Some small businesses use the process of writing a check out for cash. While it’s best to write checks to individuals and not made out for cash, some small business owners may do this because it is easier. The problem is if you write checks made out to cash, you need to keep really good records since the IRS looks for the backup paperwork for these cash withdrawals when they do their audits. Keep in mind that we all need cash for various purchases if we work with cash often these steps will help you stay organized with your recordkeeping.
Here are 4 steps to record checks made out to cash to protect your business:
- After getting cash, place the money in an envelope. Write the day you withdrew the money so it will match up with your bank register.
- Add all the cash slips, gas slips, and invoices the check will associate with together in the envelope.
- Create a spreadsheet that includes the check number, date, amount, and all the associated payments for the cashed check. Print out the spreadsheet, staple the receipts to it.
- Create a file using the check number and date you wrote the cash check and place them with your other business files.
By doing these steps, it will help you have the correct backup records for an audit if you ever need it.
Visit these posts to get more information about cash transactions.
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