Protecting Your Cash: Simple Internal Controls for Handling Cash and Checks
Handling cash and checks can be one of the riskiest areas of nonprofit financial management. Without proper internal controls, your organization may be vulnerable to theft, fraud, or errors—putting your reputation and funding at risk. The good news? Simple practices can go a long way toward safeguarding your funds. Here's how to protect your cash and checks with straightforward internal controls.
1. Segregate Duties
No single person should control all aspects of a financial transaction. Segregating duties reduces the risk of fraud and errors.
Best Practices:
One person collects cash or checks, and another records the deposits.
A third person reconciles the bank statements to ensure everything matches.
Require two signatures on checks over a certain amount.
2. Count Cash with Two People Present
Whenever cash is involved, always have two people count it together to ensure accuracy and accountability.
How It Helps:
Provides verification in case of discrepancies.
Deters theft by ensuring no one person is handling cash alone.
Action Step: Create a cash count form for both individuals to sign and date.
3. Use a Locked, Secure Location
Cash and checks should never be left in desks or unprotected areas.
Best Practices:
Store funds in a locked cash box or safe until they can be deposited.
Limit access to authorized personnel only.
4. Deposit Funds Promptly
Holding on to cash or checks increases the risk of loss or theft.
Best Practices:
Deposit funds within 24-48 hours of receipt.
Use a bank night drop if deposits can’t be made during business hours.
5. Track and Document All Transactions
Proper documentation creates a paper trail that can be reviewed and audited.
How It Helps:
Ensures accountability for every dollar collected.
Makes it easier to spot discrepancies.
Action Step: Use pre-numbered receipts for every transaction and keep a copy for your records.
6. Reconcile Bank Statements Regularly
Monthly reconciliations can catch errors or unauthorized transactions before they become bigger problems.
Best Practices:
Have someone who isn’t involved in cash handling reconcile the bank statements.
Compare deposit slips to bank statements to ensure all funds were deposited.
7. Train Your Staff and Volunteers
Everyone involved in handling funds should understand your internal controls.
Best Practices:
Provide regular training on cash handling and financial policies.
Create a written guide for easy reference.
8. Conduct Periodic Reviews or Audits
Even with strong controls, regular checks are necessary to ensure compliance.
Best Practices:
Schedule internal or external audits to review cash handling processes.
Use the findings to strengthen your internal controls.
Final Thoughts
Protecting cash and checks doesn’t have to be complicated, but it does require consistent effort. By implementing these simple internal controls, you’ll not only safeguard your funds but also build trust with donors, staff, and your board.
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