Question

. Explain the special controls needed for cash?

. What is an example of a customer audit?

Answer 1

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Explain the special controls needed for cash?

Cash is the most liquid of all assets. A business cannot survive and prosper if it does not have adequate control over its cash. Cash is the asset that has the greatest chance of “going missing” and this is why we must ensure that we have strong internal controls build around the cash process. The need to control cash is clearly evident and has many aspects.

Separation of duties

One of the most important steps to protect cash is to separate cash handling duties among different people. With proper separation of duties, no single person has control over the entire cash process.

Best practice is to have different people: -Receive and deposit cash -Record cash payments to receivable records -Reconcile cash receipts to deposits and the general ledger -Bill for goods and services -Follow up on collection of returned checks -Distribute payroll or other checks

Accountability, authorization, and approval

Cash accountability ensures that cash is accounted for, properly documented and secured, and traceable to specific cash handlers. When proper cash accountability exists, you can answer the four W's during a process: -Who has access to cash -Why they have access to cash -Where cash is at all times -What has occurred from the transaction's beginning to end

Best practices: -Record cash receipts when received. -Keep funds secured. -Document transfers. -Give receipts to each customer. -Don’t share passwords. -Give each cashier a separate cash drawer. -Supervisors verify cash deposits. -Supervisors approve all voided refunded transactions.

What is an example of a customer audit?

A customer audit is a detailed review of how the company is perceived by its customers, a review of each customer’s needs, and an evaluation of the role the company is playing in each of the customer’s businesses. Most B2B firms audit all of their customers. Some companies with very large customer bases, audit their valuable and high-potential customers, or audit a random sample of customers and use that information to classify similar customers.

Examples of a customer audit may be-

-Category purchases made in the past year, and planned purchases for the near-term which is usually 1 to 5 years.- -Detailed information about the company’s purchasing cycle and decision process. -The customer’s most compelling business problems that relate to the company. -Evaluation of the company’s performance over the past year versus customer’s needs.