Cash handling policy/guidelines

Formalisation of procedures that involve accepting, counting, tracking and dispensing of cash.

DESCRIPTION

Cash handling or management is a business activity that involves accepting, counting, tracking and dispensing cash.¹ A cash handling policy formalizes the procedures when dealing with cash.

PURPOSE & LINK TO INTEGRITY

Rules for cash management aim to give guidelines to prevent mishandling or loss of funds, and intend to ensure consistency of cash handling.² Clear cash management processes help to keep petty cash under control.

Petty cash tends to be prone to integrity issues. Anyone responsible for sorting or managing cash is in the position to steal it or assist others in stealing it. A simple and clear process and management of cash helps to prevent corruption, theft or fraud.³

KEY REQUIREMENTS

n.a.

HOW TO

The Seven Golden Rules For Handling Cash, according to MANGO (2012), are simple but effective guidelines to cash management in an organisation:⁴

1. Keep money coming in separate from money going out– Never put cash received into the petty cash tin, as this will lead to error and confusion in the accounting records. All money coming into the organisation must be paid into the bank promptly and entered into the records before it is paid out again. Otherwise, it will lead to distortion of financial information.
2. Always give receipts for money received– This protects the person receiving the money and assures the person handing it over that it is properly accounted for. Receipts must be written in ink and preferably from a numbered receipt book.
3. Always obtain receipts for money paid out– If not possible, the cost of each transaction should be noted down straight away so that the amounts are not forgotten and so that they can then be transferred to a petty cash slip and authorised by a line manager.
4. Pay surplus cash into the bank– Having cash lying around in the office is a temptation for theft. Additionally, the money would be better managed if it were earning interest on a bank account.
5. Have properly laid down procedures for receiving cash– There should always be two people present when opening cash collection boxes in order to protect those handling money. Both should count the money and sign a receipt.
6. Restrict access to petty cash and the safe– Keys to the petty cash box and the safe should only be given to authorised individuals. This should be recorded in the organisation’s Delegated Authority document.
7. Keep cash transactions to an absolute minimum- Petty cash should only be used for payments when all other methods are inappropriate. Wherever possible, suppliers’ accounts should be set up and invoices paid by cheque, as this produces a parallel set of accounts in the form of the bank statement and ensures that only authorised people make payments. Thus, it reduces the likelihood of theft or fraud.

KEY GUIDING DOCUMENTS

MANGO, 2012, Financial Management Essentials – A Handbook for NGOs, Management Accounting for Non-governmental Organisations (MANGO), UK

University of Wellington, no year, Cash handling procedure, University of Wellington

Bystrynski, no year, Handling cash: 6 simple steps, http://www.ptotoday.com/pto-today-articles/article/391-handling-cash-6-simple-steps, accessed 02.12.2015

FURTHER  READINGS

Northumbria University, 2011, Cash handling procedure, Northumbria University

UN HABITAT, 2008, Finance and accounts policies and procedures manual, UN Habitat

UNODC, 2004, UN anti-corruption toolkit, UN Office on Drugs and Crime (UNODC)

FULL REFERENCES

1. WiseGEEK, no year, What is cash handling?, WiseGEEK, http://www.wisegeek.com/what-is-cash-handling.htm, accessed 02.12.2015
2. University of Wellington, no year, Cash handling procedure, University of Wellington
3. UNODC, 2004, UN anti-corruption toolkit, UN Office on Drugs and Crime (UNODC)
4. MANGO, 2012, Financial Management Essentials – A Handbook for NGOs, Management Accounting for Non-governmental Organisations (MANGO), UK