What is “Control of Cash?”
Cash control is the process of confirming that all cash received and disbursed is accurately recorded and accounted for within your business. It is utilized in settings where transactions involving goods and services occur and is crucial to ensure responsible financial accounting.
Your policies and procedures surrounding monetary transactions, known as internal control, play a key role in effective cash management. Monitoring and recording the flow of these assets is essential for accurately maintaining an updated cash balance record.
The primary goal of implementing effective cash control rules is to reduce the risks associated with poor control, such as mismanagement of funds and fraudulent activities. By adopting sound control of cash policies, your business can meet its financial obligations while minimizing risks related to erroneous payments, theft, and fraud.
Why is it Important to have Good Cash Control?
Consistent cash management is essential to maintaining healthy financial plans and ensuring the growth of your business. Poor cash management, on the other hand, can impede your ability to operate your business smoothly, meet financial obligations, and potentially harm your business's reputation and credit rating. Noncompliance with legal and regulatory requirements may also result in penalties, fines, and legal liabilities.
To minimize these risks, businesses should establish clear cash management policies and procedures, conduct regular audits, and consider leveraging technology solutions where applicable. By implementing strong cash management practices, businesses can optimize their financial operations, improve their overall performance, and foster long-term success.
Why is Control of Cash Important for Payroll?
Establishing strong cash control policies is highly recommended to ensure proper payroll management, given that it represents one of the largest expenses for most businesses. By implementing policies and procedures to accurately document, control, and disburse payroll funds, businesses can reduce the likelihood of fraud, errors, and mismanagement of employee funds, and ensure they have enough funds to cover payroll expenses. Failure to do so may lead to legal action and damage to your reputation.
To effectively control cash for payroll, businesses should use secure payment methods, such as direct deposit or prepaid debit cards, to minimize the risk of theft or fraud. Conducting regular payroll audits and reviewing records can also help identify any irregularities or errors in the payroll process, ensuring employee pay rates, deductions, and taxes withheld are accurately recorded and paid on time. By taking these steps, businesses can optimize their cash management practices and protect their payroll operations against potential risks.
How can my Business have Good Control of Cash?
Implementing internal controls and conducting regular audits are recommended measures that can significantly improve your business's control of cash. These best practices can increase business's chances of effectively controlling cash, preventing theft, and ensuring accurate financial reporting.
Maintain control from cash in to cash out
Effective cash management involves controlling your cash flow from the moment money comes (revenue, investments, etc.) to the moment it goes out as expenses. To achieve this, your business can implement internal controls for cash that encompass corporate governance, company policies, bank account reconciliation, and more.
Keep accurate and consistent documentation
Documentation is key when it comes to controlling your cash. Tracking inbound and outbound transactions in detail is essential to understanding where money is coming from and where it's going. It's important to document every transaction immediately and keep these records separate from cash to minimize the risk of theft.
Conduct regular cash audits
To ensure the accuracy and integrity of your financial records, it is highly recommended to conduct regular cash audits. This includes performing bank reconciliations on a routine basis, the frequency of which will depend on the size and complexity of your business operations. Consistent and thorough cash audits can help you identify discrepancies or potential fraud and ensure the financial health of your business.
Define cash handling procedures
Businesses can ensure accountability and minimize the risk of errors or fraud with detailed cash handling procedures. This includes outlining who has access to cash, how many people can access it, and how they must handle financial processes. These procedures increase transparency and accuracy in financial operations.
Utilize technology to your advantage
Technology can be a valuable tool to automate cash control processes such as receipting and producing documentation. By reducing the human element, your business minimizes the risk of errors and improves the efficiency of your cash handling procedures. Consider evaluating your current processes and identifying areas where automation would be most beneficial.
Software that Supports Internal Cash Controls
When it comes to having effective control of cash for your business, it can be challenging to manage everything on your own. Fortunately, Greenshades is here to help with solutions that can assist in optimizing and streamlining your internal cash control processes. Our software offers various features, such as:
- Accurate documentation: Automated time and attendance tracking tool, ensures that payroll funds are accurately documented and recorded, giving you peace of mind.
- Secure payment methods: You can offer your employees the convenience of direct deposit and prepaid debit cards while minimizing the risk of theft or fraud.
- Compliance monitoring: Stay up-to-date with the latest payroll tax regulations and ensure that all payroll-related liabilities are properly recorded and paid on time.
- Optimized processes: Automate many aspects of your payroll management, saving time and effort by improving your overall efficiency and minimizing errors in the process
- No Float Taxes: Keeping control over your cash is essential, so we do not require pre-funding payroll tax accounts. Instead, simply receive alerts when your payroll taxes are due and pay them directly.
With Greenshades robust and user-friendly payroll tools, your business can effectively manage payroll and ensure proper control of cash.
Learn more by getting a demo today.
1 Flint, M. (2020, July 30). Cash flow: The reason 82% of small businesses fail. Preferred CFO. Retrieved April 28, 2023, from https://preferredcfo.com/cash-flow-reason-small-businesses-fail/