 In this presentation, we're going to introduce the internal controls related specifically to cash. Cash internal control goals. Is it going to be the objectives of the internal control system over cash? We want to have the cash handling separate from the record keeping. So whoever is handling the cash, we would like to have them not to be the same person doing the record keeping. And therefore we have that separation of duties. We have the person that is entering the data not having as much of an incentive to steal the cash because they're not the ones handling the cash. The people handling the cash know that if they do steal it, the record keeping should pick that up and they are a separate person. Cash receipts are deposited to the bank. We want to make sure that the cash receipts are going to the bank as soon as possible, hopefully on a daily basis so that we're not accumulating cash. We don't want to cash to be piling up because if it is then we have a greater risk of theft to happen and greater loss if theft does happen. And we want to put it into the bank as soon as possible that'll help us basically to safeguard the cash. It'll also help us to record the cash more accurately the bank being someone who is going to have a separate record of the cash recordings as we go for us. Cash payments made by check or electronic funds transfer. The point here is that we don't really want to make our payments for purchasing for business with cash. And the reason is that there's no cash audit trail for it. I mean if we use cash we don't have a good audit trail. Now some people think of cash and they think well if I have cash payments no one could track that and possibly might think of that as a good thing that you know people can't see what you're doing or there you know some the government can't see what you're doing or something like that. But note that we want good record keeping of course when it's our records because we want to be able to go back and say hey what did I spend the money on? We want to have an audit trail so that when we look at our purchases we can see what happened. If we purchased everything with cash we don't have a good audit trail. We can't go back to our bank statement and say hmm what did I write to check for? Well who did who did we write to check for? We can easily find that when we write the checks. We also have control over someone who's going to sign the checks as opposed to possibly someone requesting that the cash payment be made. So if a cash payment is being requested by one department and or for a small business and one of our employees has a cash payment request or is dealing with the payables we could still take control over the check signing activity and that can be an effective internal control so that checks aren't written of course for illegitimate reasons. Electronic fund transfers can have similar types of internal controls and be quicker as well. So we could do that electronically as well and have a similar trail of tracking to see what is going on. And so the point here is to limit the cash disbursements so that we have that tracking. Cash and cash equivalence. Now cash is going to be anything that's going to be really liquid. Something that we're going to be able to pay off our short-term obligations with. We typically think of cash as being physical cash or something that's going to be in our bank account or our checking account. Now if we're talking about something that's going to be fairly equivalent to cash cash and cash equivalence we're talking about something that's going to be due really soon. Something that we could we could also basically have access to and pay off our accounts with very quickly. If we have a long term constraint on the type of investment that we have then of course we wouldn't be calling in a cash or cash equivalent. Managing cash. When talking about managing cash we're talking about the plan receipt to be able to cover payments. And this seems kind of obvious but when we talk about accrual accounting note that we're not accounting for our income statement our revenue and expenses with cash flows. So we want to make sure that as we do accrual accounting and we look to optimize our net income that we also go back and manage our cash flows because it is important for us to make sure that we are managing cash in such a way that we have enough cash to be able to cover our payments. However we want to have a minimum steady cash level at the same time. In other words it's not efficient of course to have a lot of cash for a business. The objective of the business is to earn revenue not to have a lot of cash at any given time. If we have a lot of cash at any given time that means that we have purchasing power that we're not putting and using effectively. We're just we're just holding on to it. So what we want to do is have that minimum level of cash that we need in order to go after opportunities that will happen. But at the same time we want to have enough cash to be able to make payments. So if we have too much cash then we're not being optimal with our purchasing power. And if we don't have enough cash of course then we're not going to be able to pay our bills. If we don't have a minimum amount of cash a level that is relevant then we're not going to be able to really go after those opportunities that may arise and need a little bit more cash at any given time. Managing cash. So how are we going to achieve these goals of the cash management? Well one we want to have collection of receivables meaning we want to do what we can in order for the cash to be collected sooner. We would like to have the cash sooner rather than later. This I mean can seem like not a big deal when you're talking about you know a few days or a month but businesses will spend a lot of time to try to get that money a little bit earlier. If you can get the money a little bit earlier it could be worth a lot one because of the time value of money and two just to make sure that you are keeping up with your cash flows having the cash on hand ready for opportunities. You want to be able to delay payments of liabilities. Again it seems it could get to the point of seeming trivial on on how you delay the payments for a couple days or something like that but any kind of delay of payment that you could have is going to be beneficial to the business. You want to be able to delay the payments and that will increase the amount of cash on hand at any given time. Assets are steady assets at a steady necessary level. Once again you you don't really our goal isn't to compile assets. If we if we make a lot of money if the business is doing really well and we don't want to put the money back into the business there's no growth opportunity that we see at any given time then we probably would give that money to the owners of the business whether they be stockholders or individuals if it's a sole private or company in order for the owners to then take that money and they don't want to hold on to it either. They want to invest it. You want to be making money on the money if there's no business opportunity within the business to be making money to grow the business then we should distribute that money to the owners so that they can make their own investments and make money with it. Plan and budget expenditures so we want to make sure that we have the plan we have a budget in place in order to know what those expenditures will be that'll help us to know what what cash level we need to have at any given time and have help us to have that steady level of assets that we will want to have over time if we know what those expenditures are have an idea of what they are in advance. Invest when there is excess cash. Now when we have again when we have excess cash we don't want to just hold on to the cash because we're not making any interest on it we want to invest it and we could you know invest it back into the company if there's growth opportunities or we want to invest it in something that we're making money on like a CD or something that we make a financial investment and get a return on meaning we're trading the purchasing power at any given time we can't use it in order for a greater return or we want to give it to the owners so that they can make their own personal investments whether they be the stockholders or they be the owner of the company.