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Controls Over Cash Management

Internal controls over cash are meant to protect and safeguard cash assets. Implementing such controls empowers organizations to limit fraud. How a business approaches cash handling controls depends on the nature of the entity. The cash system in a retail setting will differ from that of a professional services firm. However, in every organization the cash system generally includes cash disbursements (payments), cash collections (receipts) and petty cash.

The following are some common internal controls businesses should have in place to protect themselves:

  • Safe storage of petty cash and cheques – Organizations are strongly encouraged to maintain a safe on their premises that requires a password or an access key. The safe should be kept in a room where only a few employees have access to it. Any blank cheques or cheques received and not deposited should be kept in the safe. The safe should be locked at all times.
  • Segregation of duties – Ensure that multiple individuals are involved when it comes to cash. Cash or cheques received should be counted by an employee, and the same employee should not be responsible for depositing the cash and recording it in the accounting system. Segregation of the cash handling reduces the risk of fraud or theft.
  • Frequently evaluating the signing authority – Organizations are encouraged to regularly review the list of employees with cheque signing permission to ensure that only those with the relevant authority can sign cheques or approve electronic funds transfer. Based on the complexity of your business and level of transactions, consider different levels of signing authority based on the monetary value of the transaction. For certain thresholds, an organization should also have measures in place that will require the sign off from multiple authorized signatories. This extra layer of review and approval will curtail the risk of misappropriation of cash.
  • Performing frequent bank reconciliations – Bank reconciliations, including credit cards, should be performed frequently to ensure that the cash balance per the entities’ books matches the actual cash in their bank accounts. All reconciling items, if any, should be verifiable and have established source documents. This will help the Organization identify any irregularities on a timely basis. Depending on the frequency of transactions, bank reconciliations can be done weekly, bi-weekly or monthly.

GG Observations

Organizations are encouraged to create and maintain robust protocols and processes that should be adhered to by all. When properly implemented, internal controls over cash can protect a business against fraud, improve the reliability and accuracy of financial records, and enhance accountability and transparency. Our team of professionals can assist you in assessing your current internal control environment and providing recommendations on where to strengthen your controls.

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