Implementing a system of strong internal cash controls is one of the best ways a small-business owner can control deficiencies in sales and cash receipts. Although internal controls are vital to managing risks in every business department, weak or nonexistent controls in sales and cash receipts can affect the business’s ability to fund daily operations and in this way are especially serious.
Well-developed and clearly written polices and standard operating procedures are vital for setting expectations and holding employees accountable for their actions. A sales and cash receipt policy identifies and outlines the reasoning behind internal controls, while SOPs provide step-by-step instructions for carrying out daily cash receipt handling and management responsibilities. For example, a policy statement might address segregation of duties as a way to ensure that no employee is responsible for more than one sale or cash receipt handling task. SOPs then identify distinctly separate procedures for cash counting, verification or authorization, data entry into the accounting system and preparing the bank deposit.
Storing cash and receipts securely and limiting access to only those employees authorized to work with cash or receipt data works to safeguard cash and financial information as well as maintain the accuracy and integrity of cash receipts and financial data. Store cash in a locked, secure location to which only one employee, such as the department supervisor, and the business owner are authorized to access. Incorporate computer security controls, such as a strong password system, a log-in system that requires a user to enter an identification code before accessing specific computer programs and SOPs that outline processes for closing open programs and securing computer screens before leaving a workstation.
Require employees to turn in hard copies of sales or cash receipts along with a record of daily receivable and payment transactions. These serve as supporting documentation for verifying the authenticity and maintaining the integrity of each cash-based transaction. Without these requirements, it can be difficult to verify whether cash-based transactions are categorized correctly or whether the amounts entered are correct. In addition, transaction verification requirements can help ensure cash doesn’t turn up missing and that data entry transactions aren’t changed at a later date.
Regular and non-scheduled detailed reviews of sales and cash receipt transactions serve to support policies and SOPs by determining whether and how well department employees are complying with cash receipt controls. Internal audits can also be helpful in identifying aspects of a policy or SOP where additional controls might be necessary or when an existing control can be strengthened by modifying a statement or a step in a daily task. Most importantly, internal audits can reveal instances of internal fraud, waste or abuse of business resources.