Business to have a cash handling policy for efficient cash management and to prevent fraud.
It is good idea your business to draw up internal control procedures for your staff who handle your business cash and monies matters in your business premises.
Genrally, the cash handling procedures shall consider cover the following.
Firstly, 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, or at automated teller machine (ATM). Cash should not be made by mail.
Receipts From Customers
Secondly, you must update Cash book, individual customer’s ledgers and trade debtors control accounts to keep track of your customers’ outstanding balances.
At the same time, send reminders to follow up on outstanding sales invoices. Document the payment methods your customers used to settle their invoices. For example, cash or cheque or by bank transfer or combination of the three.
For high volume transactions business, it is advisable to maintain your accounting records using well known bookkeeping software like Clearbooks, Xero, Sage or Quickbooks. As this will cut down administrative burden and less errors.
On the other hand, 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.
Regularly, prepare bank reconciliations. The use of computer-prepared cheques simplified the bookkeeping process.
Paying Bills Electronically
Another way to pay Bills is by electronically as an alternative to writing cheques. This has become increasingly popular and convenient.
There are different types of electronics payments:
- Paying Online,
- BACS payment,
- Electronic Fund Transfer,
- Standing Order,
- Direct Debits,
- Bank transfers,
- Telegraphic transfer
These facilities have made global trading possible.
For instance, you may pay your staff directly by deposit salary to their bank accounts. You may electronically send PAYE and NIC to the HMRC.
Besides, Handling cash electronically also enable monies available sooner between banks and there is less chance of fraud.
Security is extremely important when paying bills online. Passwords and identification numbers are a key to your company’s bank account. For this reason, 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 on regular basis.
Bank Accounts Reconciliation
Doing bank reconciliation frequently is compulsory to ensure there are sufficient funds in your bank accounts to fund the payments made electronically. This includes direct debits, cheques issued, standing order and BACS payments.
Likewise, you must also update the suppliers’ accounts frequently to ensure no overdue payments. Keep an eye on any discounts offered by the suppliers for early payments. Because this provides further savings for your business if there is sufficient cash in the bank and payment can be made.
Normally, petty cash is for paying small items, ad-hoc expenses, stationery, taxi fares, and for reimbursement of staff expenses.
You can usually set a maximum amount for withdrawals from the petty cash fund. For example, for expenses claimed up to £200 will be reimbursed from the petty cash.
Correspondingly, the person claiming petty cash must sign the petty cash voucher. Attached the expenses receipts to the petty cash voucher.
On the other hand, an effective cash handling procedure gives confidence to your Auditor that your accounting system is reliable and your company accounts give a true and fair view.