Are you really minding your own business – or is someone else?
The importance of cash
The key requirement for any business is its ability to generate and sustain profit. If building ‘cash-flow’ is the crux of excellent business management, protecting it should be likewise.
Money converts products, labour and a selection of mechanisms, such as insurance, energy and marketing to give life to your brand. It employs staff, attracts shareholders, transforms into assets, and ultimately supports independence and influence. As we build ‘cash flow’ we can inadvertently establish ‘leakages’ and attract fraud.
Here are five basic principles to help prevent this:
1) Monthly bank reconciliations
Keep accurate records of transactions and set a monthly review, preferably by an independent source. This is a critical stage in prevention. Compare company records of on-site transactions with deposits and balances to monitor your business. Reconcile to identify ‘hidden’ costs and charges you may have missed. It can be an indicator of developing trends, such as a run on a product, or discrepancy with unauthorised payments.
2) Delegation of Cash Handling
It is said that familiarity breeds contempt. Prevention by the shared responsibility of handling cash can remove this. Separate the workload for receipt and payment to ensure that divisions and personnel work autonomously. This accountability which will accurately support your monthly reconciliations. Irregularities will be highlighted by individuals.
3) Accountability of variances
An accurate system for transactions, sales and payments is instrumental to help staff do their work in a safe environment. Mistakes can happen, so have a process, either computer or ledger, that monitors balances, payments and sales as a daily report. With consistent management, errors can be quickly uncovered.
4) Authorisation
There will be key figures within your organisation who will be required as a signatory. This is a position and should be clearly defined with parameters on
limits and responsibilities. For example, suppliers may not be paid by a signatory. But client reimbursements and refunds can be.
A ceiling needs to be agreed where any unduly high payments need further authorisation. Accounts for each signatory should be considered as a regular report. We must consider advance planning for expected payments.
5) Internal audits
Regardless of size every business should have regular internal audits. This ensures systems have not been compromised and that accuracy is managed. Most operations that run into financial difficulties from tax discrepancies and unrecoverable losses or fraud. They’re often victims of their own failings. Regular internal audits conducted by senior staff or external agencies are crucial to understand business liabilities.
These can include exact stock takes of all on-site products. Or an assessment of invoices both paid and current and bank reconciliations. Remember, everything is an asset of cash.
Use these five principles and your efficiency, productivity and business performance will give you a cash value to analyse immediately. You will see the strengths and areas needed for attention. Ask yourself – are you really minding your own business, or is someone else?
