Most non-profit organizations work with a lot of cash—not just checks or wired funds, but actual banknotes. And this naturally creates a potential weak link in your accounting chain. Because cash is generally non-traceable and very mobile, it can easily be misused or misappropriated.
Any non-profit that wants to see how they're doing with good cash control does well to ask their accountant to perform a cash audit. How does this help your organization and how is an audit done? Here's what you need to know.
How Does a Cash Audit Benefit You?
By observing how staff receives, transports, records, deposits, and pays out cash, a trained CPA can spot potential trouble spots that most business owners may not be aware of. They might see, for instance, that cash is not being counted by two parties rather than a single individual alone. This "best practice" helps protect workers from theft and protects the cash from embezzlement.
When procedures are audited by an independent third party, your donors, lenders, and volunteers also have more confidence that no one is misusing their valuable money and time. Because non-profits generally must rely on donations and fundraisers, they should be able to show that it uses received money wisely and for the purpose intended. An audit helps to ensure that.
What Does a Cash Audit Look Like?
So, if a cash audit is due, what can you expect? The audit would generally have about three parts. First, the CPA pulls written records for a certain set of transactions or a certain time period in the recent past. Using these records, they'll attempt to verify independently the amount of cash begun with, the amount taken in, the amount recorded, and the amount deposited. Any discrepancies are investigated by the company.
The second step is to follow the actual cash handling process as it occurs in real-time. The observer would look for best practices—such as counting money only in a secure location—and offer recommendations where the process could be done more safely or better in line with accepted accounting principles.
Finally, a cash audit may include checking how cash is paid out. This includes reconciling any petty cash amount to the records kept for its use or examining receipts and bank statements for cash purchases during events.
Where Can You Learn More About Audit Services?
An internal audit does require some investment of time and effort, but the benefits last continue for years. Learn more about getting a cash audit for your own organization by meeting with a CPA in your area today.
If you're a business owner and you don't have an accountant, you might want to consider hiring one. Accountants help business owners by handling the books, filing tax forms and managing the costs of the business. They also offer guidance to concerning important business matters. We aren't accountants, but we do have an understanding of the importance of their duties.
We've interviewed accounting professionals and they've answered all our questions about their job description and explained how their services can benefit business owners. We've compiled all this information into articles that we've posted on this site. We hope that you will read them to learn how an accountant can benefit your business.