How Cash Control Can Help Your Business
by: Cheryl L. True on Sat, 9 May 2009 at: 4:19 PM Go to: Previous Article Next Article
Cash is unique because it is the single asset that is readily convertible into any other kind of asset. Therefore, it is also the most widely desired asset. In any case, cash is also the asset that is most susceptible to fraud and abuse. Therefore, management has to ensure that adequate controls and safeguards are in place to eliminate any unauthorized transactions with cash.
Fortunately, there are ways management can safeguard the cash generated by its organization. Each of the following methods will help an organization prevent losses due to human error or theft:
Monthly bank reconciliation - monthly bank reconciliation will help ensure that the amount of cash generated by an organization is consistent with bank records. In addition, an independent review of the reconciliation by management will provide an additional safeguard. Independent verification of bank reconciliation acts as a check to be certain the reconciliation was done properly and ensures there is no abuse of the organization's cash.
Segregation of duties over cash handling - every organization must be certain that there is adequate segregation of duties over cash handling. Separating the duties of cash receipts and disbursements prevents an individual from committing and concealing embezzlement.
Accountability for cash shortages - management should hold supervisors accountable for cash shortages. If supervisors know that they'll be held accountable for a cash shortage, they'll be motivated to keep a close eye on how cash is used within their departments.
Authorized cash disbursement - management should allow cash to be disbursed only through checks issued by authorized signers, which will provide a method for tracking cash usage. In addition, your organization should require signatures on all checks in order for them to be valid.
Internal audits - every organization should arrange to have internal audits conducted on a regular basis. Whether the auditors come from an internal audit staff or an outside auditing firm, auditing an organization's accounting system can identify how effective and accurate the operation is and whether or not any improvements need to be made.
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About the Author
Cheryl L. True is a Manila-based freelance writer who writes on a variety of topics.
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