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The New Approach – OTC Cash Receipt Procedures

Author: Steve L. Seawall, CPA Copyright 2015 Custom Micro Works All rights reserved Revised 4/26/2015

Overview

 Starting Point – Electronic Cash Receipt Book (CR Book). The starting point for processing a cash receipt is the NA Electronic Cash Receipt Book (CR Book).

Without exception, all cash receipts should be recorded first in Electronic Cash Receipt Book system. This includes both OTC cash receipts as well as DBC cash receipts.

NA has a special feature that we refer to as OTC Cash Receipt procedures. This feature is designed to help keep your overall cash receipt procedures as simple, efficient, and accurate as we know how. The OTC entry data is automatically carried over to the next step in the cash receipt process (e.g., customer payment entry or non-customer payment cash receipt entry).

OTC refers specifically to Over-the-Counter. To some people this means cash receipts collected in the office (over the counter) directly from the customer. However, we use the term to mean all cash receipts collected in the office setting, which also includes mail receipts and drop box receipts. To explain it another way, if you collect a cash receipt that is to be physically deposited into your bank account, OTC Cash Receipt procedures would apply.

Specifically the OTC Cash Receipt procedures allow you to capture a cash receipt electronically as it comes into the office. This is a common internal control in all office environments that collect cash receipts. However, not all such environments have the capability to perform this function electronically. Instead they rely on a paper system that is not as efficient, and not as effective.

Purpose

The purpose of the OTC Cash Receipt procedures is generally to provide electronic internal controls that assure cash receipts are properly recorded in the accounting system and properly deposited into your bank account.

 Receipt Book Function. Paper-based Receipt Books have been around seemingly forever. And they likely will continue to have a useful purpose in the foreseeable future. Electronic Receipt Books, however, are more efficient and more effective. The Receipt Book function is discussed in more detail below.

 Daily Cash Receipts Reconciliation. The daily cash receipts reconciliation is designed to provide assurance that all cash receipts collected each day are properly recorded in the accounting system, and that all cash receipts collected are properly deposited into the bank account. The OTC Cash Receipt procedures include an OTC Daily Cash Receipts Report of all cash receipts recorded that day. That report documents electronically the cash receipts collected. This report is then compared to an actual cash count of the currency and checks that have been prepared for deposit. The two amounts must agree! 2

Flexibility

Significant flexibility has been built into the design of this feature to allow you to make it work efficiently in virtually any office environment. This flexibility allows you to streamline your own cash receipting process in a way that fits your needs and preferences. You can skip some of the design features if you find them too cumbersome.

Electronic Receipt Book Function

What is a Receipt Book?

Nearly all cities collect money over the counter in the form of both checks and cash (i.e., currency). As a part of the daily task, the person collecting the money normally will create a hand-written receipt in duplicate for each cash receipt collected from a customer. One copy goes to the person paying the money, the other copy stays with the office.

Typically the duplicate receipts are pre-numbered and contained in a Receipt Book. At a minimum the receipt would typically identify the date, the amount, the purpose, and the person paying the money. The paper receipts are written acknowledgment that a certain amount of money has been collected from the person identified in the receipt.

What is an Electronic Receipt Book?

An Electronic Receipt Book is much like a paper Receipt Book except the related information is created and stored electronically. And not surprisingly, the receipt can be issued in paper form as well as electronically.

For example, for over-the-counter cash receipts, a hard copy of the receipt would be printed and issued to the person paying the money. For other types of cash receipts, such as mail collections and direct bank deposits from customers, a paper receipt could be mailed to the customer, or an email could be sent with or without a “receipt” attachment.

The electronic receipt book feature serves as an audit protection tool for both the city and the clerk collecting the cash receipt.

How to Use the Electronic Receipt Book

To access the electronic receipt book screen, click on the button labeled CR Book.

 Step 1. Customer makes a cash or check payment over the counter.

 Step 2. Clerk enters an OTC cash receipt in the computer and prints a Cash Receipt.

The receipt is a letter-sized sheet containing duplicate receipts – one for the customer and one for the office. The sheet has a horizontal perforation at about the bottom one-third of the sheet.

The bottom “stub” is the customer’s copy and can be torn off to be given to the customer. The top part is the office copy.

 Step 3. Clerk initials the office copy as the collector of the payment. 3

 Step 4. Clerk requests customer to initial the office copy.

What if a customer refuses to initial the office copy?

Answer: If the customer refuses to initial the office copy you should simply note that on the office copy.

 Step 5. Clerk stamps the customer’s receipt copy and gives it to the customer as acknowledgment of the payment.

This completes the Cash Receipt creation and issuance.

How to Handle an OTC Cash Receipt Created in Error

Once the OTC cash receipt is printed, the electronic entry is locked in and cannot be altered. However, it can (and should) be voided if in error. If an OTC cash receipt entry is voided, you should save the office copy of the receipt and identify it as being voided.

What to Do with the Office Copy of Receipt

The office copy of the receipt should be saved for audit purposes.

The office copy can also be used as an input document when entering the cash receipt in the Budgetary Accounting system.

Electronic Receipt Book Reports

Over-the-counter cash receipt reports can be accessed using the OTC data entry screen (click on the button labeled View and Print OTC Cash Receipt Records).

OTC Cash Receipt Procedures

The following procedures generally apply to cash receipts collected in the office and physically deposited at the bank. However, they can easily be adapted for use with direct bank credits.

 Open the OTC Cash Receipts screen if it is not already open.

Suggestion: If you want to keep the OTC Cash Receipts screen open while you are doing other work in NA, you will need to start NA in a separate window. That is, you will need to have two sessions (instances) of NA running at the same time.

 Enter cash receipt information. The entry screen is designed to be simple and quick. We need to print the Cash Receipt document and get the customer out the door as quickly as we can.

There will be cash receipts that do not fit the entry screen. For example, a customer might pay with two checks, or a check and some cash. Or, a customer might make a payment for a billing (i.e., payment on account) but the check includes an additional amount that does not represent a payment on account. 4

When this happens, remember your first priority is to issue the customer copy of the Cash Receipt document to the customer and get them out the door. Therefore, focus on getting the Cash Receipt document printed, then immediately after the customer leaves, you should write on the office copy of the Cash Receipt document details you will need later to process the OTC cash receipt entry in the accounting system.

General Guidance: The following general rules are intended to give you some guidance on how to treat certain types of cash receipt payments:

Rule 1. If the payment includes at least one check, designate the entire amount as if it was a check and document on the office copy of the Cash Receipt document additional details.

Rule 2. If a single check from the customer includes both a payment on account and an additional amount that cannot be processed as a billing payment, treat the cash receipt as if it is a payment on account. Immediately after the customer leaves, you should write on the office copy of the Cash Receipt document details you will need later to process the OTC cash receipt entry. You will need to know the amount that represents a payment on account and the purpose of the additional amount.

Rule 3. OTC Credit Card Payments. If you process Credit Card payment over the counter, the customer should be presented with a receipt documenting the payment. Because such payments are not, by definition, a cash receipt, care must be exercised not to record them as a cash receipt. Therefore, when you process such payments, you should check the checkbox labeled “Credit Card Payment – Print Receipt Only.” This will prevent the entry from being designated as a cash receipt, but at the same time allow you to print a receipt for the customer.

 Click on Print Receipt. A Cash Receipt document will appear on the screen. Generally, if you are not sure whether or not to print it, then you should go ahead and print it.

SKIP Feature. The entry screen has a “SKIP” button that allows you skip the printing of the OTC cash receipt entry. DO NOT use this feature unless it is appropriate!

Important: A Cash Receipt document MUST be printed whenever a cash receipt is collected directly from a customer in the office. The customer copy must be offered to the customer, NO EXCEPTIONS. If the customer does not want the receipt, or will not take it, that is irrelevant. It is totally unacceptable for an employee collecting money from a customer to NOT print a hard copy of the Cash Receipt document.

In certain cases you might wish to print a Cash Receipt document and send the customer copy to the payer.

You should retain the office copy of this document in accordance with your records retention policy. At a minimum you should have these documents available for inspection until after the auditor has completed the audit for the period in which the cash receipt was issued.

This procedure will be repeated throughout the day for all OTC cash receipts. For cash receipts collected directly from customers, the customer copy of the cash receipt document MUST be provided to the customer. If the customer refuses to accept the receipt you must note that on the office copy. 5

Recommendation: An OTC cash receipt record should be created for all OTC cash receipts. This includes drop-box and mail cash receipts. However, for drop-box and mail receipts in which the customer is not presenting payment in the office, you can skip the printing of the Cash Receipt document. OTC cash receipt reports will more than likely provide the information you need to complete the cash receipting process.

 Daily Cash Reconciliation. Toward the end of each day you must set aside a certain amount of time to perform the daily cash reconciliation. Normally you will start the cash reconciliation at about the same time every day. We call this the daily cutoff time.

All OTC cash receipts printed after the cutoff time MUST be dated the next business day. If a customer comes into the office and makes a payment after the cutoff time, create the Cash Receipt document in the normal manner except change the date to the next business day. You should explain to the customer why the receipt is dated the next day. Of course, do not include these receipts in the daily cash reconciliation you are currently preparing.

 OTC Daily Cash Receipts Report. Using the OTC Cash Receipt screen, click on Print Daily Report. This report will show detail of the cash receipts collected that day. It will also show the amount collected in checks and the amount collected in cash.

At the bottom of this report you can document comments that relate to specific cash receipt entries shown in the report. You should review the office copy of all Cash Receipt documents identified in the report to see if any have special instructions on them. These additional details should be written at the bottom of the report in the area reserved for comments.

 Cash Count. You must physically count the cash and checks collected as of the cutoff time and compare your count to the OTC Daily Cash Receipts Report. Most importantly, the total amount counted should agree with the report total. Of course, you will have to remove any change or petty cash in the cash drawer that was present at the beginning of the day.

The cash receipts are now ready to be physically deposited in the bank. If for whatever reason you do not make a physical deposit at the bank, the cash receipts should be segregated from all other moneys in a money bag or envelope and temporarily stored in a safe.

 OTC Procedures Finished. At this point the OTC cash receipt procedures are completed.

Caution! Remember that the OTC entry is only the Starting Point. The customer payment has NOT been recorded in the Billing and Accounts Receivable system. Nor has any cash receipts been recorded in the Budgetary Accounting system.

 Additional Cash Receipt processing is needed depending on the type of cash receipt:

Customer Payments on Account – refer to Cash Receipt Procedures for Customer Payments.

All Other Cash Receipts – refer to Cash Receipt Procedures for Non-Customer Payments.

Credit Card Payments – refer to Cash Receipt Procedures – Credit Card Payments