Five Internal Controls for Handling Cash in Your OrganizationFebruary 06, 2018
Keeping cash on hand in your business? It’s a good idea to have a safety net, but be sure to have internal controls in place.
Does your organization still receive cash payments? Though many organizations try to avoid keeping cash on hand, sometimes it’s necessary. Luckily there are ways to help safeguard your business. In order to protect yourself with regards to cash collected, it is important to implement good internal controls within your organization.
There are five ways your organization can strengthen its internal controls over handling cash:
- Safeguarding Assets: Protect the organization’s cash on hand by placing them in a locked cabinet or drawer with limited access (or better yet a drop safe). This should be monitored to ensure only the right personnel have access to handling cash. For example, petty cash and/or blank checks should be stored in a locked drawer with limited access and only authorized personnel have the combination or key.
- Segregation of Duties: Authorizing a transaction, the recording of a transaction and maintaining custody of the related assets should all be handled by different personnel. If cash handling duties are performed by different employees, it helps ensure that not one person has complete control over the cash handling process.
- Accountability: Ensure all cash transactions have been authorized, have been properly accounted for, and have been documented properly. Ensuring accountability among employees also helps to reduce the risk of lost or stolen cash receipts and incorrect recording of transactions.
- Reconciliations: It is important to reconcile all bank accounts monthly to ensure all transactions are being recorded accurately and completely. In addition to bank reconciliations, the organization should also reconcile their programmatic systems to their accounting systems, and perform periodic counts of cash on hand.
- Monitoring: A review process is crucial to ensure controls are in place and running effectively. Management should review and monitor regularly and investigate any unusual activity. This process will help determine if a control is not working properly or needs to be changed or updated.
With the implementation and proper monitoring of the five controls noted above, an Organization can help minimize the risk of errors, decrease the opportunity for fraudulent activity and increase the chance of detecting errors within the cash collection cycle. Management should also investigate and resolve discrepancies noted from reviews, reconciliations, and other internal analysis of accounting transactions on a timely basis. Have questions on your organization’s cash handling procedure? Reach out to us.