Paying out tips (cash/check/card) and closing drawer for a solo employee

[Salon4]

I am the owner and sole employee of a salon. I accept cash, checks, and credit cards, and receive tips within all of those payment types. I would like to receive all of my tips in cash when I close out the drawer. Based on what I have learned from other threads, when I receive a tip via cash or check, I plan to just take the extra cash out at the point of sale, or wait until I close out the drawer and just take the cash overage when closing the drawer. But, how are tips via credit cards to be handled in that scenario? I understand from reading other threads that my credit card tips will be deposited into my bank account along with the true payment amount. How do I know my tip total (cash/check/card) when I close out the drawer and how to I receive it without making my drawer unbalanced?

Is the following process correct?

1. Add up the cash and checks in the drawer (this tells me sales and tips for cash/check).
2. Identify how long the drawer has been open.
3. Generate a sales report for that same time period.
4. Go to “Sales by Payment Types” section of the Sales Report and manually add together the totals for “Cash” and “Other” (this tells me sales for cash/check).
5. Manually calculate tips from cash/check by subtracting cash/check sales (from step 4) from cash/check sales and tip (from step 1).
6. Remove that amount of cash from the drawer to receive cash/check tips.
7. On Sales Report, identify “Tips (non-cash)” amount (this tells me my credit card tips).
8. Do a “Pay out” transaction for the “Tips (non-cash)" amount to receive credit card tips.
9. Then close the drawer.

This involves many steps, several manual calculations, and tipping myself out twice each time I close the drawer. This seems unnecessarily complicated. Please help!

[TheRealChipA]

Hi @Salon4.  Tipping as Square has implemented it was not designed to handle your situation easily.  This is because Square built tipping to conform to laws about tipped employees and being sure that we stay legal with all of the tipping regulations out there.  Depending on our particular situation with either direct tips or tip pools, tips are calculated for each employee and reported on their timesheets, as required by law.  You have a highly unique situation. But the procedure you have outlined covers all of the bases. And there is really no way to streamline it much, if at all.  You have to accomplish three things — determine extra cash is in the drawer (cash tips), determine the card tips, add those together and do one cash out before you close the drawer.  The steps you have do that, and I can’t think of a better way, really.

Also, you have actually missed at least one important step.  You haven’t mentioned that you are adding your cash tips to your sales for the day.  Since those need to be accounted for as income to you, you’ll need to do that as well.  Credit tips are already reported to the IRS at the end of the year on your Square 1099.  Since you have no tipped employees, the IRS will automatically consider those taxable income to you, so that part is covered.

I’m sorry I can’t be of more help, but truly you seem to be doing what you need to do in your situation.  Still, I’m happy to answer any other questions you might have.

Regards,