As we have mentioned already, every now and then it’s a must to send your excess cash to your bank. It’s this “cash in transit” – not yet arrived to bank, but already sent from your part.

Do it as regularly as needed to avoid any excess cash lying around. People have heightened temptations when it comes to cash and why first off give them that and secondly why not just avoid the trouble and risks. So try as often as possible to make sure the cash is transferred to your bank account.

Keep a good track record of how much money, when and by who was transferred and received. This way you can go back in time in case needed (i.e. in case of any dispute or something), you know at all times how much money should have been transferred to bank and how much actually was received and all in all it’s always good to have an overview of your assets and their movement.

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In a way it’s kind of like planning for stock count. There are teams, instructions and the time. While there isn’t much else to add, it’s just this one little thing to watch out for – temptation that money creates.

To kick it off you have to plan the time the count takes place – plan it as close to year-end as possible and make sure you have gotten rid of all excessive cash by that time. Make sure you have the people available for the time planned and inform them of this count as soon as practicable.

Another thing to watch out is the people themselves. When we say that money creates temptation, the first thing you have to consider, is the trustworthiness of them. Can you trust them with money?

With the time and people selected and planned, make sure your instructions are up-to-date and that they include everything that you want to be included. Are the instructions clear and not confusing? Make all those who are going to be counting aware of the instructions and make sure they have read and understood everything.

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The obvious answer to such a question is of course “all”. And as you might guess, it’s obviously the right answer, but there’s a little more to it. Whilst counting all is a “must”, surely you can see that for practical reasons the smaller the amount, the better.

When we say practical reasons, we mean the saving of time, resources (i.e. people and expenses to extra work time) and reducing any risks. Risks which arise are obvious – exposure to temptations that money creates, human error that occur when counting etc.

So to save all the hassle, make sure your risks are as minimal as possible, make sure the cash amount to be counted is as little as possible – transfer it to the bank, pay off creditors etc. Reduce the physical amount to as low as practicable to your business model (i.e. shops need certain amount of free cash for an example).

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Some companies may have considerable amounts of cash meaning they deal on regular basis with cash payments. As such there is usually more than one place for keeping those cash amounts and obviously there are considerable security requirements and procedures introduced.

One thing that also must be remembered is that cash is like all assets, they need to be counted or confirmed for existence every now and then. When bank accounts are confirmed with bank statements, receivables with confirmation letters or payments, the cash is behaving in a way like the inventory.

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Every company dealing with either foreign clients or suppliers is bound to have some foreign currencies on their bank account. Normally by the bank you have separate accounts for those currencies meaning you literally have let’s say 100 USD and 500 EUR in the bank. However, on the balance sheet you can only have one currency, the functional currency of the company.

There are a few things that need to be considered here – the goal of keeping things clear and accuracy. First off on the balance sheet we suggest having separate accounts for all different currencies just to keep things clear and to avoid any messing up. There are cases when on the same bank account you can actually have more than one currency – especially on those cases we suggest having separate accounts on the balance sheet. Keeping things sorted on the balance sheet gives a good overview of the resources as well as enables you to see where you money standing in case of any fluctuating currencies being used.

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Financing wise it may be smart to put some money standing on your bank account to deposit accounts so they would earn you higher interest. Provided that you still may be in the need of those funds you’ll probably put them on the short term deposit accounts meaning in about 2-3 months you will be given back the money. When making these transactions, on the balance sheet you do the following entry:

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When you have dealings with cash, you’ll definitely have the need to transfer physical cash to the bank on your bank account. The cash receipt is gaining an asset for sure on your balance sheet, but it’s what happens with it inside the group what matters.

The initial cash related entry may be something like this (a very simplistic one):

Dr Cash

Cr Revenue

So eventually you may have loads of cash physically at your premises. Since holding cash there may not be the safest place, you probably want to take it into the bank. Depositing the cash on your bank account is usually more useful provided you don’t have cash dealings of your own with suppliers, employees etc. In case you’re not the one taking money to the bank on your own, you will probably use a special service for this.

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