For example;
All Wal-Marts are corporate owned and based in Arkansas.
Does headquarters touch the money from every store? How are the funds made from Idaho, Minnesota, China, and Mexico all pooled together?
Does the store manager at store #2345 deposit the daily sales into a local bank, and then corporate Wal-Mart wipes the account at the end of the day?
Or does the money stay local, and then corporate takes a cut off the top of annual sales much like a franchise would work?
In the UK, all the stores would simply bank the cash (I assume you are talking about cash) into the corporate bank account. A security van would collect it and take it to a clearing house where the paperwork would get done. Of course over here, the vast majority of the takings would be through debit and credit cards anyway.
To a company like Walmart, money is only numbers in a bank account. How the actual dollar bills are handled is irrelevant.
For CC and Debit transactions they could all flow into one account no problem.
But my main question is, with cash sales how is that handled? A typical Wal-Mart store must do a pretty sizable amount of cash deposits.
I can’t answer your bigger question, but for this… businesses sometimes have daily deposit accounts just wherever’s closest/easiest/safest to bring the cash and checks. Then they write a check off it or in whichever way transfer it to the bank where they hold their operating accounts. But this is another step that costs money and makes cash management harder–good cash management is itself (in a sense) profitable and relies on getting your money in your “pocket” now and paying that money out at a small delay.
Research cash management for more info, it’s not super complicated. The principle is basically bank your money as early as possible and pay your expenses as late as possible.
I don’t work in retail but here’s the daily life of cash as I understand it:
The let’s-call-them retail cashier counts out the drawers with the cash expected to be needed. Periodically a manager will take excess cash and large bills and replenish quarters, fives, etc if necessary. (Some places still have timed safes to replenish if at night and so on.) At the end of the day drawers are counted and balanced. Earlier, at the end of the business day, the cash that’s excess or not in use is brought to the bank. The highest ranking person possible is the one who does the bank run. When they do, they’ve often called in a change order to get the denominations they’ll need for drawers and ATM. (If the person in charge of the money mutts and cleans the bills personally, they’ll get change orders less often.)
So at this point, the money is in the bank, and cash is money TODAY and making a tiny bit of interest in a money market account, possibly jumping between different accounts maybe at different banks to make a tiny bit more interest, disbursed as needed into expense accounts and on payday into payroll accounts, jumping around the company, its banks and subsidiaries, and it’s a flurry of pieces of paper and imaginary numbers! If everybody keeps good track, the system won’t collapse under its own weight and a small number of people will buy a yacht!
I’ve worked and been manager at some big box retailers, and some box retailers also. And a lot of the cash procedures are the same.
Depending on the size of store, the day to day banking will either be done with a local bank or a bank using an armored car service.
Every day the previous day’s receipts are totaled and reported somewhere, whether it is reported in a company wide reporting system or a local ledger book. There is then a corresponding bank deposit with all the cash and checks. Electronic transactions are part of the day’s sales, but are not processed manually like cash and checks. Each store has its own internal procedure on cash processing. There may be one big deposit of all the registers, or it may be a bunch of little deposits by each registers sales.
A Walmart or Home Depot has daily armored car service, and there is a deadline to have the deposit ready.
In one little grocery store I worked, there would be multiple little deposits dropped in the night depository box at the bank a block away, then the owner would go to the bank the next day and officially deposit the money.
A medium sized store may have a safe to hold its sales and a manager on duty may have the responsibility to make daily cash deposits.
Once the money is in the bank, it is easy to move it around electronically.
The change is handled separately, but similarly. Each store has a set change amount - some stores call it a change bank, a change drawer – for its store. It may be $500 or $50,000, but the amount stays constant. As change is needed during the day, and individual register may “buy” change from the drawer, and when the cashier is counted out, excess change may be sold back to the change drawer, but again, the amount stays constant in that drawer.
Each day the head cashier or person in charge will balance the drawer to make sure it balances and will place a change order from the bank if needed. If you are a little store, the manger buys change when the banking is done in person each day, or if you use an armored car service, you have to place an order for your change. You get your change when the car comes to get your deposit.
Each store has security procedures along the way to protect the cash and identify fraud.
Any other questions?
Each location of a chain typically maintains an account at a nearby bank*. Each business day, they deposit all the excess cash taken in into that account, and they use it to take out the coins and bills they need for the next day’s change. They might also deposit checks received into this account. if that account balance gets too large, money is transferred out to a corporate account.
But they don’t use that account for much else. Payments to suppliers and wages to employees are paid via checks/e-checks from another, corporate account in a different bank.
*usually, this is NOT a local independent bank, unless there is no other bank nearby. Chains would prefer to deal with a branch of a national bank, like Wells Fargo, etc. (I presume they have some agreement with them to get specially reduced fees from their branches.) One of the complaints against chain stores is that the money doesn’t stay in their community. It stays in the local bank only temporarily, and then is transferred to a corporate account. And profits from the store go to owners at corporate headquarters. Nothing much stays in the community.
I’ve worked big box retailers and they always used armored car service that picked up the money from a back room location that had a safe.
I’ve also worked in small mall stores. There the closing manager and a closing associate took the money to a bank and dropped it into the night depository.
In banking we called them “payable thru” accounts. A business dumps the money in it every night and pulls the funds every day for transmission to where they actually bank. They were a pitb because they call the bank when the numbers don’t match their reports and it was always one of their branches - they report depositing the wrong amount, don’t make the deposit pickup deadline or don’t drop it off. For one role I had, these calls were the first couple of hours of my day.
It would seem to me to be simpler for accounting to have a single account for each store (for a very large store like Walmart) or one account for the municipal area or state for smaller chain stores. Simply tracking all the deposits can be difficult if all the Walmart deposits go into one account for the entire USA.
For cash (change, etc.) often with modern bank machines dispensing 20’s, many stores need to buy smaller denominations from the bank. For some, this is through their local account, for others, there is a central account to order change from.
Basically, I assume the short answer is - how good is the bank-reconciliation and store till-management software. People I know in the business have to update their till counts, enter over/under counts, and enter deposits into a computerized system. This would allow the central office to match up deposits from a dozen or more stores against transactions through a single account.
many McDonald, for example, are franchises; and the central corporation gets their “rake-off” (advertising and franchise fees, percent of sales, etc.) by an amount paid regularly by the owner/operator from their own business’s account.
Many very large stores have a branch of a large bank within them, and can make frequent, smaller deposits. The bank then worries about the security of the cash and when it’s best to transport it elsewhere.
For other large stores, cash pickup and change drop-off is done with an armoured car service. All those guys driving around aren’t just transferring cash from one bank to another. Nowadays so much buying is done with credit and debit that cash handling is a lot less of an issue for stores; but many have a policy to collect from tills whenever they hit a certain amount (i.e. no more than $1000 in till). The 7-11 stores I’ve seen, to foil robbers, have a timelock safe where they deposit envelopes when they hit more than $X (some small amount, about $200 I think) and only the armoured car service can open it, on a timed lock. the safe also can spit out change if the till runs low - preprogrammed $20 change capsules.