What is Cash Control?

Cash control is a process that is utilized to verify the complete nature and accurate recording of all cash that is received as well as any cash disbursements that take place. As a broad principle of responsible financial accounting, cash control takes place in any environment where goods and services are bought and sold. As such, businesses, non-profit organizations and households all employ the basic tenets of cash control.

To fully understand cash control, it is helpful to understand what is meant by cash, when it comes to financial accounting. Along with referring to currency and coin, cash is also understood to include forms of financial exchange like money orders, credit card receipts, and checks. Essentially, any type of financial exchange that can be immediately negotiated for a fixed value qualifies as cash.

Cash control means competently managing all these types of financial instruments by maintaining an accurate tracking system that accounts for both receiving and disbursing the cash. Designing a cash control process is not difficult at all. There are a few basic elements that will be incorporated into the process regardless of whether the cash control procedure is used in the home or in an office or business environment.

First, all transactions related to cash must be documented and recorded immediately. With cash control, there is no use of the accrual method of accounting. Each cash receipt is recorded upon reception, while each disbursement is entered at the time that the payment is released. The mode of documentation requires only some basic template that will record the necessary data. For the home, a checking account can be used to track all cash deposited into a common account for the good of the home, with the check book register can serve as the basic document that keeps track of the inbound and outbound transactions.

Next, solid cash control procedures requires that there be only certain individuals who have access to the cash. This type of security serves two purposes. First, accountability is established for the way that the cash is managed. Second, the empowerment of two people to oversee cash control helps to ensure that important transactions can take place at any given time, even if one individual is unavailable for some reason.

Last, cash control demands that the documents related to the task are kept separated from the physical location of the cash. In other words, the accounting book that is used to record the cash transactions should not be kept in the safe with the currency, money orders, and checks. This simple precaution helps to ensure that the task of altering the physical evidence related to cash in hand is more difficult and thus minimizes the chances for theft to occur.