Cash rounding is here! As of October 28 The Central Bank of Ireland decided that 1c and 2c coins are to be scrapped at the request of the Department of Finance. At present there are 19 countries participating in cash rounding, many of whom are EU Members (Belgium, Denmark, Finland, Hungary, The Netherlands, Sweden, and Republic of Ireland).
This decision comes following a 1 and 2 cent Rounding Trial in Wexford Town conducted by the Central Bank for two months in 2013. The trial was a success with 85% of consumers and 100% of retailers welcoming the national cash rounding of cent coins in Ireland.
But what is cash rounding?
Cash rounding is when the total amount of a bill is rounded up or down to the nearest 5 cent. It is important to note that it only applies to cash payments and not to electronic methods of payments. It also applies to the total amount of a purchase, not on each individual price of an item. The aim of rounding is to reduce the use of 1 and 2 cent coins as often they’re not actively used by consumers and they are costly to mint.
For total amounts ending in 1 and 2, the amount should be rounded down to zero; those ending in 3 and 4 should be rounded up to 5; those ending in 6 and 7 should be rounded down to 5; those ending in 8 and 9 should be rounded up to 10.
Here are a few examples to help you grasp the idea.
- a transaction costing €20.21 or €20.22 would be rounded to €20.20
- a transaction costing €20.23 or €20.24 would be rounded to €20.25
- a transaction costing €20.26 or €20.27 would be rounded to €20.25
- a transaction costing €20.28 or €20.29 would be rounded to €20.30
So what does this mean for my small business?
According to the Central Bank cash rounding will be conducted on a voluntary basis and 1c and 2c coins will still remain as legal tender. Retailers and customers must accept rounding but both parties are also entitled to use exact change.
If your small business rounds up a total at the end and a customer complains then you should give them exact change because rounding is voluntary. There is no need to ask a customer if they want to participate, they should actively tell you if they don’t wish to take part.
Cash rounding will not mean that your small business will have to change all of your shelf prices. It only involves rounding the total at the till, not individual items. You will not have to change how your POS system operates if you do not wish to do so. There will also be no implication on your VAT return. VAT will be charged as normal on the unrounded amount of an item.
Our VAT guide can give you more information on all things VAT and how it can affect the running of your business.