Internal Management of Cash at Bell Studio

This article discusses the internal management of cash at Bell Studio, including the processes of purchases, cash disbursements, and payroll. It identifies weaknesses in the system and the associated risks. The analysis highlights the lack of control by apex management and unrealistic assumptions, which can lead to supply chain and legal risks. Recommendations for improving cash management are provided.

Running head: INTERNAL MANAGEMENT OF CASH
Management of Cash At Bell Studio
Name of the Student:
Name of the University:
Author Note:

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INTERNAL MANAGEMENT OF CASH
Table of Contents
Introduction:....................................................................................................................................3
Body:................................................................................................................................................3
Data flow diagram of purchases and cash disbursements systems:.................................................3
Data flow diagram of payroll system:.............................................................................................7
System flowchart of purchases system:...........................................................................................9
System flowchart of cash disbursements system:..........................................................................10
System flowchart of payroll system:.............................................................................................12

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Employees record their hours
of work on time cards
Supervisors review time cards
and send to payroll dept.
Payroll clerk prints payroll register (2 copies)
and prepares cheque
Sends cheques to
supervisors Dispatches a copy of
Payroll register to A/c
payable dept.
Files register and
time cards
. 12
Description of internal control weakness in each system and risks associated with the identified
weakness:.......................................................................................................................................13
Weak control of apex management over cash flow:..................................................................13
Unrealistic assumptions:............................................................................................................13
Conclusion:....................................................................................................................................14

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Introduction:
Internal management of cash is one of the most significant operations which business
organisations conduct. Internal management of cash management with the account department at
its helm and under direct supervision of the apex management involves accounting of payments
as well as receipts of money in all the departments. The entire process of cash management as a
result involve myriads of operations like making payments of suppliers and payment of salaries
to the employees on the payroll of the business organisations (Arango et al. 2016). Thus, cash
management attracts substantial risks which have impacts on all the other department. The aim
of the paper is to evaluate the cash management process of Bell Studio, an Adelaide based
wholesaler of artefacts from the view of a business analyst. This would be followed by
evaluation of risk which the present cash management system of Bell Studio presents. The third
part of the evaluation of the internal controls which the accounts department of Bell Studio
follow to ensure its expenditure cycle is aligned to the business requirement of the studio. The
report would be based on a case study which takes into account three areas of cash management
at Bell Studio namely, purchase systems, cash disbursements system and the payroll system.
Body:
Data flow diagram of purchases and cash disbursements systems:
The flow diagram shown below shows that entire data flow process of purchase systems
and cash disbursement system which took in Bell Studio. It must be pointed out that the data
flow in this case refers to the flow of data like the orders placed with the supplier through the
PO. The The diagram below that the purchase systems of Bell Studio was initiated by the
purchase clerk who took opening inventory recording for a particular day and identified the
inventory items which were insufficient (Seifert and Gonenc 2018). The purchase clerk placed

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order(s) for the item(s) which was/were short with the vendors as per the ‘valid vendor file’ by
preparing a digital purchase order or PO.
The next stage of data flow is initiated by the receiving clerk on receipt of the supplies of
goods received from the supplier. There would be two main documents containing the data
namely, purchase order and the receiving report, the former being prepared by the purchase clerk
while the latter would be prepared by the receiving clerk upon receipt of the inventory. The
receiving clerk at the receiving clerk on receiving the inventory inspected the goods and tallied
the inventory against the particulars mentioned in the PO. The receiving clerk prepared two
copies of Receiving Report or RR one of which was sent with the inventory to the inventory
warehouse while the other was filed by the clerk. The inventory department sent the copy of the
RR attached to the goods to the accounts payable department (Ang 2018). The accounts payable
clerk on receiving the RR tallied its particulars with the PO and the invoice received from the
supplier(s) concerned, following which all the three documents were sent to the cash
disbursement department for processing the payment. The cash disbursement department clerk
held the three documents till the due date of making the payment. The cash disbursement
department clerk then prepared to cheque which was sent to the treasurer along with the three
documents for approval of the treasurer. Thus, the purchase data being carried by the RR,
Invoice and PO are passed down to the treasurer for processing the cheque payment to the
supplier(s). The treasurer signed the cheque and mailed it to the supplier(s) concerned. The
receiving clerk then filed the copies of the three documents namely, PO, RR and Invoice along
with a copy of the cheque.

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Purchasing clerk
checks inventory Purchasing clerk
identifies the stock of
finished goods which is
low
Purchasing makes
digital 2 PO copiesSends copy to
vendor
Files 2nd copy in the purchase dept.
department
Vendor sends inventory
Receiving clerk verifies the supplies and
prepares 2 copies of receiving reports
(RR)
1 RR copy follows
goods
1 RR copy
filed Inventory clerk sends RR to a/c
payable department
Figure 1. Flow diagram showing process of data flow part 1

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Inventory clerk sends RR to a/c
payable department RR copy is filed till
suppliers invoice comes
A/c payable department
tallies PO, RR and invoiceA/c payable department
updates subsidiary ledger
A/c payable department sends RR, PO
and Invoice to cash disbursement
department
Cash disbursement department holds PO,
RR and Invoice until due date
(Source: Author)
Figure 2. Flow chart showing flow of data from cash disbursement department to the treasurer
(Source: Author)

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Cash disbursement department holds PO,
RR and Invoice until due date Clerk prepares cheque
on the invoiced
amount
Cash disbursement clerk sends cheque to treasurer
Treasurer signs cheque and mail to vendor
Cash disbursement clerk updates cheque register, a/c payable subsidiary
ledger and a/c payable control account
Receiving clerk files Invoice,
PO, RR and cheque
Figure 3. Process diagram showing payment of cheque and final filing by the receiving clerk
(Source: Author)
Data flow diagram of payroll system:
The data flow diagram of payroll system as shown below at Bell Studio was initiated by
the employees who recorded their respective attendance on time cards on daily basis. The

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INTERNAL MANAGEMENT OF CASH
supervisors ensured that the attendance entries made by each employees were accurate and sent
to details to the payroll department. The payroll department clerk input the payroll details of the
employees on cheques (Ang 2017). The payroll department clerk also printed two copies of
payroll register and updated the centrally maintained employee payroll database. Then the
payroll clerk disbursed the pay cheques of employees to the concerned supervisors for review
and payment to the employees reporting to them. The clerk then dispatched a copy of the register
of payroll to the accounts payable department and retained the second copy of the register along
with time card (Vestlund et al. 2019). This analysis shows that the data flow system started with
employees of each department recording their attendances on time cards followed by the
supervisors of the departments reviewing the time cards. Then the data consisted of the employee
attendance data flowed from the individual department to the payroll department. The payment
department clerk verified the data to prepare the employee’s pay cheques. The next level of data
flow took place between the payroll department and the accounts payable department.

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INTERNAL MANAGEMENT OF CASH
Employees record their hours
of work on time cards
Supervisors review time cards
and send to payroll dept.
Payroll clerk prints payroll register (2 copies)
and prepares cheque
Sends cheques to
supervisors Dispatches a copy of
Payroll register to A/c
payable dept.
Files register and
time cards
System flowchart of purchases system:
The system flow of the purchases system would consist of internal parties namely
internal departments and external party namely supplier(s). The system is initiated by the
purchase clerk placing order with the suppliers. The receiving department forms the second stage
of purchasing system on receiving the suppliers of goods from suppliers. The receiving
department department then transfers the purchase order prepared by the purchase department
and the receiving order it prepares to the warehouse department (Hicks et al. 2017). The

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Purchase clerk Receiving department
Warehouse department
A/c payable dept.Treasurer
Supplier
(cheque)
warehouse department sends these documents to the accounts payable department which
ultimately processes the payment cheque. The cheque is then passed over to treasurer department
for approval which them dispatches the cheques to the concerned suppliers. The RR, PO, copy of
the cheques and the invoice are then filed by the receiving department.
Figure 4. Systems flow of purchase system
(Source: Author)
System flowchart of cash disbursements system:
The system flowchart of cash disbursement at Bell Studio could be initiated either by the
accounts payable department in case of acquisition of supplies of inventory from suppliers or by
the payroll department in case of payment of salaries to employees. In case of making payments
to suppliers, the warehouse department transferred the purchase order attached to the goods to
the accounts payable department. The accounts payable department upon obtaining the invoices
for respective supplies of goods, prepared the payment cheques (Herrera-Cáceres and Ibeas

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Cash disbursement
system
A/c payable clerk sends
cheque for payment to
suppliers
Payroll department
sends employee pay
cheques
Cheque payment(s) to
suppliers
Salary payment to
employees
2016). The accounts payable department then forwarded the cheque to the treasurer for approval.
The latter then dispatched the cheques to the suppliers.
The second part of cash disbursement at Bell Studio occurred during making salary
compensation to employees. The processes was initiated with the supervisors sending the payroll
records of the employees to the payroll department which after verification of the same issued
payment cheques to the supervisors for disbursement (Gillett 2016).
Figure 5. Cash disbursement system of Bell Studio
(Source: Author)

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Employees record their hours
of work on time cards
Supervisors review time cards
and send to payroll dept.
Payroll clerk prints payroll register (2 copies)
and prepares cheque
Sends cheques to
supervisors Dispatches a copy of
Payroll register to A/c
payable dept.
Files register and
time cards
System flowchart of payroll system:
Figure 6. System flow of payroll system
(Source: Author)
The system flowchart of the payroll system as shown consisted of three main participants
namely, the employees, the supervisors and the payroll department. The employees recorded
their respective attendances on time cards which were in turn reviewed by the supervisors

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concerned. The supervisors forwarded the payroll records to the employees to the payroll
department which upon verification of the same made cheque payments to the supervisors for
payment to the respective employees.
Description of internal control weakness in each system and risks associated with the
identified weakness:
It is evident from the analysis of the two types of cash flows at Bell Studio namely,
payment to suppliers and salary payments to employees that the entire system suffered from
several weaknesses. The following are the weaknesses which the cash management systems of
Bell Studio suffered and the risks which they attracted consequentially:
Weak control of apex management over cash flow:
The case study clearly shows that the management of the company had very low control
on the internal cash management. First of all, purchase clerk could verify the inventory and place
orders without approval of the purchase manager. Secondly, the receiving clerk could admit
supplies into the inventory without any approval of the manager. Thus, it is evident the apex
management did not intervene into the actions of the clerks (Ogbeide and Akanji 2017). This
lack of control of the apex management over the crucial business operations like ordering
suppliers and inventory management could attract risks of faulty ordering of goods or supply
chain risks.
Unrealistic assumptions:
The second flaw in the cash management at Bell Studio was unrealistic assumptions. For
example, the purchase clerk placed orders which were received by the receiving clerk. However,
company did not have contingency plans to manage unexpected challenges which it might face.

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The challenges can be delivery of faulty inventory in terms of quality and quantity. The case
study did not mention any particular above the steps the company might take to manage dispute
with suppliers. Thus, it can be pointed out that this lack of appropriate steps would attract legal
risks from the side of the suppliers. Thus, it is clear that the supply management diagram and the
employee compensation diagrams of Bell Studio lack strategic planning.
Conclusion:
It can concluded from the analysis that the cash management strategy of Bell Studio was
weak. It was lengthy and involved several departments. However, the activities like ordering pofr
supplies rested in the hands of the clear with no management intervention. This weak cash
management system attracted several risks. Finally, it can be concluded that the management of
Bell Studio should take steps to stringently control cash management.

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