Protecting Checking, Savings, and Petty Cash Business Accounts - dummies

Protecting Checking, Savings, and Petty Cash Business Accounts

Protect your business’s checking, savings, and petty cash accounts. Cash used in a business is vulnerable; “dipping” into the checking, savings, and petty cash accounts can be tempting for some employees. Protect those accounts with safety measures.

You aren’t the only one handling the cash for your business. You have some employees encountering incoming cash at cash registers and others opening the mail and finding checks for orders to purchase products or pay bills, and checks from other sources. Employees may need petty cash to pay for mail sent COD (Collect on Delivery) or to pay for other unexpected, low-cost needs.

You can drive yourself crazy with worry about all this cash flow, but just putting in place the proper controls for your cash can help protect your business’s family jewels. Cash flows through your business in four key ways:

  • Deposits and payments into and out of your checking accounts

  • Deposits and payments into and out of your savings accounts

  • Petty cash funds in critical locations where fast cash may be needed

  • Transactions made in your cash registers

Checking accounts

Almost every dime that comes into your business flows through your business’s checking account (at least that’s what should happen). Whether it’s cash collected at your cash registers, payments received in the mail, cash used to fill the cash registers, or petty cash accounts, payments sent out to pay business obligations, or any other cash need, this cash enters and exits your checking account. That’s why your checking account is your main tool for protecting your cash flow.

Deciding on types of checks

After you choose your bank, you need to consider what type of checks you want to use in your business. For example, you need different checks depending upon whether you handwrite each check or print checks from your computerized accounting system.

If you plan to write your checks, you’ll most likely use a business voucher check in a three-ring binder; this type of check consists of a voucher on the left and a check on the right (see the image). This provides the best control for manual checks because each check and voucher are numbered. When a check is written, the voucher should be filled out with details about the date, the check’s recipient, and the purpose of the check.

A business voucher check is used by many businesses that manually write out their checks. [Credit:
Credit: Check sample is from
A business voucher check is used by many businesses that manually write out their checks.

If you plan to print checks from your computerized accounting system, you’ll need to order checks that match that system’s programming. Each computer software program has a unique template for printing checks. Refer to your accounting software package for more information on the types of checks that are available and how to order them.

Initially, when the business is small, you can keep control of the outflow of money by signing each check. But as the business grows, you’ll probably find that you need to delegate check-signing responsibilities to someone else, especially if your business requires you to travel frequently.

Arranging deposits to the checking account

Of course, you also need to deposit money into the checking account, and you want to be sure your deposit slips contain all the needed detail as well as documentation to back up the deposit information. Most banks provide printed deposit slips with all the necessary detail to be sure the money is deposited in the appropriate account. They also usually provide you with a “For deposit only” stamp that includes the account number for the back of the checks.

Whoever opens your business mail should be instructed to use the “For deposit only” stamp immediately on the back of any check received in the mail. This stamp makes it a lot harder for anyone to use that check for other than its intended business purposes.

Savings accounts

Some businesses find they have more cash than they need to meet their immediate plans. Rather than keep that extra cash in a non-interest bearing account, many businesses open a savings account to store the extra cash stash.

If you’re a small business owner with few employees, you’ll probably be the one to control the flow of money into and out of your savings account. As you grow and find that you need to delegate the responsibility for the business’s savings, be sure to think carefully about who gets access and how you will document the flow of funds into and out of the savings account.

Petty cash accounts

Every business needs unexpected cash on almost a weekly basis. Whether it’s money to pay the postman when he brings a letter or package COD, money to buy a few emergency stamps to get the mail out, or money for some office supplies needed before the next delivery, businesses need to keep some cash on hand, called petty cash, for unexpected expenses.

You should keep around $50 to $100 in a petty cash box. If you find that you’re faced with cash expenses more or less often than you initially expected, you can adjust the amount kept in petty cash accordingly. Be sure you set up a good control system that requires anyone who uses the cash to write a voucher that specifies how much was used and why.