MEANING SUBSTITUTE PETTY CASH FOR CHECKS

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Cutting and issuing an always check is a long, multistep process. One must match a supplier invoice to a purchase order and receiving document, enter the invoice into the computer, watch for the deadline, and then print the check, own it signed, and mail it to the supplier. For small payments where in fact the supplier turns up at the company offices, there is a less complicated way. It is much easier to cover a supplier from the petty-cash box. This process eliminates the entire process needed seriously to cut a check. However, there are some severe limitations on the usage of petty cash that limit its effectiveness to a few situations. First, since the intention is to bypass the most common checks and balances of the accounts payable process, it must only connect with those payments which are so small that no body cares if the machine is bypassed. Generally in most companies, the quantity that can be paid with minimal controls is usually below $100. For amounts larger than this, the usual check-paying process is probably better, since it needs tighter control over payment approvals. Another problem is so it makes little sense to stuff money into a package and mail it to the supplier, since the amount of money can be intercepted and removed at many points on the way, causing no payment. Consequently, it is way better handy the cash directly to a supplier representative, who must certanly be on the organization premises to sign for the money. By limiting the usage of petty cash to small amounts and on-site payments, one can effectively reduce this approach to a small percentage of the total amount that a lot of companies pay out. Nonetheless, it is really a simple and effective approach that can lead to some reduction in the volume of transactions flowing through the normal accounts payable system.

Some control is needed if petty cash can be used as a regular form of payment. One key item is always to require a signed receipt for all moneys handed out, preferably having an accompanying invoice from the supplier. This allows sufficient proof of why an expense was incurred and covers the company if the supplier claims so it was never paid. Also, there should be a regular reconciliation of the petty-cash box to ensure that all expenditures and replenishments are accounted for. It is specially important if you have a top volume of payments going from the petty-cash box, while there is a prospect of tens of thousands of dollars to disappear as time passes if you have not a constant reconciliation. Finally, given the high volume of usage, it is very important to provide control of the petty-cash box to a single individual who need responsibility for the money. When followed by storage in a locked container, these measures present a powerful set of controls over continual petty-cash disbursements.

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