Cash in this case, is defined as currencies, coins, checks (cheques), money orders, Electronic Fund Transfer (EFT), E-commerce such as credit and debit card transactions and other cash equivalent. Cash verifications, reconciliation and review process usually involves a control process to confirm that financial transactions recorded represent activities that actually occurred in ordinary course of business operations and could be identified with a particular section or department or cost/profit center for which the authorization for such transactions was initiated.
During this control process, source documents, bank statements, transaction payment systems, credit/debit card statements, and other evidence of transactions, are used to match cash transactions recorded in business accounting system; that is all cash receipts and payments. It also involves counting and balancing cash on daily basis.
Consistent performance of this process, usually monthly, of reviewing Cash General Ledger and financial transactions is a critical control measure and very important for any business, to ensure completeness, accuracy and timeliness of revenue and expenses, while being recoded in appropriate chart of accounts.
Cash Management and Staff Cash Handler
One of the basic control in cash management is to identify the right authorized cash handler in your business. This involves taking appropriate measures at the very stage of hiring employees whose responsibility is basically to handle cash. Such Control Tasks may include;
- Employees employment/job history check and verification prior to hiring, usually through third guarantor attestation to new applicants’ honesty and integrity.
- Further background check on the new employee to establish a follow-up procedures in event of cash loss through misappropriation, fraud or outright theft. Also to ensure trustworthiness of the employee.
- Businesses determine a cash limit or a level of risk tolerance when it comes to cash control. In most instances, security measures such as fingerprint identification on everyone to whom cash handling duties are delegated.
Other measures to protect cash include;
- To separate cash handling duties among different people. The ultimate control tip is, no one person should possess a monopoly or control over the entire cash handling process.
- Proper documentation and filing of cash operations to ensure individual employee’s accountability for cash handling, all endorsed or cancelled checks (cheques), unidentified checks (cheques), all deposits and withdrawals, etc.
- Reconciliation of cash/bank and investigation of cash differences
- Physical security measures such as fire-proof Safe box on lock, of all physical cash and other important documents, only accessible to authorized persons.
Alternatives to Periodic Physical Cash Count
Most businesses who maintain a substantial amount physical cash often outsource cash count and verification function to an independent professional or firm to carry out on monthly. quarterly or half yearly basis, depending on client arrangements. This is an effort to further strengthen existing internal controls on cash flow management in business and to avoid potential consequences of not performing cash verification and reconciliation such as;
- Inability to detect errors, discrepancies, irregularities or misappropriations;
- Damaging or mutilation of cash transaction receipts and other documents to conceal dubious act;
- Inaccurate application of cash transactions to appropriate charts of accounts for departments concerned and many more.
Do You Need Accounting Help?
Consistent up to date and cleaning of accounting records for sound business decision making, may be posing some difficulties when you are preoccupied with other business functions. Is it time to consider independent professionals because of certain technical complications that could occur along the line? It could also be daunting, time-consuming procedures. Not recording correctly and poor monitoring can cause complications and confusion.
At Fritznoble , we assist our clients on the best available options that suit their businesses...Reach out/ Outsource With Us… If Accounting works are bothering you, then it’s time you outsourced your accounting and bookkeeping requirements, this will help you concentrate more on core competencies of your business; with a team of professionals to help.
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