Guiding Principles for Setting Up Policies and Procedures
Understand that a reference to cash covers more than currency that physically exists and is actually on hand. As a matter fact, one of the initiatives for keeping money secured is to make sure that only a minimum amount is physically available on the business premises. This denotes that the monies subject to internal controls include those that are kept intact as deposit accounts, from where funds are withdrawn as a means to meet the company’s financial requirements.
Best practices recommend depositing most of the cash received during the day to a reliable local depository bank. In some instances, a depository bank’s armored vehicle is requested to pick-up the deposit to ensure security of transport.
The most important aspect of cash management is to institute efficient and effective security measures for cash handling. Internal control policies and procedures are therefore implemented to safeguard funds and monies against theft, waste and embezzlement.
There are twelve operational principles observed and used as guidelines for setting-up policies and procedures for managing cash and its movement. These are:
(1) Recording and documentation of transactions
(2) Segregation of duties and responsibilities
(3) Authorization of transactions
(4) Timeliness of payment
(5) Review and verification of documents
(6) Security of physical conditions
(7) Supervision, monitoring and traceability of fund movements
(8) Planning and budgeting controls
(9) Establishment of accountability
(10) Limitations over accessibility and availability
(11) Summarization and reports
(12) Element of surprise in relation to periodic audits and related initiatives.
Policies and procedures are formulated by integrating these principles as built-in preventive and corrective measures in managing the following aspects of business operations:
- Receipt or collection of payments
- To defray costs and purchases
- To pay for obligations
- The maintenance of unused or available funds.