Many businesses especially growing companies are delegating their business financial matters including the responsibility to authorize and make payments to their finance staff. It is advisable that the business to draw up internal control procedures on handling petty cash and money matters in the office for better controls and to avoid dispute as well as to prevent fraud.
The internal procedures should cover the following:
Bank Deposits and Received From Customers
When paying a cheque or cash into a bank account, a deposit or paying in slip must be completed. Deposits can be made in person, by mail, at an automatic teller machine (ATM). Cash should not be made by mail.
Cash book, individual customer’s ledgers and trade debtors control accounts must be updated to generate customers' latest outstanding balances. There must be follow up on outstanding sales invoices, collecting cash from customers when invoices fall due as soon as possible would enhance your business cash flow.
For high volume transactions businesses, it is advisable to maintain your accounting records using well known bookkeeping software like Sage, Quickbooks or Viztopia as this will cut down administrative burden and accuracy can be maintained.
Issuing cheques
The cheque must be signed by authorized signatory only and approval must be obtained for payment. Ideally, the person authorizing the invoice for payment should not be the same person signing the cheques.
There are computer software packages available that write cheques and reconcile a bank amount automatically. Using computer software is the quickest and accurate way of writing cheques. The computer prints the cheques and records the payments for accounting purposes. Accounting statements and bank reconciliations are then prepared from the information entered for the cheques payments. The use of computer-prepared cheques has simplified the bookkeeping process for many businesses.
Paying Bills Electronically
Bills and payments can be paid electronically as an alternative to writing cheques. There are different types of electronics payments – Paying Online, BACS payment, Electronic Fund Transfer, Standing Order or Direct Debits, bank transfers, telegraphic transfer and so on. Electronic payments facilities have provided businesses with big advantage and enable global trading.
Many businesses directly deposit salaries to their employees' bank accounts and electronically send PAYE and NIC to the HMRC. Businesses use the online system reduces the time and expense of processing paper based cheques and monies available sooner and there is less chance of fraud or paper form cheque being lost.
Security is extremely important when paying bills online. Passwords and identification numbers are a key to the company's bank account. They should never be left where unauthorized staff or the public can see them.
However, it is still a best practice to perform accuracy check by reviewing the payments made electronically regular basis.
Bank Accounts Reconciliations
Doing bank reconciliation frequently is compulsory to ensure there are sufficient funds in the bank accounts to clear payments made electronically, direct debits, cheques issued, standing order and suppliers payments.
The suppliers’ accounts must be updated frequently to ensure no long overdue payments. Keep an eye on any discounts offered by the suppliers for early payments because this provides further savings for the business if there is sufficient cash in the bank and payment can be made.
Petty Cash
Petty cash is normally used for paying small items, ad-hoc expenses, stationery, taxi fares, and reimbursement to staff expenses that occur in the office. Companies usually set a maximum amount for withdrawals from the petty cash fund; the limit can be for expenses claimed up to £200.
Pety cash expenses and receipts must be retained and ensure the person claiming the petty cash sign the petty cash voucher.
Not only having effective monies handling procedures in your business will ease up your company accounts preparation process but it will lso help your company’s auditors when performing their audit checks at year end.
Concise Accountancy – Internal procedures for effective business finance management
