What should I ask about a scrap yard’s cash handling and payout procedures?
Ask how a seller of material gets paid, who approves it, who holds and counts the cash, and how each payout is recorded against the scale ticket. Then test the process on a sample of days. A yard with clear controls over payouts is far easier to understand and to hand over.
Because a yard buys material from the public and from trades, payouts are the heart of its controls. Ask for a description of the process from the moment a load is weighed to the moment the supplier is paid. Who prepares the ticket, who authorizes the amount, and who hands over the funds? More than one person should be involved.
Then look at the cash itself. Where is it kept overnight? Who reconciles the drawer at the end of the day, and how are shortages handled? Ask how often the owner reviews the records. Pick a handful of days and match the scale tickets to the payouts and to the bank. Gaps or round figures that do not match deserve questions.
Ask how identity and records of sellers are kept, and how the yard handles disputes about weight or grade. Ask what a typical day’s cash need looks like, so you know how much working cash you will need to fund. Your accountant can test the controls and explain how the accounting method affects the reported figures. Your lawyer can advise on record-keeping duties for the yard. Finally, ask what has gone wrong before, such as a short drawer or a disputed payout, and how it was resolved, because honest examples show how the controls really work.
Key takeaways
- Ask who prepares, approves and hands over each payout.
- Match scale tickets to payouts and bank records on a sample of days.
- Ask how overnight cash is kept and who reconciles the drawer.
Related reading
15 pages on the same subject, grouped by topic.
Selling
Due diligence
- Expert answerWhat should I check about a store’s cash handling and till reconciliation?
- Expert answerHow do I check a marina’s pump-out and fuel spill procedures?
- Expert answerHow can I check a food truck’s cash and card sales handling?
- Expert answerWhat chemical handling training should a pool service technician have?
Buying
- Expert answerHow do I check a demolition company’s records on hazardous material handling before buying?
- Expert answerHow do I check the cash replenishment routine on an ATM route?
- GuideBuying a grain elevator and handling facility in Canada
- Expert answerHow do I assess the corrals, chutes and handling equipment on a cattle ranch?
- Expert answerHow do I check a stable’s pasture rotation and manure handling setup?
- Expert answerHow do I find a forklift or material handling business for sale?
- Expert answerIs an auto wrecker the same business as a scrap metal yard?
- Expert answerIs a summer slowdown at an HVAC company normal, and how does it manage cash?
Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentAccrual and cash-based accounting
- 02Business Development Bank of CanadaGovernmentHow to conduct due diligence when buying a business
Deavo is an advertising and listings platform, not a brokerage, law firm or valuation firm. This page is general information, not legal, tax, accounting or valuation advice, and rules differ by province. Confirm anything you rely on with a qualified professional before you act on it.