Review Why is internal control important for cash?
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Nội dung chính- Stay informed. Get all the latest news delivered straight to your inbox. Also in Business Blog How can internal control control cash?What is the most important internal control over cash?What are some common internal controls for cash?What is the primary goal of internal controls for cash payments?
September 20, 2022
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. We also discuss how to keep your control environment in place with many still working remotely.
*Editor’s Note: This blog has been updated as of September 20, 2022.
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. How has that changed in the remote work environment? Read on.
5 key internal controls
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.
Maintaining Controls in a Remote or Hybrid Work Environment
COVID-19 has forced many organizations into a remote or hybrid work environment, bringing on a new set of challenges. Internal controls designed to operate effectively in an office environment may not be ideal for a remote or hybrid workplace. Here are some ways you can maintain controls in a remote or hybrid work environment.
- Segregation of Duties - Segregation of duties may become difficult as employees shift to alternative work schedules or have other issues. Maintaining segregation of duties should be a top priority for control owners and is something that should be constantly assessed as circumstances change. Challenging times may make segregation of duties difficult and may force
you to get creative by requesting employees perform duties they are not otherwise accustomed to performing.Digital sign-offs - You should also consider the manner in which you document the completion of controls. Control owners should be cautious about the integrity of an employee’s initials simply typed onto a digital document, as any employee can perform this task. Digital signatures, which require an employee to enter credentials prior to signing, enhance the integrity of a
sign-off and are often time stamped. Digital signatures may also “lock down” the document, prohibiting any changes to the signed document.Timely review - Given the circumstances, it is not unreasonable that preparation and review may take longer than under normal circumstances. Even if additional time is granted for the preparation and review of documents, you should consider the implications this could have on cash balances as a whole. The longer it takes to complete a
control, the greater the consequences may be if you identify an error.
With the implementation and proper monitoring of the five controls noted above as well as reviewing to ensure all controls are continuing to operate properly in a remote/hybrid environment, 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.
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How can internal control control cash?
Best practices:. Record cash receipts when received.. Keep funds secured.. Document transfers.. Give receipts to each customer.. Don't share passwords.. Give each cashier a separate cash drawer.. Supervisors verify cash deposits.. Supervisors approve all voided refunded transactions..What is the most important internal control over cash?
Records and Documentation This is one of the most important internal controls on cash collection. If the payer is present in the office, the clerk should issue a signed receipt listing the date and amount received.What are some common internal controls for cash?
5 Important Internal Controls for Cash Disbursements. Segregate duties. The foundation of a good internal control system is segregation of duties. ... . Review authorized signors. ... . Consider requiring dual signatures. ... . Remember the wire transfers. ... . Reconcile bank accounts in a timely manner..What is the primary goal of internal controls for cash payments?
The primary goal of internal controls for cash payments is to ensure that the business pays only for properly authorized transactions. Banks provide important services to individuals and businesses. They accept deposits, process payments to others, and provide statements that account for these and other transactions. Tải thêm tài liệu liên quan đến nội dung bài viết Why is internal control important for cash? Control of cash
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