How do I verify a business’s cash sales?

Cash is the one revenue stream a buyer cannot verify by pulling a bank statement, because cash that is never deposited leaves no trail at all. That does not make it unverifiable — it means you verify it indirectly, by checking whether everything around the cash is internally consistent.

Daily records versus deposits

Ask for daily point-of-sale or register close-out reports, often called Z-tapes, for a representative stretch of months, and compare the cash total on each to what actually appears deposited in the bank around the same date. Consistent, prompt deposits that track the register total are a good sign. Irregular deposit timing, or deposits that never quite match the register close, is worth asking about directly.

Watch the cash-to-card ratio over time

Most cash-accepting businesses also take cards, and the split between the two tends to be fairly stable for a given business and location. A cash share that has drifted upward over the years the seller has owned the business, without an obvious explanation, is a pattern worth understanding rather than a coincidence to ignore.

Cross-check against cost of goods sold

• For a restaurant or bar, compare purchase volumes of food and liquor against reported sales at typical markups for the concept
• For a retail business, compare inventory turnover against reported revenue
• For a service business, compare booking or appointment volume against reported transactions
• A business selling far less than its purchasing pattern would suggest is a classic sign of unreported cash

What this cannot tell you

No single check proves a cash figure with certainty, and that is the honest limit of verifying cash sales. What these checks do together is show whether the story holds up from several independent angles at once, and a number that survives all of them is far more credible than one that only survives the explanation behind it.