Adequate control over all cash receipts and disbursement are a vital element of the company’s internal accounting controls. The following Cash Cycle Procedures should be utilized to control the flow of cash through your company and should be clearly defined within your accounting manual.

Cash Process MapCash Cycle Procedures

CSH101 Cash Drawers and Credit Cards Procedure

Proper internal control should be maintained over funds received by cashiers or sales clerks at all times. The company should identify cash procedures for cash drawer control, including cash receipts, credit cards, special tender items, cash payouts and reconciliation with deposits.

CSH102 Cash Receipts and Deposits Procedure

The company should establish the methods to be followed for receiving, applying and depositing cash receipts. The Cash Receipts Procedure applies to all cash receipts received by the company. Accurate internal control of cash receipts and deposits should be maintained at all times. For example, Cash deposits should be made on the same day as receipt.

CSH103 Problem Checks Procedure

The company should define a problem checks procedure to describe how difficult to cash checks are handled before depositing, in order to save time in returning and following-up on unsigned checks, checks marked “payment in full”, or those returned by the bank. This applies to all checks received by the company.

CSH104 Wire Transfers Procedure

The company should provide additional payment options to customers and vendors in order to make funds immediately available to the receiving party. Wire transfers should be treated with special care and accuracy to prevent loss to the company or the customer.

The company should explain the steps necessary to ensure proper wire transfer procedures are followed when processing wire transfer requests. This applies to customers who are sending or receiving wire transfers and the financial institutions, which process these requests.

CSH105 Check Signing Authority Procedure

The company should outline “dollar limits”, the check signing authority process, and limit the number of employees authorized to sign checks, while ensuring that there should be no fewer than three individuals at all times.

While a hired accountant, office manager, or accounting clerk may be responsible for entering bills, paying bills, and printing out checks, all printed checks and related documentation should be presented to a second individual for signing. No one person or employee (other than perhaps the owner) should be allowed to enter invoices, select invoices for payment, then print and sign checks. At a minimum, this process requires at least two individuals to ensure the integrity of the accounting system remains intact. This applies to all regular bank checking accounts of the company.

CSH106 Check Request Procedure

The company should describe the process for completing a check request form to ensure the efficient processing and record keeping of all manual check requests.

CSH107 Bank Account Reconciliations

The company should outline the practices for preparation of a monthly bank reconciliation and ensure the accuracy of the company’s bank account records by proving the monthly balance shown in the bank’s Account Register. This applies to all bank accounts maintained by the company.

CSH108 Petty Cash

The Petty Cash Procedure helps outline the disbursement and reimbursement of petty cash. To facilitate minor business expenses, a petty cash fund will be available to employees. This procedure applies to all employees of the company.

Cash Cycle Risks

Common risks associated with embezzlement, fraud, and your cash cycle include:

  • The authorization or accuracy of cash receipts, the failure to record cash receipts or withholding or delaying the recording of cash receipts.
  • diverted cash receipts; unauthorized cash disbursements or loss of funds
  • Covering unauthorized transactions by substituting unsupported credits or fictitious expenditures to cover misappropriated collections; under or over estimating cash or receivables.
  • Misstating cash balances; covering unauthorized transactions by falsifying bank reconciliation.

All cash collections must be properly identified, control totals developed, and collections promptly deposited to limit risks associated with recording cash receipts or withholding or delaying the recording of cash receipts.

All transactions should be promptly and accurately recorded in sufficient detail on proper accounting records and appropriate reports issued to prevent unauthorized transaction substitution with unsupported credits or fictitious expenditures.

All transactions are properly accumulated, classified and summarized in the general ledger; balances are correctly reconciled with bank statement balances in a timely manner to prevent cash balance misstatement or the offsetting of unauthorized transactions.

How Safe are Your Cash Receipts?

Cash Cycle Procedures are an important element of internal control to ensure that your company’s income statement is accurate. If your primary source of operational cash flow is from cash sales then your cash needs to be protected, managed and monitored using industry best practices for financial internal controls.

 

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