Last month our ‘Best Practices of the Month’ series featured an in-depth look at accounts payable and bill pay. If you missed it, feel free to look it over here. As we continue with our series, we’ll now take a look at cash receipts. This can be the most important control to have in your organization to ensure your assets are protected and in the hands of responsible employees.
With the proper segregation of duties, there should not be a single person in control of the entire cash process. Read through the suggestions below and see if your organization follows any of the recommended practices for the cash receipts transaction cycle. Are there any you are missing and need to implement with your team?
Segregation of Duties
- When it comes to receiving cash, it’s best to have different employees doing the following:
- Receiving the cash
- Recording the cash payments
- Depositing the cash
- Reconciling the cash receipts to deposits and the general ledger
- Sometimes in small organizations it’s not always possible to completely separate duties. In instances such as this, be creative by using other employees or the board treasurer to make sure everything is documented and properly reviewed.
Accountability of Cash Receipts
- Accountability procedures will make sure that the cash is properly documented, secured, and traceable to all specific cash handlers. Ways to ensure accountability include:
- Record the cash immediately upon receipt by maintaining a log of cash and checks received. This should include copies of the checks received and should be signed by the employee who collected the money.
- Immediately endorse the checks upon receipt “For Deposit Only.” This can prevent anyone else being able to sign the back.
- Keep the funds secured in a lock box until deposit. Don’t share passwords or combinations to the lock box between employees and make sure the number of employees with access to the safe is a limited.
- Provide numbered receipts to the customer when applicable.
- Have a Controller or other team member verify the deposits before they go to the bank.
- Make frequent deposits so the money isn’t sitting in the safe for long periods of time.
If the simple steps above are implemented there can be a great peace of mind knowing your assets are protected. That’s all for this round of Best Practices. Stay tuned for next month when we look at another accounting cycle.
Nonprofit Accounting and Finance Consultant