Cash management involves planning, controlling, and accounting for cash to ensure a company’s financial stability. For companies like Parkview, efficient cash management balances liquidity with revenue generation. Objectives include:
Accurate Accounting: Track receipts, disbursements, and balances precisely.
Loss Prevention: Minimize theft or fraud risks.
Borrowing Anticipation: Ensure cash availability for operations via loans or lines of credit (e.g., Rankin, Inc.’s $1 million line).
Avoid Idle Cash: Invest excess cash in revenue-generating securities rather than letting it sit unproductively.
Internal controls support these goals by:
Separating cash handling from record-keeping to prevent fraud.
Using cash budgets to forecast needs.
Listing receipts at collection points and depositing daily.
Paying by check (except petty cash) with approvals separated from signing.
Reconciling bank statements promptly by non-cash-handling staff. Errors like a $15 cash shortage (recorded as Cash Over and Short) highlight the need for controls to maintain accuracy and security, ensuring cash supports operations without excess or loss.