Money or hard cash is an important element of any profit generating organization. An organization’s resources produce income, which alternatively generates cash inflows. These cash inflows are employed for numerous reasons – to payoff creditors, to pay employees compensation, reward shareholders, replacement of technologies and resources, and provide for growth.
Cash is unique and important since it is the only asset that is easily convertible into any other type of asset. Hence, it is also the most commonly desired asset in any organization. But, on the other hand, cash is also the asset that is for the most part at risk to fraud and abuse. Consequently, management must make sure that sufficient controls and safeguards have to be in place to eradicate any unlawful transactions with cash.
Luckily, there are methods management can safeguard the cash produced by its organization. Following are the methods that will facilitate management to avoid losses because of human error or theft:
- Monthly bank reconciliation
- Separation of duties over cash handling
- Liability for cash shortages
- Authoritative cash disbursement
- Internal audits
Monthly bank reconciliation – Monthly bank reconciliation will facilitate to make sure that the amount produced by an organization is consistent with bank records. Moreover to this, an independent evaluation by management will give an additional safeguard.
Separation of duties over cash handling – In order to eradicate any unauthorized transactions with cash, every organization must ensure that there is sufficient separation of duties over cash handling. Separation of duties will stop an individual from committing and concealing fraud and abuse.
Liability for cash shortages – If supervisors know that they will be held liable for a cash shortage, they will be provoked to keep a close eye on how cash is employed within their departments. And, management should hold supervisors liable for cash shortages.
Authoritative cash disbursement – Management should employ a method to track cash usage. And in order to do this, management must let cash to be pay out only through checks issued by authorized signatories.
Internal audits – Every organization must have to conduct internal audits on a regular basis. An internal audits, whether it is conducted by an internal audit staff or an outside auditing firm, will help to identify how efficient and precise the operation is and tell you whether or not any enhancement are needed.
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Source by john irron