Wednesday 12 December 2018

Methods of internal control of cash

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Internal control procedures for the receipt of cash help your small business prevent loss due to employee fraud and accounting errors. These controls are intend to limit access to cash to specify employees and verify that all receipts, refunds or transfers are document correctly and in a timely manner.

A company's activities generate information that will provide benefits to the wearer in such activities be carry out in accordance with the specify procedures. Internal control of cash will generate useful information for the wearer when internal control is effective.

Introduction to Internal Control of cash

In General, every company in the exercise of the functions contained in the company require. The supervisory and control in carrying out all the activities of the company.  This is done so that the implementation of the activities of such companies could achieve the desire goals of the company. It can avoid the abuses done to certain parties.  The existence of an internal control structure can maintain the richness of the company.  As well as a wealth of investors and lenders who are cultivate within the company.

To keep assets, ensuring accuracy, honesty and efficiency in the handling of resources. The recording of transactions-transactions every company should have a system of internal control.   Internal control does not eliminate confusion, errors and cheating-cheating that occur at the company. But internal control is intend to be able to know the blame quickly and promptly handle it, pressing issues as low as possible.

Internal control of cash

Is one way to keep the company's cash funds are not divert. Despite the recalls, it was not possible to be eliminate. But with internal control of cash these abuses can be avoid. Internal Control of cash is divided into two:

Internal control over Cash Receipts:

In the Organization of the company in General found many types of ordinary cash transactions or routine. By not questioning the source of the cash. A base for the prevention of errors or fraud is the principle of internal control. The system includes a separation of functions between the physical handling of money by organizing its books.

This system requires that the work of someone with other employees can complement each other.

Internal control system the receipt of cash, are:

  • All cash receipts should be deposit to the bank entirely in days of the 60s.

  • Cash receipt functions and accounts payable must be separate at all.

  • The physical handling of cash should be separate entirely from the conducting of bookkeeping and the cashier is not authorize or is entitle to the bookkeeping.

  • Cashier require to provide receipts, receipt by leaving the effluent to the archive.

  • Done name cash periodically by an independent party.

Internal control over Cash Expenses : some principles of internal control of cash expenditure, namely:

  • All cash expenses must be authorize by Superiors in advance.

  • All accounts payable must be made using a check, except for a small number of expenditure made using checks can be done using petty cash funds.

  • Need for provisions firmly in confirmation of payment. There should be a statute who is entitle to write a check, who has the right to sign the check.

  • All checks must be number before.

  • Responsibility for receipt of cash must be separate from the responsibility for accounts payable.

  • The recording of cash must be separate from the task of making the payment.

  • Invoices approve for payment and all require supporting documents must be a prerequisite for making the payment.

  • After payment is made, all supporting documents should be mark "paid" or "paid off" in order not to be use for the second time.

Cash Internal Controls Procedure

If your nonprofit organization has just a handful of employees (or maybe only one!), developing appropriate internal controls for cash and bank accounts are critical for maintaining the security of your organization’s funds. Below are some recommended processes to help reduce opportunity for fraud or other losses.

Reconcile the bank statement monthly.

This control is essential to early detection of fraud and minimizing losses to the organization.  Ideally, the bank statement should be reconciled by someone who is not an account signor and someone who does not make deposits. If that is not possible due to limited employees, consider hiring a bookkeeper to perform the reconciliation or require that a Board member performs this function.  Another mitigating control would be to have an independent person (such as a Board member) review and sign off on the bank statement reconciliation each month.

Monitor who opens the bank statement.

In some cases, fraud is discovered simply because a different person opens the mail. Someone other than the person writing and mailing the checks should receive the unopened bank statement and review the contents before it is reconciled. If the organization only has one employee or utilizes an outside bookkeeper to reconcile the account, consider giving a Board member read-only online access to the bank statements, so that (s)he has access to the bank statements directly from the website in order to review them for propriety.

Keep all unused checks in a locked cabinet or closet.

In addition, unused check stock should not be maintain by the person authorize to sign checks. If that is not be possible in your organization. One of the other controls mentioned here will be necessary.

Require two signatures on checks above a set threshold.

Identify in the policy manual whether certain checks can be exclude from the requirement. For example, if a set amount is paid for rent each month based upon a sign lease. Then as long as the rent is for the amount note in the lease, a second signature would not be require.

Cross-train staff.

Require that employees take vacations and train other employees to perform their duties (such as making bank deposits and other essential accounting duties) during their absences.

Make deposits daily or at least weekly if possible.

Also remember to keep cash and checks on hand locked up in between deposits.  In addition, immediately place restrictive endorsements on checks.

These are just some of the safeguards that your nonprofit can employ. To ensure that cash transactions are properly authorize and record.  In even the smallest organization, there can be another person who looks over things periodically to detect questionable transactions.

Fortunately, establishing good internal controls requires more of an investment of attention than money. Thus, very small nonprofits or even all-volunteer groups can create appropriate controls and reap the benefits.


Internal control of cash aim so that the transaction had happen got approval from authorities, can be record appropriately so that management can evaluate all the information against the transaction correctly. Then, with a good control, then it will generate good cash management.

The company will have funds that are arrange so as to be able to use those funds to pay the debt that had been due. And when there are excess funds then the company can use the funds available for investment companies.

Cash is the most liquid asset and susceptible to theft or misappropriation of occurrence if not control properly. Therefore, to minimize the possibility of cheating or misappropriation involving cash money company, need a good existence of internal control over cash and bank.

Cash control system (cash control system) is a procedure that embrace to keep cash funds of the company. This system forms the internal control is adequate towards cash.

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