Cash receipts internal controls follow each payment from the moment the mail is opened until it appears as a deposit on the bank statement. Two people open the mail and list every check. Checks are endorsed for deposit at once. Someone who never touches the money posts the receivables, and a third person matches the log to the bank.
Opening the mail: the first point of cash receipts control
The mail opening is where a check is most exposed, because no record of it exists yet. Assign the job to someone with no access to the receivables ledger, ideally with a second person present, and have them write down every payment before it leaves the room.
The first record is the remittance list, sometimes called the mail log. It is created on the spot, before checks go anywhere else. For each payment, the opener records:
- Date received.
- Payer name as printed on the check.
- Check number and amount.
- Invoice or account the customer referenced, taken from the remittance slip if one came with it.
- Initials of the opener and the witness.
The opener totals the list, signs it and sends one copy to the person who will reconcile, not to the person who posts receivables. The checks go to whoever prepares the deposit. The remittance slips go to the receivables clerk.
That three-way split of paper is the whole point. The reconciler now holds an independent list of what arrived. If a check is taken later, the list still shows it, and the gap appears when the list is compared with the deposit.
A witness is not always practical. Where only one person can open the mail, rotate the job among staff and have the owner or manager open it unannounced from time to time. A person who knows the mail might be opened by someone else on any given day has far less room to remove a check.
Why does restrictive endorsement of incoming checks matter?
A restrictive endorsement, usually a stamp reading "For deposit only" with the company's account number, limits a check so it can only be deposited to that account. It turns a check that could be cashed or deposited elsewhere into one that is worth little to a thief. Stamp each check during mail opening.
Stamping at the opening desk, not later at the deposit, closes the window between arrival and endorsement. An unendorsed check sitting in a tray is the easiest item in the office to divert. The stamp should name the business and include the account number, so a bank teller has no doubt where the money belongs.
Endorsement is not a guarantee. Some banks process checks without close inspection, and a skilled fraudster may try to deposit a stamped check anyway. The stamp's value lies in raising the effort and leaving evidence. A stamped check deposited into the wrong account is a much clearer event than an unstamped one.
Checks made out to cash or carrying a blank endorsement need special handling. Log them, flag them on the remittance list and deposit them the same day.
The cash receipts log and who may not touch it
The cash receipts log is the running record of every payment received, built from the daily remittance lists. It is the reconciler's baseline for comparing deposits and postings. The person who opens the mail or prepares the deposit should never be able to edit the log after it has been signed.
A useful cash receipts log has one row per payment and these columns:
| Column | Why it is there |
|---|---|
| Date received | Ties to the day's remittance list |
| Payer | Matches to the customer account |
| Check or reference number | Finds the item on the bank statement or check image |
| Amount | The figure everything else must agree with |
| Deposit date and deposit slip number | Shows which bank deposit it went in |
| Posted to customer and invoice | Shows how the receivables clerk applied it |
| Exceptions | Notes such as a short payment, an unknown payer or a returned check |
Keep the log in a spreadsheet or system where edits are tracked, or close each day's page with a signature.
Who may not post to receivables
The receivables clerk posts customer payments from the remittance slips, but must not handle the checks themselves. A clerk who receives cash and also posts to customer accounts can carry out lapping: taking one customer's payment and covering it with the next customer's, then repeating. Lapping can run for months because each customer's account eventually looks paid.
Keeping the clerk away from the money, and keeping the opener away from the ledger, means a lapping scheme would need both people. Customer statements sent by someone other than the receivables clerk add a further check, because customers who were credited late tend to call.
How fast should cash receipts reach the bank?
Cash receipts should reach the bank the same business day they arrive, or the next day at the latest. Every night a check sits in the office is a night it can go missing, and a long gap between receipt and deposit makes it harder to see whether a specific check was ever banked.
Daily deposits also make the reconciliation easier. When each day's remittance list becomes one deposit, a reconciler can match list totals to deposit totals one day at a time. When three days of checks are batched together, a missing check can hide inside a larger total, and the reconciler has to reopen every slip to find it.
Set a written rule for the deposit:
- The deposit preparer counts the checks and agrees the total to the signed remittance list.
- The deposit slip lists each check separately, not just a total.
- The preparer keeps a copy of the deposit slip and the bank receipt.
- Undeposited checks, if any, are locked in a safe with a note of why they were held.
Businesses that deposit by scanner rather than at a branch need extra rules for the scanned item and the paper check left behind. Remote deposit capture controls for scanned checks covers storage, destruction and duplicate presentment.
Matching logged cash receipts to bank deposits and customer accounts
The matching step ties three records together: the cash receipts log, the bank statement and the customer postings. Each logged payment should appear in a bank deposit for the same amount and be applied to a customer account. A payment present in one record and missing from another is the exception to investigate.
A worked example: one day's receipts
The figures below are an example. Four checks arrive on 14 March.
| Payer (example) | Check no. | Logged amount | Deposit 14 Mar | Posted to customer |
|---|---|---|---|---|
| Northgate Supply | 4471 | 1,250.00 | 1,250.00 | Northgate, invoice 2093 |
| Ridley Clinic | 10982 | 640.00 | 640.00 | Ridley, invoice 2101 |
| Avon Street Cafe | 233 | 310.50 | 310.50 | Avon Street, invoice 2088 |
| Hale & Morris | 7710 | 2,800.00 | (not in deposit) | Hale & Morris, invoice 2079 |
| Total | 5,000.50 | 2,200.50 | 5,000.50 |
The bank statement shows a deposit of 2,200.50 on 14 March. The log and the postings both total 5,000.50. The 2,800.00 check from Hale & Morris was logged and posted as paid, but it never reached the bank.
Three explanations are possible. The check was held back for a reason someone wrote down, it was lost, or it was taken. The customer account now shows as paid, so if nobody looks, the receivable has vanished and nobody chases it. The reconciler asks the deposit preparer first, checks the safe, then contacts the customer to ask whether the check has cleared their bank.
Monthly matching
Daily matching catches gaps quickly, but a monthly comparison over the whole period still matters. Total the receipts log for the month and compare it with total deposits on the bank statement, adjusting for deposits in transit at either end. Any unexplained difference becomes a reconciling item with a name and an owner. When old receipt differences have sat on the reconciliation for months, cleaning up old reconciling items for good explains how to research and resolve them.
PreciseBankFlow reads each deposit line from the bank statement PDF and matches it against the ledger or register you provide, so the unmatched items on a day like the example above appear on an exception list. More detail is on the PreciseBankFlow home page.
Cash receipts that skip the mailroom: lockbox, card and electronic payments
Many cash receipts never pass through the mail. Lockbox services, card payments, ACH credits and online payment links deliver money directly to the bank, so the risk moves from the envelope to the data. The controls shift from physical handling to who can change where money goes and how payments are applied.
The main risks and controls by channel:
- Lockbox. The bank opens the mail and sends a file of payments and images. The mail-opening risk falls away, but the file must be reconciled to the deposit, and someone must review items the bank could not match.
- Card and online payments. Processors deposit net amounts after fees, refunds and chargebacks. Reconcile each payout to the processor report, not just to invoices, and restrict who can issue refunds in the processor dashboard.
- ACH and wire credits. The risk is on your own instructions. If an invoice template or customer portal shows bank details, control who can change them, because a changed account number on an invoice sends customer money elsewhere.
- Payment applied to the wrong customer. With no remittance slip, unapplied cash builds up. Assign someone to clear unapplied receipts weekly.
Refund rights in a processor dashboard deserve the same care as check signing. A refund sent to a card the employee controls is a disbursement, and belongs under cash disbursement controls that stop bad payments.
Mistake: letting the cash receipts clerk handle customer complaints and credits
A frequent design flaw in cash receipts internal controls is letting the receivables clerk also issue credit memos and answer customers who say they already paid. Credits and write-offs are a way to make a stolen payment disappear from the customer's balance. The person who might benefit should not be the person who approves them.
Route these to someone else:
- Credit memos and write-offs. Approved by a manager who sees the reason and the customer's payment history.
- Customer disputes about payment. When a customer says "we paid that," the inquiry goes to someone outside receivables, who checks the cleared check image and where it was deposited.
- Customer statements. Mailed or emailed by someone other than the receivables clerk, so a customer who was credited late sees it and asks.
Review a monthly report of every credit memo and write-off. Look for credits on accounts that recently paid, credits just under an approval limit, and a concentration of credits by one user.
Many small teams cannot split every duty. Where the same person must open mail and post, the owner can still review the remittance list against deposits weekly and look at a sample of cleared check images. That review, done consistently, gives someone outside the process a regular look at what arrived and what was banked.