Internal Control Best Practices for Petty Cash Management

Effective Internal Control

Internal control is responsible for managing all the money that a company receives from sales and other income, as well as its exits under a program to pay suppliers to cancel those coming and services.

Purpose of Effective Internal Control

• Protecting resources against waste, fraud, and shortfalls
• Promoting adequate accounting data
• Encouraging compliance with company policies
• Judging the efficiency of operations

Major Cash Inflows in the Company

1. Cash sales
2. Charges to customers
3. Borrowings
4. Sales of fixed assets

Items That Are Not Part of Cash

1. Vouchers boxes
2. Postdated checks
3. Returned checks
4. Tax stamps and mailing

Recommendations for Petty Cash Management

1. Make careful counts.
2. Separate the group cash.
3. The person doing the counting should not be the same as the one who prepared the documentation sources.
4. The results are confidential business information.

Creating a Petty Cash Fund

1. Make an estimate of the amount of money needed to pay off expenses.
2. Take into account that it is for a short period not exceeding one month.
3. Assign a single person to its administration.
4. Make delivery of the petty cash vouchers to charge for putting them into operation, as required.

Missing and Petty Cash Surplus

If there is a difference, it can be corrected by noting the differences in an account called "Missing and Surplus Cash."

When a shortage of cash is detected, the aforementioned account will have a balance due.

Recommendations for Petty Cash Management

1. Make careful counts.
2. Separate the group cash.
3. The person doing the counting should not be the same as the one who prepared the documentation sources.
4. The results are confidential business information.

Creating a Petty Cash Fund

1. Make an estimate of the amount of money needed to pay off expenses.
2. Take into account that it is for a short period not exceeding one month.
3. Assign a single person to its administration.
4. Make delivery of the petty cash vouchers to charge for putting them into operation, as required.

Missing and Petty Cash Surplus

If there is a difference, it can be corrected by noting the differences in an account called "Missing and Surplus Cash."

When a shortage of cash is detected, the aforementioned account will have a balance due.