Segregation of Cash Duties and Why it Matters

Have you heard of the term 'segregation of cash duties?' If not, it's one of the most important topics we may cover on this blog. It refers to the idea that cash duties, or the work tasks involving money, do not all fall within the control of one lone employee. The cash duties are split among two or more so that it is harder to embezzle from the company and cover up the evidence. 

In businesses with proper financial controls in place, the employee who collects and deposits cash from vendors, customers, and other outside sources should not be the same person who is responsible for entering data, receipts, and logs into your financial system. The person who deposits and handles the money also should not have access to update the system. This will prevent the person depositing the money from stealing it and then covering their tracks in the accounting system to hide the evidence. 

Segregating cash duties is important because it helps reduce your business's risk of embezzlement and steaminess your accounting tasks. Refer to this matrix by the University of California Santa Cruz to see which cash handling tasks should be completed by whom in your office. 

Other important cash best practices include:

• Maintain a log of all cash coming and going that multiple people review to ensure cash does not go missing.
• Cash and check depositing should take place in a visible, possibly event monitored, environment.
• Restrict checks by endorsing with "For Deposit Only" on them.
• Safeguard all cash in office is a secured place.
• Make deposits frequently so extra cash is not lying around.
• Use a second person to count and verify large sums of cash for accuracy and safety of the cash. 
• Use an unrelated 3rd party such as Tally Services to audit your books and review your cash duties to make sure your business is safe from embezzlement. 

Working with an outside bookkeeping and accounting firm can also help protect your business. Tally Services will come alongside you to streamline processes and help you adopt financial controls that make sense, as well as keep an eye on the financial side of the business to protect you from ill will.

If your business has not clearly defined cash duties in a way that separates responsibilities and removes sole control, Tally Services highly recommends you do so. Tally Services in Fort Collins, Colorado is here to help businesses big and small find a cash handling solution that meets your needs and protects your business from embezzlement, fraud, and theft. Contact us today to get started.