Why should the employee who handles cash receipts not have the responsibility for maintaining the accounts receivable records?

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The proper control of cash receipts is the responsibility of the agency director.  This resource intends to aid an agency in understanding its risks and identifying applicable controls to minimize those risks.

General Guidelines

• Segregation of duties in the handling of cash is one of the most effective ways to gain control over this asset.  No individual is to have complete control in the handling of cash. Specifically, no one individual’s duties should include the actual handling of money, recording receipt of money, and the reconciliation of bank accounts or with the state treasurer. 
• Incoming cash must be made a matter of record as soon as possible.
• Two persons should open the mail when they expect cash or checks in the mail.  One person needs to create a cash list another person should review the cash list with the receipts.  A copy of the cash list is then forwarded to the DES Finance Cashier with receipts. A second copy of the cash list is used for accounting controls. A weekly comparison of the cash list and Cash Receipt Report received via email should be completed.
• Amounts of currency contained in each item of mail are verified.  Documents enclosed with the currency received are machine date stamped or dated and initialed by the employee opening the mail.
• A secure area is needed for the safeguarding and processing of cash received.  Access to the secured area is restricted to authorized personnel only.  The secured area is locked when not occupied.
• Cash is protected by the use of registers, safes, or locks, and kept in areas of limited access.
• Collections made over the counter or in the field are documented by the issuance of sequentially pre-numbered official receipts or through cash registers or automated cashiering systems.  All such receipts are to be strictly accounted for and the reason for any missing documents determined and documented.  Blank form receipts are not used.  Receipts indicate mode of payment, such as cash, check, etc.  The total dollar amount recorded on cash receipt forms, by mode of payment, is balanced daily to total cash, checks, etc. collected
• The cash receiving function of an agency is centralized to the extent possible.
• When cash is received in branch offices, it is to be transmitted to the central office through the banking system.  Branch office personnel are restricted to making cash deposits and central office personnel make any cash withdrawals and reconcile bank accounts.
• A balance and summary of all cash receipts is prepared daily.  Any shortages or overages are carefully investigated and, to the extent possible, corrected.
• Receipts are deposited intact on a daily basis.  When a deposit slip is prepared, the cashier must get signed approval from a supervisor before making the bank deposit.
• Authenticated, duplicate deposit slips are retained and compared with amounts recorded in cash receipts records.
• Moneys are picked up or delivered to appropriate authorities on a scheduled basis.
• Adequate records are maintained to ensure the correct handling and final disposition of items held in suspense.  Suspense accounting is eliminated whenever possible by the direct deposit of the item to the correct fund and account.  However, deposits are not to be delayed because the account distribution cannot be immediately determined.

• Cash receipts retained on the premises overnight are minimized and locked up in a secure place, such as a safe.
• Cashiers are prohibited from cashing personal checks or notes of personal indebtedness.
• Written procedures on all cashiering and cash control procedures are maintained by each agency.

Invoicing

DES provides automated invoicing using the Agency Billing System (ABS) in Agency Financial Reporting System (AFRS).

DES manages aged outstanding receivables.

Internal control procedures for the receipt of cash help your small business prevent loss due to employee fraud and accounting errors. Key control objectives of the cash payment system are to limit access to cash to specified employees and verify that all receipts, refunds or transfers are documented correctly and within 24 hours of the transaction. Any withdrawals of company cash must be accompanied by proper authorization from a supervisor or manager. The company should never use cash receipts from customers for petty cash or check cashing.

Job Duties

Separating the key tasks involved in cash processing makes it more difficult for dishonest employees to conceal fraudulent transactions. The person who receives and deposits the cash should not also perform the reconciliations. This also serves as a double-check to find and correct clerical mistakes and bank deposit errors. In smaller companies, it may not be possible to split the accounting duties between more than one employee. In this case, a supervisor should carefully review the cash receipt logs and reconciliations every month to ensure there are no discrepancies.

Access to Cash

All employees who handle cash should complete a training course on the appropriate procedures before having access to the log and safe, according to the University of Nevada Las Vegas. These procedures should be documented in writing and handed to the employee at the start of training. Cover all possible scenarios, including internal control over cash disbursements in addition to consumer transactions.

Store all cash in a safe or lockbox until it is deposited in the bank. Only the cash handling clerk and one backup employee should have a key to the lockbox or the combination to the safe. If either of these employees leaves the company or is reassigned to another position, change the lock or safe combination.

Records and Documentation

When a payment comes into the office, the cash processing clerk should immediately record the transaction into the cash receipt log and assign it an identification number, according to the University of California San Diego. 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. The transaction numbers must be unique and sequential so an auditor can quickly see if a cash receipt is missing from the log. If an employee transfers possession of a cash receipt to another employee, both parties must sign a receipt stating the date and dollar amount of the transfer.

Ledger and Reconciliation

Each day, the employee responsible for preparing the reconciliations should compare the day's total from the cash receipts log with the daily bank deposits and the cash held in the lockbox or safe. At the end of the month, he will print the general ledger reports for the company's cash account and compare them to the monthly totals on the cash receipt log. Any discrepancies not due to deposits in transit should be investigated and the reasons noted on the reconciliation report. Each reconciliation must be signed and dated by the person who prepared it.

Why is there a need to maintain a good internal control system over cash cash receipts and cash payment?

What are the risks associated with cash receipts?

Why should responsibility for related transactions be divided among different departments or individuals?

Why internal control is important in cash transactions?