What are some of the most effective cash receipts controls that a company should implement?
Definition of Internal ControlInternal control encompasses the policies and procedures that an organization establishes to ensure that it operates in accordance with management's intentions and that accountability is maintained for all transactions. This includes the methods adopted by the organization to safeguard its assets, to check the accuracy and reliability of its accounting data, to promote operational efficiency, and to encourage adherence to prescribed managerial policies. Show This broad definition of internal control includes two different aspects of control: administrative control and accounting control. Administrative (or operational) controls are generally aimed at improving operating efficiencies or otherwise controlling the activities of the organization. These controls are in contrast to internal accounting controls, which are primarily directed at reliable financial reporting (i.e., ensuring the accuracy and reliability of the financial data and safeguarding assets.) Internal controls are usually developed and put into place to either prevent mistakes or detect them on a timely basis if they occur. For example, College departments use cash transmittal forms to deposit cash with the Business Office. Cashiers in the Business Office check cash transmittal forms to make sure that the deposit equals the amount shown on the form and that accurate account numbers are used. These cashiers are performing controls designed to prevent mistakes from entering the College's accounting system. To detect any mistakes that get through the process, the computer system has been designed do that it will detect (and not accept) out-of-balance transactions and invalid account numbers. The category (administrative or accounting) into which a specific internal control might fall is not particularly important. Far more relevant are the reasons why internal controls are established and the purpose they serve. Purpose of Internal ControlInternal controls are put into place largely to allow management to monitor operations, identify business risks, and generate pertinent financial and nonfinancial information. In short, internal controls are designed and implemented so that management can run the organization. Internal controls also ensure that responsibilities are met. Generally speaking, internal controls are established to provide reasonable assurance that:
Internal Controls over CashBecause cash is negotiable, readily spendable, and easily transported, it is important for proper internal controls to be in place to protect this asset. Accordingly, it is the policy of the College that the following internal controls over cash be implemented throughout the College:
Separation of DutiesThe internal control that most effectively assures the secure handling of cash is separation of duties. Having different people receive cash, prepare the transmittal, and reconcile the ledger sheets attain this. This allows each person to serve as a control over the others, catching mistakes and preventing the misappropriation of funds. In a small office where separation of duties is difficult, it is imperative that the supervisor review cash operations each day. Safeguarding of AssetsCash is prone to theft or misplacement. Accordingly, it is important to have internal controls in place to safeguard these assets so that assets to them is limited to authorized personnel. See section E-2-6 for additional information on security. What is the most important control in the cash collection process?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 the four control measures for cash?There are four internal control measures for cash. They are employee background checks, use of written protocols, separation of duties, and securing assets and cash in safe locations.
What are some common controls for cash?Internal Control of Cash Receipts. Obtaining employee bonding insurance, requiring background checks.. Establishing segregation of duties.. Safeguarding cash and cash equivalents in secure locations.. Using a lockbox to receive cash payments from customers.. Making daily bank deposits.. How can cash receipts be better handled?5 Ways to Improve Your Internal Controls around Cash Receipts and Disbursements. Set-up a mail log of all remittance received. ... . Implement a lock box system. ... . Avoid placing too much trust and responsibility in any one person. ... . Adopt an electronic payment system. ... . Incorporate a stamp imprint.. |