Cash float: what it means, how much to keep in the till, and how to record it in Xero

Short answer: a cash float means one of two things. In a shop, café or market stall it is the till float: a fixed amount of notes and coins put in the till at the start of the day so you can give change, for example £150. At the end of the day you count the till, keep the same float back for tomorrow, and bank the rest. The float is still the business’s money, so in Xero it is a small current asset, not an expense, and its balance should stay the same every day. In finance, “float” also means the timing gap between a payment being made and the money arriving or leaving the bank: card takings that settle two days later, a payout from your card provider net of fees, a cheque not yet cleared. That gap is often why the bank balance today is lower than the sales you took.

The till float: how much to keep

There is no right amount for every business. Size it from your own change needs, not a rule of thumb:

1. Think about the first hour or two of trading. You need enough change for the first customers before cash sales start refilling the till.
2. Look at what customers pay with. If most of your cash customers hand over a £20 or $50 note for a small purchase, you need more £5 and £10 notes (or $5, $10 and $20) and fewer coins.
3. Keep it the same every day. A fixed float makes the cash-up a simple sum and makes a shortfall obvious.
4. Keep it as small as works. Cash in the till is cash not in the bank, and it is the cash most exposed to loss or theft. If most customers pay by card, a smaller float usually does the job.

A £150 float for a small UK café, as an example:

Denomination	Count	Value
£10 notes	4	£40
£5 notes	8	£40
£2 coins	10	£20
£1 coins	20	£20
50p	20	£10
20p	50	£10
10p	50	£5
5p	60	£3
2p	50	£1
1p	100	£1
Total		£150

In Australia there are no 1c or 2c coins and cash totals are rounded to the nearest 5c, so an Australian float starts at 5c pieces.

A worked example: the end-of-day cash-up

The café opens with its £150 float. During the day the till system records £468.90 of cash sales, and £6.50 is taken out of the till to buy milk, with the receipt put in the drawer. At close the till is counted: £607.40.

Line	Amount
Float at the start of the day	£150.00
Plus cash sales (from the till report)	£468.90
Less paid out of the till (milk, receipt kept)	−£6.50
Cash that should be in the till	£612.40
Cash counted	£607.40
Over or short	£5.00 short
Less float kept back for tomorrow	−£150.00
Cash to bank	£457.40

Three habits keep this clean. Count the float back out first, in the same denominations, so tomorrow starts with exactly £150. Bank the rest rather than letting the till creep up. And record the £5 shortfall rather than topping it up from your own pocket: one £5 day is noise, but a shortfall most days on the same shift is a pattern worth looking at.

How to record a till float in Xero

Setting up the float (once). Create an account for it: either a current asset account called something like “Cash float” with Enable payments to this account ticked, or a manual bank account with no bank feed. Then record the £150 moving into it from the business bank account, as a transfer or a Spend Money against the float account. On the Balance Sheet it sits with your other cash and current assets, and it stays at £150 as long as you keep the float fixed.

Each day’s takings. For the café’s day above, the entries are:

What	Account	Amount
Cash sales	Sales (with VAT or GST as it applies)	£468.90
Milk paid from the till	General expenses or cost of sales, with the receipt	£6.50
Till shortfall	A “Till discrepancies” or “Cash over/short” expense account	£5.00
Banked	The business bank account, matched to the deposit on the statement	£457.40

The check: £468.90 − £6.50 − £5.00 = £457.40, so everything taken in is accounted for and the float account is still £150. Many till and point-of-sale systems post a daily sales summary to Xero for you; some, such as Lightspeed Retail (formerly Vend), post a register closure that carries the float, cash movements and discrepancies, and expect a cash float account to exist. Either way, the deposit that reaches the bank should match the “cash to bank” figure from the cash-up, so it reconciles in one line.

Changing the float. If you raise it from £150 to £200, record another £50 into the float account from the bank. If you stop holding cash, bank the float and the account goes back to zero. A float account that drifts away from the agreed amount means a day’s takings were coded to the wrong place.

The other float: the timing gap before money reaches the bank

Card and online payments rarely land the day you take them. Suppose the café takes £2,340 on cards on a Saturday. The card provider pays out on Tuesday, after a fee of, say, 1.5% (£35.10), so £2,304.90 reaches the bank. On Sunday night the sales are real but the bank shows none of them: for three days, £2,304.90 is “in float”.

The clean way to handle this in Xero is a clearing account (for example “Card payments clearing”):

1. Record the day’s card sales of £2,340 into the clearing account, not the bank.
2. Record the £35.10 fee from the clearing account to a bank or merchant fees expense.
3. When the £2,304.90 payout arrives, reconcile it as a transfer from the clearing account to the bank.

The clearing account goes back to zero once every payout has landed. If it keeps a balance, a payout is missing, a refund or chargeback was not recorded, or fees were not split out. Recording the payout as sales instead hides the fee and understates sales by the same amount.

Timing float matters most over weekends and holidays, at month end (sales are in the profit and loss but the cash is still in transit, one reason the bank balance can be lower than the profit), and when a bank balance in Xero looks wrong. Money in transit is one of the gaps the bank balance doesn’t match guide walks through.

Float, petty cash and cash flow: not the same thing

• Till float: change for customers. A fixed amount that comes back every night.
• Petty cash: a small fund for small business purchases (milk, stamps, parking). It is spent and topped up, with receipts, so its balance moves. Keep it separate from the till if you can, so the cash-up stays simple.
• Cash flow: all the money coming in and going out of the business over a period. A float is a tiny part of the cash you hold; the cash inflow and outflow examples show what the full picture looks like, and the 12-month cash flow forecast shows where the bank is heading.

Common questions

What is a cash float? In a shop or café, it is the fixed amount of notes and coins put in the till at the start of the day so you can give change. In finance, float also means the delay between a payment being made and the money being available in the bank, such as card takings that settle a few days later.

How much should a cash float be? Enough change for the first hour or two of trading, sized to the notes your customers usually pay with. A small café might use £100 to £200, but the right figure depends on how many customers pay cash. Keep it the same every day and as small as works.

Is a cash float an asset or an expense? An asset. The float is still the business’s cash, so it sits on the Balance Sheet as a current asset (or a cash account) and stays at the same amount while the float is fixed. Only cash actually spent, or a shortfall, becomes an expense.

How do I record a till float in Xero? Create a “Cash float” current asset account with payments enabled, or a manual bank account, and record the float into it from the business bank account once. Each day, record cash sales, anything paid from the till and any shortfall, and reconcile the banked amount to the deposit on the bank statement.

What do I do if the till is short? Record the shortfall to a till discrepancies expense account rather than topping it up from your own money, and keep the float at its fixed amount. Watch for a pattern by day or shift, which tells you more than a single short day.

Why is my bank balance lower than my takings? Usually timing float: card and online payments settle a day or more after the sale, and arrive net of fees. A clearing account in Xero shows how much is still in transit and makes the payouts reconcile.

See the cash, not just the till

The till tells you about today. ReportPilot reads your Xero figures and sends a short plain-English email every Monday: cash in the bank and how it has moved since last month end, how sales and net profit compare with last month, who owes you and how much is overdue, and bills due soon. Its dashboard shows 24 months of sales, profit, cash and money owed to you by month. It asks Xero for read-only access, so it can read your accounts but never change them, and there is a 14-day free trial with no card.