Chapter 10
Cash Controls
291
Protect Cash when it is on the Premises
Having cash on the premises of a business may be a temptation to a dishonest employee. It therefore
becomes necessary to protect surplus amounts of cash. When the money reaches a predetermined
amount, the overage is placed in a safe area (i.e. a locked office or back room).The business may use
a safe to store the cash until it is deposited into a bank account.The combination or key to the safe
should only be made available to a limited number of trustworthy employees.
As described previously, cash receipts should be deposited intact. Deposits may be made more than
once a day to minimize the amount of cash on the premises. If deposits are to be made after hours,
the company can make use of the bank’s night deposit box.
For larger companies that have substantial amounts of cash on hand, security guards may be
employed to physically protect the premises. Similarly, security firms may be employed when
moving large amounts of cash from the company’s premises to the bank.
Cheques received, which may be treated like cash, should be stamped “for deposit only” on the back
to discourage fraudulent cashing of the cheque.
Remove Cash from the Premises as soon as Possible
Since cash is portable and highly vulnerable to theft, a company should keep minimal cash on site
by making regular bank deposits.
In addition, establishing a properly controlled bank account is required to keep cash on the premises
to a minimum. Just as all cash receipts are deposited in the bank, all payments are made with
cheques, eliminating the need to keep a large amount of cash on the premises. For the few expenses
that must be paid in cash, a small amount can be kept as petty cash.
These three rules provide a basis for managing cash in a business. The overall goal is to ensure that
cash received is the amount of cash recorded, which in turn is the amount of cash deposited.
The process and controls related to keeping a bank account and maintaining a small amount of cash
as petty cash will be discussed in detail.
