Free Trial

Safari Books Online is a digital library providing on-demand subscription access to thousands of learning resources.

Share this Page URL
Help

Chapter 6. Maintaining control of cash > Methods of controlling cash - Pg. 22

Maintaining control of cash 1.2. What does abundance of cash on hand signify? A. B. C. D. Unwise investment practices Profitability Liquidity Non-productivity 22 Methods of controlling cash Explanation There are various ways you can control your organization's cash. Use these methods to ensure that your cash is being managed as well as possible: · · · · · · Using bank accounts Maintaining lockboxes Utilizing electronic funds transfer (EFT) Analyzing "over" and "short" amounts of cash Conducting surprise cash counts Supporting physical protection of cash Using bank accounts Your organization should use separate bank accounts for various business processes, such as a disbursement account and a payroll account. Although this practice means that your organization will have numerous bank accounts to track, doing so provides your organization with record-keeping devices that help you trace cash transactions. Being able to track cash transactions allows you to control how cash is used within your organization. Maintaining lockboxes A lockbox is a post office box that an organization keeps at its bank. Checks are mailed to the lockbox, where the bank collects them. The bank is authorized to deposit the checks into one of the organization's bank accounts, and the bank then sends the organization a document detailing the day's deposits, so they can be recorded in the organization's books. Maintaining lockboxes ensures that the checks an organization receives are safely deposited into the organization's bank accounts. Utilizing electronic funds transfer Electronic funds transfer, or EFT, is the computer-based transfer of monies between two accounts that doesn't involve any physical exchange of funds. EFT is becoming a popular method for making payments because it eliminates the check writing process and the errors and abuse that can ac- company this process. EFT also minimizes an organization's need to pay bank charges for check processing. Analyzing "over" and "short" amounts of cash Over amounts of cash are monies that are in excess of the expected deposited amount, and a short amount of cash is the amount that is missing from an expected deposited amount. If the amount of cash deposited in an area of your organization is either over or short from the expected amount, the issue should be investigated.