Due to rounding rules between items on your Sales and Payments reports, you may notice some 1 cent discrepancies between your Sales and Payments reports within the same period.
There are other cases where the Sales Report does not match the record of Payment collected. For example, when taking Cash payments. In this case, a Payment Type Solution has been applied and the Cash Rounding Payment Type will record the discrepancy against the account.
The article below explains why rounding discrepancies occur on your Sales and Payments reports. This will give you a better understanding of how the rounding discrepancy may affect your reporting and things to keep in mind when reporting on your store.
Background information
Before we take you through why there are rounding discrepancies between each product sold on your Sales and Payments reports, it is important for you to have a clear idea of the different terms used.
Sales Report: Gives a breakdown of daily totals over a period.
Sales: This is money that should be paid to the store when all sales are closed. These sales will all have been created between the opening and closing time of your store, but they do not represent how much money has been received within this register closure period.
Payments: This is the sum of the total amount of money that has been received by payment type.
Payment Report: Gives a breakdown of how much money has been received for each payment type in your store over a period.
Payment Type: Payment types are different methods in store to receive money. This can include Cash, Credit Card, Gift Card, On Account etc.
Cash Rounding Payment Type: This is a feature in Retail POS that lets you pick different rounding denominations and rules depending on your country's currency. For more information on Cash Rounding in Retail POS, click here.
Revenue: The total value of sales in the specified period.
Retail Price: The price of a product when it is sold to a customer.
Liabilities: A liability is an obligation to pay in the future. On Account, Store Credit, Gift Cards or Loyalty are recorded as liabilities and not payments in Retail POS.
What does the Rounding Discrepancy look like?
Now that you have an understanding of the terms we are about to use, let's look at what this rounding discrepancy may look like on your Sales and Payments reports.
Processing a sale in store.
If you process two sales in store, each with 1 of these products the price will be:
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67.91981 + 4.07519 = 71.995 (Corresponding Payment Amount = $72.000000)
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67.91981 + 4.07519 = 71.995 (Corresponding Payment Amount = $72.000000)
The total on your Sales Report will be $143.99.
The total on you Payments Report will be $144.00.
Generally, these two figures should match; however, as you can see from the Sales and Payments Report above, they do not.
Retail POS does not automatically record this revenue discrepancy, due to the Rounding Rules that are set in place in Retail POS itself.
What are the Rounding Rules set in Retail POS?
In Retail POS, everything is stored to 5 decimal places, except for Payments, which are rounded to 2 decimal places. This is because payments are based on making purchases, and generally, when making purchases, everything is rounded to 2 decimal places.
However, retail prices and things like taxes are not rounded to 2 decimal places as this could cause quite a discrepancy.
Why does this happen?
Both the Sales Report and Payments Reports have very clear reporting lines.
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Sales Reports shows the net sales Revenue that you collect in store. This means that the sales report shows gross revenue minus discounts, allowances and returns and is based on the retail price of products recorded on Retail POS.
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The Payments Report shows how much money has been received for each payment type in your store over a period. Therefore, it shows, revenue as the Amount Owed and is recorded at the point of time the amount is owed, and not when it was paid (as in at the time of sale). As mentioned above, as Payments are based on money received, Payments are rounded to 2 decimal places for a purpose.
How does this work with Xero?
We currently solve this for Xero integrated customers by running some code to figure out what the payment discrepancies are. This is then posted to your Till payment discrepancies account on Xero when you post your Register Closures.
What can we do about the rounding discrepancy?
As mentioned above, for Cash Rounding, Retail POS has the ability to create a Cash Rounding Payment Type solution. However, because of Materiality, the same has not been applied to the rounding discrepancies between Sales Reports and Payment reports.
Materiality is an accounting concept that relates to the importance of recording an event or transaction. Accounting rules state that when you are dealing with large sums of money and rounding to the nearest decimal, do not round if rounding the sum would affect its materiality. Therefore, if the general information is correct and your reports are not materially misstated, the transaction can stand as it is.
As the rounding discrepancies between your Sales and Payments reports will always be plus or minus 1 cent, these discrepancies are far below any retailer's materiality and can stand as it is.
What happens now?
The only thing to do when faced with rounding discrepancies is to note the following:
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The only way that you would not expect a discrepancy is if you were operating on a cash basis and did not offer On Account, Store Credit, Gift Cards or Loyalty, which would be recorded as liabilities and not payments.
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The figures in both your payments and revenue are correct and accurate. They merely display the accuracy available for each figure.
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These rounding discrepancies are normal and expected by an accountant. If you require more information, get in contact with an Accountant who will be able to offer you more advice on this.