TODAY? in our weekly column I will continue to look at how entrepreneurs manage their businesses and specifically I will look at business cash management.
In the definition of cash I will restrict it to the currency in this context and to some extent I will look at money held in a business current account.
Cash is an asset and liquid for that matter. Its availability in business is essential in day-to-day operations.
And because of this, its management in a business requires more attention and its total control is very much desirable.
A loose usage of this essential asset in business will not translate well in business managing.
? A tight noose around this desirable assetin a business will do well.? As you must be aware every small business must maintain a business current account at a preferred bank.
Business current account is very essential to any small business because of the flexible conditions attached to it.
A current account allows unlimited deposits and withdraws in a day and the operation of a cheque book is necessarily for business transactions.
? However, today we look at how a small business manages its cash more especially in the absence of an accountant.
? As you must also be aware, a small business cannot afford to employ a qualified accountant because its financial standing cannot allow it, in short a small business cannot meet the salary obligations of a qualified accountant although this can be argued.
? Managing cash in a small business with no proper cash control procedures in place, exposes it to being misused.
? In my research conducted over several small businesses, financial indiscipline in a way cash was misused, was found to be rampant.
The golden rule method of taking money received in a business whether cash or cheques regardless of its source to a bank and equally using cheques for payments is not fully followed by small businesses.
? Most of them, when cash is received it is applied to other several uses? even? before it is taken to the bank.
Sometimes the expenses analysis is written on the piece of paper not supported by vouchers very? difficult to?? trace? the records.
And in this case, it becomes very difficult for a business to account for the usage of such cash.
The proper maintenance of cash records will give a business a clear cash flow procedure? and enables a business owner to make proper informed decisions.
? The essence of maintaining businesses current accounts at the bank isto ensure that the business funds are properly safeguarded and this way a business is given chance to properly account for its resources prudently? Cash is universally desirable and therefore it must be safe guarded prudently to enable its usage? is restricted to business operations.
? Sometimes the cash is misapplied because of the power that is invested in business owners; if discipline is instilled in them things can change for the better.
A small business should assign responsibilities to a trusted employee who should receive cash or cheques and prepares them for depositing at the bank.
However, on the other hand, control of cash disbursements is accomplished by ensuring that, substantially, all cash payments are made by cheques.
Voucher system is an additional safe guard over disbursement.
A business should ensure that when cash is withdrawn from a business current account, the cash disbursed is fully supported by vouchers fully approved by responsible official in a business set up.
In my research,? I discovered that most SMEs do not use a petty cash fund to disburse payments for small payments, instead, cash is used to make all kinds of payments whether big or small.
In this case a business is compelled to withdraw a substantial amount of money in a day to make such type of payments.
The important thing to do here is to ensure that every cash payment made is supported by an approved voucher and this must be taken very seriously by powers that be.
And these vouchers must be filed away properly as source documents.
This will enable a consultant to prepare books of accounts.
Mind you, even a small business must file tax returns to the Government supported by yearly financial statements.
Therefore,? proper financial records must be kept at the business premises.
However , a business that properly follows? a golden method rule can use a petty cash fund to disburse small payments, while? at the same time making big payments through cheques.
Petty cash must be establised? and one trusted employee be assigned to operate this cash.
When management establishes the amount to be used, that money is turned over to the appointed person and operates by way of vouchers, each voucher, when approved removes the money from the petty cash until the balance is depleted and the amount is replenished by total vouchers approved.
A petty cash account analyses the expenses incurred through it. Comments/questions call: 0979212235 or email: wklpublications699@gmail.com
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Source: http://www.times.co.zm/?p=10222
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