What is cash control?
Cash control is a process used to verify the complete nature and accurate recording of all cash received, as well as any cash disbursements that occur. As a general principle of responsible financial accounting, this process takes place in any environment where goods and services are bought and sold. As such, businesses, nonprofits, and families employ its core principles.
To fully understand cash control, it helps to understand what is meant by cash when it comes to financial accounting. In addition to referring to currency and currency, this term also covers forms of financial exchange, such as money orders, credit card receipts, and checks. Essentially, any type of financial exchange that can be immediately traded for a fixed amount qualifies.
Cash control means competently managing all these types of financial instruments, maintaining an accurate tracking system that takes into account both the receipt and disbursement of cash. Designing this process is usually not difficult, and there are some basic elements that will be incorporated into the process, whether the procedure is used at home or in an office or business environment.
First, all cash-related transactions must be documented and recorded immediately. The accrual basis of accounting is not used, in which gains and expenses are recorded when incurred and not when received or paid. Each cash receipt is recorded on receipt, while each disbursement is entered at the time the payment is released. This documentation mode only requires a few basic templates that will record the necessary data. For the family, a checking account can be used to track all the money deposited in a common account for the good of the family, and the checkbook can serve as the basic document that keeps track of incoming and outgoing transactions.
So, robust procedures require multiple but limited people to have access to the money, which serves two purposes. First, people can be held accountable for how money is managed. Second, having at least two people overseeing the process helps ensure that important transactions can take place at any time, even if an individual is unavailable for some reason.
Cash control also requires that task-related documents be kept separate from the physical location of the cashier. In other words, the ledger used to record cash transactions should not be kept in the vault with cash, money orders, and checks. This simple precaution helps ensure that the task of tampering with physical evidence related to money is more difficult and therefore minimizes the chances of theft.