Collection and Cash Receipt Controls (#12)
/In this episode, we discuss the controls associated with collections, cash receipts, and petty cash. The main concept is to avoid cash-related controls by keeping cash off the premises, usually by encouraging the use of ACH payments or payments into a bank lockbox. Key points made in the podcast are:
Collection Controls
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The collections staff is not allowed to handle cash receipts, since this presents a temptation to steal the cash and use credit memos to cover up the theft
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The collections staff can only create credit memos without approvals that are relatively small; all others require management approval
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Management approval is required to assign invoices to a collection agency, because of the significant collection fees charged
Cash Receipts Controls
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Two people open the mail, to reduce cash and check pilferage
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The mailroom staff creates a list of all cash and checks received, of which it retains a copy
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The mailroom staff endorses all received checks as being for deposit only
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The cash receipts clerk matches all checks entered into the accounting system to the list provided by the mailroom, to look for anomalies
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Compare the bank deposit slip to the cash receipts journal, to see if the courier removed any cash or checks
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Force the cash receipts clerk to take vacations, which may uncover instances of lapping fraud
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The cash register clerk gives a receipt to every paying customer, so the customer can compare the receipt to the amount paid
Petty Cash Controls
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Don’t use petty cash at all
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Assign responsibility for the petty cash box
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Document all disbursements from the petty cash box
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Audit the petty cash box
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Place a contact switch under the petty cash box, so that an alarm will sound if the box is taken
Related Courses
Accounting Information Systems