IOU stands for “I owe You”, and it is an informal document that acknowledges debt between two parties.
In retail, IOUs are often used when money needs to be taken out of the store, such as in cases of taking money from petty cash to buy something the store needs, or taking cash float to exchange it into small denominations from outside.
Usually when the time the money will be kept out of the store is longer than a shift or full day, in a way that a safe handover will show a discrepancy, an IOU is signed by the person taking the money and put in the safe to replace the missing money, so that the amount that should be available in the safe at the end of the shift tallies with the books.
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For example, Store X needs to buy medicines and required items to be kept in its first-aid box. The required products are expected to cost around $100. There are no pharmacies in the mall the store is based in, so one staff, John, is assigned to source these products from outside and bring them on the next day with him, when he comes for his shift.
John takes $100 from petty cash to buy the items. In return, he signs an IOU form for that amount, together with the manager authorizing this, and this form stays in the petty cash box to show where the missing $100 are.
On the next day, John brings the items and the receipt for them, and any change from the $100 if the items cost less than that. Now the IOU is considered to be settled and the date of settlement is recorded on the same form and signed by the manager.
