Safeguarding cash allows your small business to maximize cash flow.
Cash, including checks, is an important aspect of many businesses. But controls such as monthly reporting must be put in place to safeguard it. If not, you may not have a grasp on what you need for future investments, which may impact further cash flow.
The FlowFirst management model consists of four flows: sales flow, operational flow, financial flow and, most importantly, cash flow.
The accumulation of cash enables the proper level of investment that drives the other three flows, which ultimately leads to increased cash flow. Financial flow, in addition to processing accounting and financial information and providing financial results and management reports, must have the built in internal controls to safeguard cash.
Many processes exist to help safeguard cash. Some examples include properly handing checks and expense reports, monitoring and reconciling the monthly budget, and establishing controls for the monthly reporting process. All of these types of processes are vital to safeguarding cash and allow your business to maximize cash flow.
Many safeguards exist for protecting cash in the form of checks.
When issuing, receiving and recording checking transactions, there are a number of processes that every business should follow:
- The primary check signers should maintain a sequential log of checks and physically inspect voided or cancelled checks.
- Password-protected Excel files should be kept by the primary check signer. This helps ensure that all checks are sequentially accounted for.
- An alternate check signer should be designated in the event that the primary check signer isnt available. This alternate signer should be given access to the Excel files.
- Images of the front and back of cancelled checks should be saved with each bank statement.
- The primary check signer should review and initial the monthly bank reconciliation. Following this, a designated member of management outside of the accounting department (who is familiar with the companys vendors) should review the monthly activity, including wire transfers and cancelled check images.
- Make sure that all credit card usage and check request forms are signed by the requester and reviewed by the accounting department monthly.
- Checks over a certain dollar amount should require a second signature. Establish controls for larger checks, where the primary check signer reviews and sorts the larger checks, so the secondary signer is able to quickly review these checks before mailing.
- Include any supporting documentation with invoices and mailed checks. Do not mail separately.
Next page- 8 recommendations for safeguarding cash flow