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 Table of Contents
ACCOUNTS RECEIVABLE POLICY: CASH RECEIPTS SAMPLE 1.......................................................................3
ACCOUNTS RECEIVABLE POLICY: CASH RECEIPTS SAMPLE 2.......................................................................6

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 ACCOUNTS RECEIVABLE POLICY: CASH RECEIPTS
SAMPLE 1

Prepared By:

Approved By:

Revision Date:

Effective Date:

PURPOSE

The purpose is to define policies and procedures for correctly dealing with and recording cash receipts.

SCOPE

Cash receipts in all forms include coins, checks, money orders and bank drafts, and postal and express money
orders (either local or from abroad).

POLICY

Bank lockbox deposits are delivered via courier to Company X accounts receivable (AR) at scheduled times
Monday through Friday on bank business days. The delivery includes wire payments, which are considered their
own deposits. A few wire remits are submitted to Company X via other means such as email. The bank duplicates
this process with their own remits on most wires.

Each deposit is applied as a separate cash batch to simplify balancing. The bank processes the checks and
includes the remits and envelopes within each deposit. The deposits can also include backup documents and
other letters mailed to the lockbox.

DEFINITIONS

• Cash: Cash means all currency, including coins, checks, money orders and bank drafts, and postal and
express money orders.

PROCEDURES

AR CASH APPLICATIONS OVERVIEW

When deposits are received, the deposit ticket (a pink slip) and the bank’s cover sheet indicate the deposit
amount. The cover sheet also indicates how many checks are in the deposit. The bank also provides an adding
machine tape showing the addition of each individual check and copies of each check.

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Generally, the remit is separated from the envelope, and they are immediately clipped together with any pertinent
backup that may have been included. The remit and envelope are scanned later so the envelope is retained until
the scanning step has been completed. As each remit is separated, it is evaluated as to any deductions that
require corresponding debits to be created.

After all remits have been separated and checked for deductions, it is time to create the debits and credits for
each qualifying remit. The deduction batch needs to be verified and posted by the other cash applications clerk or
someone else trained to do this.

Applying each remit can then begin. A new cash batch is opened and titled with the company SNS or MDT, the
applications clerk’s initials, and “CB” to indicate that it is a cash batch.

Once the cash application has been completed for the deposit, the deposit dollar amount is verified, and each
entry is checked. The entry must not have a balance on any invoice where money was applied. Any unapplied
cash must be approved by the proper account analyst via email for that remit. Once this has been completed, the
cash batch is then given to the credit manager or someone is assigned to check and log the batch, which is then
posted.

The batch is returned to the cash applications clerk who makes a copy of each remit for every deduction it
contains. Each copy is then highlighted. Each deduction has the deduction name, the amount and the account
where it was created highlighted. The highlighted copies along with any backup are taken to the correct account
analyst or put in the correct sorting bin. The original remit and envelope are scanned before reassembling the
original remits and filed as a deposit.

Month-end AR processing can be expedited if wire remit information has not been received via the bank. The
remit information is requested through the carrier who then gets the information from the bank.

OTHER CASH
Accounts payable (AP) delivers checks that are deemed "other cash." The account analyst and the cash
applications clerk are the keepers of the lockbox, and each individual has a key. Checks are kept in the locked
lockbox until they are ready for deposit. The deposits are done twice monthly or as needed by AP. Each check
comes with a general ledger (GL) code written in by AP. The GL code signifies where the funds must be applied.

When creating a deposit, all checks to be included in the deposit are added. Data is input in the Other Cash
spreadsheet, located in the Other Cash folder. Each spreadsheet is named after the current date (e.g., 10 27 05
Other Cash). A copy of checks that contain no remittance advice is created.

To apply the checks, open the accounts receivable – AR transactions – receipt batch list. The title should be the
person’s initials followed by other cash. The transaction type is Misc. Receipt; the date is the actual date on the
check. When the date involves a prior month, the year/period will change. This must be changed back to reflect
the current year/period.

Fields that need input are payer, amount and check/receipt. The GL codes and the amount are input in the bottom
field. Save at this point and move on to the next check. Once all checks are finished, give them to the AP
manager to check the batch and post.

Once the batch is finished, print a copy to put with the spreadsheet and any remittance advice. These must be
stapled together; two-hole punched and put in a binder located outside the AP manager’s office. All the checks
are put together in one deposit and given to accounts payable with the total tape.

INTERNATIONAL CASH
There are three components to consider:
• Commercial Invoice (CI) Total
• Invoice Total
• Customer’s Payment (Funds Received Via Wire Transfer From Customer or Customer’s Bank in Settlement of
a Letter of Credit)

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The cash amount applied should be the amount of the CI with fewer known deductions (shortages damages or
advertising amounts).

Any difference between the CI total and the invoice total must be brought to the attention of order management as
soon as possible for an explanation. Generally, this results from a unit of measure (UOM) conversion, and the
amount is minimal.

When settling lines of credit (LCs), it is standard practice for the seller to bear the additional costs of banking fees
associated with discrepancy resolution, couriers, etc. Therefore, the amount received when an LC is settled may
be less than displayed on the LC documents. These differences can also include charges other than bank fees. In
situations where a variance occurs, the domestic bank, which has processed the LC on behalf of the issuing bank
for the customer, will provide a list of settlement charges. The domestic bank named in the LC must be contacted
if such a list is not readily made available.

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 ACCOUNTS RECEIVABLE POLICY: CASH RECEIPTS
SAMPLE 2

INTRODUCTION

The purpose of this policy is to outline the proper method of receiving and recording cash receipts.

POLICY AND PROCEDURES

ACH RECEIPTS
Daily the AR clerk checks the online bank statements to determine the new cash received in the Company’s AR
account. The AR clerk downloads the ACH activity from the bank system. Key Control – Treasury accesses the
online banking system for details of daily cash receipts for posting in Oracle. The postings are reviewed
and approved by the AR manager. The AR clerk then notifies the manager of AR that the cash is posted in
Oracle.

The manager of AR daily reviews the cash posted to Oracle to ensure that the payment received is equal to the
amount in AR. Key Control – All manual journal entries (MJEs) are approved by a manager level indicated
by initials and date. The manager-level approver will be someone other than the journal entry preparer. All
MJEs are compared against source and supporting documents to ensure that documentation is adequate,
sufficient and complete and that the amounts to be posted are for the correct amount, account and
accounting period. If the amount of cash received does not match the amount listed in the AR, the manager of
AR reconciles the receivables to sales to identify the reason for the difference.

The AR manager will then determine if the payment received is greater than the posted invoice. If the amount of
cash received is greater than the invoice, the AR manager will enter the excess cash received as an “unallocated
amount” in Oracle. Once the good or service has been provided and the billing posted, the AR manager can offset
the unallocated amount in Oracle.

If the payment received is not greater than the invoice, the AR manager will determine if there is an error on the
invoice. If there is an error on the invoice, the AR manager will re-bill the customer. If there is no error on the
invoice, the AR manager will reconcile the differences and prepare a journal entry to adjust the GL.

STANDARD CHECK RECEIPTS

All checks from customers should be sent to the lockbox at the bank. The bank is responsible for depositing the
received checks into the company account.

Daily the AR clerk checks the online bank statements to determine the new cash received in the company AR
account. The AR clerk downloads the check activity from the bank system. Key Control – Treasury accesses
the online banking system for details of daily cash receipts for posting in Oracle. The postings are
reviewed and approved by the AR manager. The AR clerk then notifies the manager of AR that the cash is
posted in Oracle. The AR manager will then follow the same process steps as the ACH receipts outlined above.

MISC. CHECK RECEIPTS

Occasionally miscellaneous checks are sent to company corporate and must be deposited with the bank.
Examples of misc. checks are employees reimbursing the company, one-time checks, etc.

Once a check is received at the company corporate office, the receptionist will notify an AR clerk that the check
has arrived. The receptionist will deliver the check to the AR clerk at his or her desk.

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The AR clerk will copy the original check and save the copy as a backup. Someone without access to the
accounts then fills out a deposit ticket for the check received. (See example deposit slip on the last page) Key
Control – The bank deposit slip is prepared by someone without access to cash posting functionality in
Oracle. Once the deposit slip is completed, the AR clerk will either mail the check and the deposit slip to the bank
or if possible, will deposit the check in person at the bank. The AR clerk will then notify the AR manager that the
misc. check has been deposited in the bank.

The AR manager will check the online banking system for the misc. check to post to the company bank account.
Once the check has been posted to the bank account, the AR manager will post the cash in Oracle. Key Control
– All manual journal entries (MJEs) are approved by a manager level indicated by initials and date. The
manager-level approver will be someone other than the journal entry preparer. All MJEs are compared
against source and supporting documents to ensure that documentation is adequate, sufficient and
complete and that the amounts to be posted are for the correct amount, account and accounting period.

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