still unreconciled and needs to be allocated somewhere in the accounts. The previous accountant simply allocated it to 'cash wages paid' but I am reluctant to do that because of NIC's and that.

Any advice as to what I should do? (apart from resigning as the accountant which i am considering)


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By neileg
12th Dec 2011 11:58

What advice have you given?

It's customary to have a till reconcilliation sheet of some form for any retail operation. Have you helped your client by providing a template?

HMRC will assume that any cash underages are drawings, a view I have a lot of sympathy with. I certainly wouldn't be treating this as any unsubstantiated expenses.

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to cheekychappy
12th Dec 2011 12:09

Reconcilations and systems

neileg wrote:

HMRC will assume that any cash underages are drawings, a view I have a lot of sympathy with. I certainly wouldn't be treating this as any unsubstantiated expenses.

I wholeheartedly agree with you there. I did provide the client with reconciliation sheets and systems on how each staff member should handle cash but he wont use them - citing time constraints and other issues. Having spent many years as a waiter, owning my own restaurants and setting others up - I know what works and what doesn't and they are not onerous. 


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12th Dec 2011 12:10

Par for the course

This is the small change of being an accountant in practice and dealing with clients such as this. If you resign from every job like this, you will end up with few clients.

The situation you describe is not uncommon and we can all sit here and get our collective knickers in twists over VAT penalties and money laundering issues and as much good as it will do us.

Is it outwith the realms of possibility that the cash shortage is from cash wages? Depending on the amounts earned & by whom, it is possible that there would have been no tax/NIC due.

Warn the client about the dangers you have outlined from HMRC, offer to provide payroll services to help, don't expect him to take a blind bit of notice and prepare for more of the same next year.  






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12th Dec 2011 12:25


If cash is spent, and no records maintained or proof of business expenditure, then I don't see why it would go anywhere but drawings.

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12th Dec 2011 14:17

This is one reason I won't

This is one reason I won't take instructions from pubs and takeaways

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12th Dec 2011 14:42

Director's loan

The client is responsible for the money in the till. If there's no sensible explanation given then I would debit the money missing as director's loan.

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14th Dec 2011 10:59

Might wake him up...

If you insist on treating it as his drawings that might perhaps wake him up to the importance of getting supporting documentation for till shortages in future.

On the other hand if he is intransigent, remember that the accounts are ultimately the responsibility of the directors, so you could treat as wages BUT make sure you get very solid documentation that you advised otherwise and that he accepts the responsibility and any consequences. I'm assuming that there's no audit involved?

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14th Dec 2011 11:42

Cash difference

Is there any mileage in the suggestion that part may be to poor ringing up of sales!  Otherwise I agree drawings/ directors loan account.  Good Luck

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14th Dec 2011 11:55

my method

My method to these fairly common situations is as follows:

1.  Ask for the names, addresses and NI numbers of those people to whom money was paid, and roughly the wages paid.  In my experience if the guy is legit but just keeping poor records, he or she can still come up with names.  Because I stress the importance of these details even for casuals, my clients all know they need to get them.

2.  I then direct the client to the part of my website which deals with cash control, and the spreadsheet methods I will have sent no doubt several times.

3. In the close out letter I mention the cash "black hole" as a key risk area.  If the client has elected not to go for fee protection insurance, I strongly recommend that they buy it stressing the fact that any HMRC visitor worth his or her salt is going to zero in on cash and not let go of it in a hurry.

Confronted with this lot, I have several retail clients who've suddenly upped their game and taken steps to eliminate the black hole.  But if I am not convinced there have been any wages paid, the difference goes to the director's account.




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17th Dec 2011 01:26

Missing cash = wages?

I assume you do the wages for the Co as well. If so, you can only allocate cash to wages for those employees he has made you aware of. If you still think he may be genuine then you shld be able to do an exercise to gauge how many staff he has on board at any time (taking into account weekly and seasonal fluctuations) then compare this with the wages records. If there seems to be a diff then the client wld still need to provide you with details of additional staff he may have taken on (he shld be providing you with details on an ongoing basis anyway.) It's probably an issue of the previous accountant doing a dodgy "stick it to wages" and now you're accounting for the issue properly the client doesn't like the sound of the truth. There may not be any more liability to tax for the client if it is treated as a dividend so you cld sell it to him on that basis. What is the wages figure compared to previous years, is it likely to raise ?'s from HMRC?

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