TT12 Controlling Cash

Guide to Financial Management

Top Tips 12

Top Tips for Controlling Cash

Cash can be easily misplaced or misused leading to losses for an organisation. Cash controls are very important in protecting everyone who handles cash. They provide guidance on cash handling. They also remove the suspicion of fraud – and the temptation.

Follow the 10 Golden Rules for Handling Cash as follows:

1. Keep money coming in separate from money going out

Never put cash received into the petty cash tin. It will cause errors and confusion in the accounting records. All money coming into the organisation must be paid into the bank promptly and entered into the records before it is paid out again. Otherwise it can be confusing when reconciling the cash balance.

2. Always give receipts for money received

This is one of the highest risk areas, so be warned!  Proper issuing of receipts helps to protect the organisation from cash being pocketed rather than banked. Use pre-numbered duplicate receipt books written in pen. 

Keep track of your receipt books using a register, recording each book as you receive it from the printers, the date it started being used and the date it was returned finished.  Use receipt books in order. Make sure unused receipt books are locked up.

3. Always obtain receipts for money paid out

Sometimes this may not be possible, for example, when purchasing items from a market. In this case the cost of each transaction should be noted down straight away so that the amounts are not forgotten. Then they can be transferred to a petty cash slip and authorised by a line manager. Remember – no receipt means there is no proof that the purchase was made.

4. Pay surplus cash into the bank

Having cash lying around in the office is a temptation to a thief and the money would also be managed better if it were earning interest in a bank account. A casual approach to cash on the premises might lead to people wanting to ‘borrow’ from it. Often fraud has started in this way. Every attempt should be made to pay cash into the bank on a daily basis or, at the very least, within 3 days of receipt.

5. Have properly laid down procedures for receiving cash

To protect people handling money, there should always be two people present when opening cash collection boxes, envelopes and other sources of money. Both people should count the cash and sign the receipt.

6. Restrict access to petty cash and the safe

The keys to the petty cash box and the safe should only be given to authorised individuals. This should be recorded in the organisation’s Delegated Authority document.

7. Reconcile the petty cash book

The petty cash should be counted and reconciled at least once every week. Any discrepancies must be reported straight away to a manager, and investigated.

8. Keep cash transactions to an absolute minimum

Petty cash should only be used to make payments when all other methods are impossible. Wherever possible, suppliers’ accounts should be set up and invoices paid by cheque. The advantage of paying for most transactions by cheque is that this has the effect of producing an extra set of records in the form of the bank statement. Also, it ensures that only authorised people make payments and it reduces the likelihood of theft or fraud.

9. Manage and monitor staff advances

Any cash advance given to staff (eg to go to the field) should be accounted for and cleared before another advance is given. All payments made must be justified by receipts. Any balances owed to or owed by the member of staff must be paid to clear the advance.

10. Be clear about who is responsible for what

Everyone in the organisation should be completely clear about who is responsible for handling cash, and what their specific responsibilities are. If possible, set out the responsibilities on job descriptions. Everyone should also know who is not allowed to handle cash!

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