Cash over short: what it means and how to find the cause

Cash over short (also written cash over and short, or cash over/short) is the ledger account that records the difference between the cash a drawer should contain and the cash it actually contains at the end of a shift or day. It is an ordinary line in every retail and restaurant chart of accounts, and it is expected to move a little every day.

The formula

A positive result is an overage (more cash than expected); a negative result is a shortage. Most bookkeeping software shows it as a single account with debits for shortages and credits for overages.

The journal entry

At month end the account nets out. Small totals in either direction are normal; a shortage that grows month over month, or one that clusters on particular shifts, is the signal worth looking into.

What is a normal amount?

Most operators tolerate a few dollars per drawer per day. Common house rules are a variance under $5 or under 1% of cash sales for the shift. Persistent shortages above that, or a variance that appears only on certain days or registers, is where the review starts.

Where the difference usually comes from

A drawer variance is a symptom. The transactions that produce it fall into a small number of types, and each one leaves a record in the point-of-sale system.

• Change-making errors. The most common cause, and the least patterned: overages and shortages roughly cancel over time and are spread across staff.
• Cash refunds without a matching return. A refund recorded against a cash sale removes cash from the drawer. If the refund was not for a real return, the drawer is short by that amount. Look at refunds issued close in time to the original sale, and refunds with no receipt or customer attached.
• Voids after payment. A sale that was paid in cash and then voided leaves the cash in the drawer but removes the sale from expected cash. Voided-after-payment transactions should be rare and explainable.
• Discounts applied after the customer paid. A discount added to a completed sale reduces the expected cash while the full amount was collected. Large or frequent discounts on one employee's login are worth matching against the promotions that were actually running.
• No-sale drawer opens. Opening the drawer without a sale is needed to make change, but a count of no-sale opens per employee per shift that is far above the store's average is a pattern to compare against the shift's needs.
• Open checks left unpaid. An order that was served and never closed leaves expected cash short of counted cash only if the cash was taken; more often it simply shows as an open check at close. Either way it is an entry to reconcile.
• Paid-outs and float errors. A supplier paid from the drawer without a paid-out entry, or a float counted wrong at open, produces a one-time variance that is easy to trace once you look at the day.

How to find the cause in an afternoon

1. Pull the cash log for the day: opening float, cash sales, cash refunds, paid-outs, and the closing count. Recompute the variance yourself; a surprising number of "shortages" are arithmetic.
2. List every refund, void and discount for the day with the employee login, the time, and the original sale time. Anything within minutes of its original sale, or after the customer paid, goes on a short list.
3. Count no-sale drawer opens by employee and compare to the shift: a busy cash shift might need a dozen; a quiet card-heavy shift should need few.
4. Repeat for the last 30 days and compare each employee's refund, void and discount rate with the average of the other non-manager staff. Managers legitimately do more of all three, so keep them out of the comparison.
5. Talk to the people involved before drawing any conclusion. Every pattern above has ordinary explanations: a promotion, a returned item, a manager approving a comp, a new hire making change. The records tell you where to look, not what happened.

Frequently asked

Is cash over short an expense or income?

It is usually classified as an expense account (a miscellaneous or operating expense). A net overage for the period simply reduces that expense; some businesses present a net overage as other income.

Should employees be charged for shortages?

Deducting shortages from wages is restricted or prohibited in many US states and Canadian provinces, and in several it is unlawful for tipped employees. Ask an employment lawyer in your jurisdiction before adopting any such policy.

How often should drawers be counted?

At every shift change and at close. Per-shift counts are what make the variance attributable to a shift instead of to a whole day.