Chapter 5

Receiving and Checking

Money

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Contents
1 Control over receipts

2 Remittance advices

3 Receipts given to customers

4 Various ways in which customers pay

5 Cash: physical security considerations

6 Cheques

7 Receipt of cheque payments

8 Receipt of card payments

9 EFTPOS

10 Other receipts
VERTEX LEARNING SOLUTIONS - https://vls-online.com
 Control Over Receipts

Control Over Receipts

Receipts must be well controlled to ensure a good cash flow. There are three key features of
control.
• Banking (performed promptly and correctly)
• Security (avoiding loss or theft)
• Documentation (remittance advice)

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Control Over Receipts

Control Over Receipts

In any business controls over cash receipts are fundamental if the company is to keep a
healthy cash position. Control over cash receipts will concentrate on three main areas.
• Receipts must be banked promptly.
• The record of receipts must be complete.
• The loss of receipts through theft or accident must be prevented.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Example: Control Over Cash Receipts

Suppose that your company sells goods for $10,000 during the month of April to XYZ.
You receive a payment of $10,000 by cheque along with a remittance advice which
shows exactly which invoices the cheque covers.

(a) You examine the cheque to ensure it is valid and completed correctly and you pay
it in to the company account within 24 hours as company policy dictates (banked
promptly).

(b) A colleague records the cheque details and compares the amount of the cheque
to the remittance advice (checking for completeness). Usually, the payment would
also be checked against the total amount owed by the customer as part of the
completeness check.

(c) The segregation of duties between the person who banks the money and the
person who records it is a very good control to prevent theft and accidental loss.
Crossed cheques having two parallel lines can only be paid into the account of the
payee. This helps to protect against loss and theft.
VERTEX LEARNING SOLUTIONS - https://vls-online.com
 Remittance Advices

Remittance Advices

• Trade customers usually send a remittance

advice with their payment.
• When a cheque arrives from a trade (i.e.,
business) customer it is usually accompanied
by a remittance advice.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

Remittance Advices

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Remittance Advices

Remittance Advices

• A remittance advice shows which invoices a payment covers.

• The paying company may send out its own remittance advices with its payment.
However, it is common now for the receiving company to send a statement
which has a detachable remittance advice . The paying business or individual will
mark off those invoices which are covered by & the payment. This tear-off advice
will then be returned by the paying company, although it may send its own
remittance advice as well.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Procedures to Compare Receipt with Remittance
Advice
The member of staff who records the receipt should compare it with the remittance
advice sent by the paying company, using the following procedures.

Step 1 Check that the amounts shown on the remittance advice add up to the total.

Step 2 Compare the total with the amount of the receipt (usually a cheque).

Step 3 If there is a disagreement between the two amounts, mark on the remittance
advice the amount received and calculate the difference.

Step 4 Send the cheque to be banked and then record the receipt.

Step 5 Send the marked-up remittance advice to the receivable's ledger department
(where amounts which are owed to the business by individual customers are dealt with).

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Procedures to Compare Receipt with Remittance
Advice

If there are differences between the amount received and the amount shown on the
remittance advice, these will be dealt with by the receivable's ledger department (the
department that deals with customers who buy on credit). The receivables ledger
department will contact the customer and resolve any query.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Receipts given to Customers

Receipts given to Customers

• Till receipts or written receipts should contain

certain information.
• A receipt is a document given by the seller to
the buyer when goods change hands in
exchange for payment. It may be a till receipt,
a written receipt or some other form of
receipt.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Evidence of Payment other than in Cash

When a customer pays by some means other than cash, he may obtain some
evidence of payment which is not a receipt.

▪ Credit Card
▪ Debit Card
▪ Cheque
▪ Banker’s Draft, Postal Orders

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Cash: Physical Security Considerations

Holding cash creates problems and careful security procedures are required.

Forgery: There are frequent cases of forgery of larger denomination notes ($50, $20 and
$10). It is advisable to examine all notes carefully before they are accepted, the metal
thread incorporated into all these notes is difficult to duplicate.

Theft: Theft by staff. This risk can be reduced by being careful about the people the
business employs; their references should be checked properly, and they should be
monitored closely for their first few months of work.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Cash: Physical Security Considerations
Cash register security: The cash register should be secure with keys needed to operate it. Staff
should be trained to make them aware of the importance of keeping their keys safe and of not
leaving the cash register open.

Safes: If possible, cash should be removed from the till regularly (so that there is only a relatively
small amount in the till) and stored in a safer place. The ideal place would be a safe.

Frequent banking: In general, cash should be taken to the bank on a regular and frequent basis,
this minimizes the amount of money on the business premises. It is not a good idea to let the
same person go to the bank every day at the same time. For security reasons it is better to vary
the member of staff who takes the money to the bank and the time of day it is taken.

Cash should never be sent by post, if it is lost or stolen there is no way to trace or recover it.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Cheques

Cheques

A cheque is 'an unconditional order in writing

addressed by a person to a bank, signed by
the person giving it, requiring the bank to pay
on demand a sum certain in money to or to
the order of a specified person.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Receipt of Cheque Payments

It is best practice to follow these procedures when an individual customer

pays by cheque.

Step 1 Examine the face of the cheque to ensure all the details are correct.

Date (including the year)

Payee name

Amount in both words and figures

Step 2 Make sure that the cheque is signed by the drawer.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Plastic Cards

Plastic Cards
There are two main types of card, and we will
look at them in turn.
• Credit cards
• Debit cards
Debit cards allow you to spend money by
drawing on funds you have deposited at the
bank. Credit cards allow you to borrow money
from the card issuer up to a certain limit in
order to purchase items or withdraw cash.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 EFTPOS

EFTPOS
• EFTPOS (Electronic Funds Transfer at Point of Sale) makes possible the
automatic transfer of funds from a customer's bank account to a retail
organization at the point in time when the customer purchases goods (or
services) from it.
• EFTPOS is an established system of payment for goods and services, in
widespread use throughout the world. The effect has been to reduce both the
number of cheques written and the number of debit or credit card transactions
processed manually.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 The EFTPOS Terminal

The EFTPOS Terminal

• Most types of credit card and debit card can be processed through the EFTPOS
terminal which sits on or by the retailer's counter. The terminal can read the
magnetic strips on the backs of cards automatically.
• The transaction will come back not authorized where the credit or debit card has
been reported stolen.
• It may also be not authorized where the transaction would exceed the
customer's credit limit on their card, although the credit card company may let
the transaction through and suggest to the customer that their credit limit
should be raised.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Other Receipts

Other Receipts
• A banker's draft, also known as a banker's cheque, is like asking a bank to write a
cheque for you. You give them your money and they give you a cheque for that
amount, to give to the person you're paying.
• This is a method of payment which is available from banks on payment of a fee.
Paying by banker's draft is common when a customer is buying property and
needs a guarantee that the payment cannot be dishonored in order to complete
the purchase.

VERTEX LEARNING SOLUTIONS - https://vls-online.com

 Standing Orders and Direct Debits

Standing Orders and Direct Debits

• A Direct Debit is an agreement between you and the organization you're paying, which allows them
to take money out of your account at regular intervals. The organization will set this up and they
can alter the amount being paid upon your instruction. Direct Debits are ideal for paying bills that
can vary from month to month such as gas and electricity. If you wish to cancel a Direct Debit you
must contact the organization directly.
• A Standing Order is an automatic regular payment, but the amount is fixed. You can set up a
Standing Order and only you can make changes to it such as change the amount or payment date.
E.g., paying rental payments or insurance. You can cancel a Standing Order via your Online Banking.

VERTEX LEARNING SOLUTIONS - https://vls-online.com