Paper on Financial Monitoring and Control Essay

Paper on Financial Monitoring and Control - Essay Example According to Nikolai et al (2009), efficient monitoring and control of cash ensure that there is adequate cash to undertake important activities in organizations. Cash control systems need internal control measures that are adequate and effective, which must comply with laws and regulations of any given jurisdiction where the business or project is carried out. Kutz (2003) asserts that error and lack of control over organizations assets and cash lead to business or project failure. Components of financial monitoring and control system First, roles and responsibilities form part of the components of financial monitoring and control system. Every financial or accounting officer has a role to play regarding cash receipts and disbursement as well as towards financial records. Access to cash of the organization should be limited to few authorized personnel and duties performed by different accounting and finance officers should be separated. Cash should be controlled from the time it is r eceived from customers (at the point of sale) to the point it is deposited in the bank. Point of sales terminals or cash registers need to be used. This is because point of sales terminals and cash registers allow for monitoring cash inflow. Second, financial records are components of monitoring and controlling finances. All expenses and revenue (income) transactions are recorded in general ledger. General ledgers form the foundation for generating reports and financial statements of each project. Revenue, cost and managerial accounting are used for internal purposes for planning, monitoring and controlling organization’s monies. Financial records are evidences that financial transactions took place. Financial records assist project managers to determine how much they have spent, how much they have and how much they need to spent in future (Garman and Forgue, 2007). Gross et al (2005) asserts that well kept financial records enables managers and interested parties to review r esult of financial transactions. Cash shortages and excess will be easily identified and remedial measures taken to correct the situation when proper records are kept. List of all checks received must be recorded and forwarded to the appropriate department. Cashiers must prepare daily bank deposits. Records of all billings, payables, accruals, receivables, invoices, contracts and suppliers must be kept appropriately. Third, disbursements thresholds also form part of financial monitoring and control system. Procedures that allow payments of actual expenditures must be complied with accordingly. The organization must create ceilings above which payments shall only be made through checks. For example, an organization ensures that payments above $200 must be made using checks. Furthermore, large amounts of cash to be disbursed must be authorized and approved by people who are in higher positions. For example, any expenditure above $5,000 must only be approved and authorized by the proje ct director or managing director. The organization should properly utilize petty cash systems and payments should only be made upon verification of all supporting documents. Fourth, a budget forms a component of financial monitoring and control system. Budgets reflect financial goals and objectives of a project covering a specific period of time. During budgeting, technological trends, resource pricing, employee relations, raw materials cycles, inventory levels, financial needs and seasonality should be taken into considerations (Shim and Siegel 2008). Donovan (2005) explained that before a person or organization spend what they have earned, it is important to prepare budgets to be able to focus on priorities. Therefore, every