What are the risks of cash?

The Perils of Cash: Risks Associated with Workplace Cash Handling

Cash handling in the workplace presents a range of financial risks that can have severe consequences for businesses. Understanding these risks and implementing robust internal controls is crucial to mitigate potential losses.

Theft

Unauthorised access to cash is a major concern for any business. Cash can be stolen through a variety of methods, including:

• Physical theft: Employees or external individuals may physically remove cash from the premises.
• Embezzlement: Employees may divert funds for personal use, often by making unauthorised withdrawals or falsifying records.

Accidental Errors and Discrepancies

Human error is another significant risk associated with cash handling. Mistakes in counting, recording, or reconciling cash can lead to discrepancies, resulting in financial losses.

Fraud

Deliberate fraud is a more serious threat to businesses. Common fraudulent schemes include:

• Skimming: Employees may steal small amounts of cash over time, often by undercounting receipts or not recording all transactions.
• Falsified transactions: Dishonest employees may create fictitious transactions to cover up unauthorised withdrawals or misappropriated funds.

Financial Impact

The financial consequences of cash handling risks can be devastating for businesses. Losses can range from minor discrepancies to large-scale embezzlement schemes. In addition to direct financial losses, businesses may also face:

• Legal liability: In cases of fraud, businesses may be held responsible for the actions of their employees.
• Reputational damage: Cash handling scandals can severely damage a company’s reputation, leading to lost customers and reduced sales.

Mitigating Risks

To address the risks associated with workplace cash handling, businesses should implement robust internal controls. These controls may include:

• Segregating duties: Assigning different tasks to different employees, such as handling cash, recording transactions, and reconciling accounts.
• Establishing clear policies and procedures: Outlining proper cash handling practices, including counting, storage, and reconciliation.
• Implementing surveillance: Using cameras or other monitoring systems to deter theft and fraud.
• Performing regular audits: Conducting independent reviews of cash handling records to identify any discrepancies or irregularities.

Conclusion

Cash handling in the workplace carries significant risks for businesses, ranging from theft and error to deliberate fraud. By understanding these risks and implementing robust internal controls, businesses can mitigate potential losses and protect their financial well-being.