Should you stop accepting cash…?

We had a new customer go live last week and, interestingly, they don’t accept cash payments in their office.

This seemed odd at first, but the more I thought about it, the more it made me wonder –would this be a good move for other utilities?

Transitioning to not accepting cash

This customer is not located in a downtown area and, therefore, doesn’t have as many walk-in cash payments as some utility offices. Since they adopted the no cash policy, customers who would otherwise pay in cash are required to purchase a money order.

They experienced a few complaints at first, but otherwise it’s been a smooth transition. Signs in the lobby alert new customers of the no cash policy and a message on their bills reminds customers each month.

Advantages of not accepting cash

Not accepting cash eliminates the possibility of cash overages and shortages and saves time that would otherwise be required to count and balance a cash drawer each day.

This utility deposits checks using remote deposit capture, so not accepting cash means they have no reason to make a bank deposit. This saves the time involved in preparing the deposit as well as the time and effort of taking it to the bank.

Finally, by not accepting cash, there is no need to store cash on-site overnight, reducing the risk of break-ins.

Reduces risk of stealing

Over the course of my career, I have personal knowledge of a handful of embezzlement cases with municipalities or utilities I have worked with. In each of those cases, a clerk pocketed cash and tried to hide it (most times not very well).

By not accepting cash, any temptation by less-than-honest staff members is eliminated.

Payment options besides cash

Many utilities are trying to find ways to reduce walk-in traffic and not accepting cash payments certainly would help in that endeavor. With options such as bank drafts, online bill pay and IVR phone payments, your customers have options besides paying with cash, but they do all require a bank account or credit card.

Are you looking for ways to improve your office operation?

Are you looking for ways your office could operate more efficiently? If so, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could benefit your utility.

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© 2014 Gary Sanders

Could this happen in your office…?

A recent FBI press release described how a dishonest employee of a North Carolina municipality embezzled over $90,000. It seems she was issuing receipts for cash payments and pocketing the cash, then adjusting the accounts so customers wouldn’t notice the missing payments. She was caught when she failed to adjust a customer’s account for a payment she kept and the customer produced the payment receipt.

Could something like this happen in your office…?

Poor internal controls

Clearly this was a case of management not implementing effective internal controls and not maintaining proper separation of duties, as the last Utility Information Pipeline described.

Never, ever should the employee who receives payments be the same person who also approves adjustments to customer accounts. Something as basic as having a supervisor review and approve adjustments could have identified this fraud immediately.

My experience with fraud cases

Each of these cases involved dishonest employees pocketing cash payments.

In my career spanning 30 plus years, I’ve assisted in explaining or investigating a handful of utility embezzlement cases. Each of these cases involved dishonest employees pocketing cash payments. Some were more creative than others in attempting to cover it up.

One case involved a customer service clerk who embezzled security deposits paid in cash. This employee then used a supervisory override to enter the deposit in the system without receipting the cash. This way, the customer would still have a deposit applied to their final bill and wouldn’t complain. This practice went undetected for several years. Had this utility been reconciling deposits on a regular basis, this would have been detected the first month it happened.

Another case involved a cashier voiding every cash payment in a day’s work and pocketing the cash. Obviously, this wasn’t the smartest embezzler, as the fruad was caught the next month when multiple customers complained after receiving bills with no payments credited to their accounts. Even though the embezzlement was caught quickly and the employee was immediately fired and prosecuted, the entity involved still had to deal with the negative publicity and the ensuing investigation.

Adopt a cash handling policy

Every office should have a written cash handling policy that all employees are familiar with and abide by.

Here are some standard practices that should be included in a comprehensive cash handling policy:

  • Assign each cashier a separate cash drawer
  • Issue hand written receipts only in emergencies
  • Receipt payments as they happen
  • Account for cash overages and shortages
  • Monitor voided payments
  • Have a second employee double check each deposit

Let’s take a look at each of these in more depth…

Assign each cashier a separate cash drawer

Many smaller offices share a single cash drawer out of convenience. However, if you experience cash balancing problems, the only way to identify the responsible party is for each cashier to be accountable for their own cash drawer.

Issue hand written receipts only in emergencies

Hand written receipts should be avoided at all costs, unless the power is out or your system is down. Issuing hand written receipts and pocketing the cash is the most prevalent method of embezzling payments.

If your software isn’t capable of generating a receipt for all types of payments, including cash receipts that aren’t billed, it’s time to look for new software!

Receipt payments as they happen

Payments should be receipted as they take place. Many offices allow customers to drop off checks and enter them in the system later. This is not a good cash management policy and should be avoided. If employees see this as acceptable for check payments, will they also be tempted to do the same for cash payments?

Account for cash overages and shortages

Cash overages and shortages should be tracked by cashier. Even the best cashiers make mistakes counting change, so an occasional cash overage or shortage is to be expected. Not tracking overages and shortages makes it easier for employees to shortchange a customer and keep the cash. For utilities that base employee evaluations on performance measures, the number and amount of cash overages or shortages is an excellent performance measure for cashiers.

Monitor voided payments

All voided payments should be reviewed and accounted for, especially voided cash payments. An excessive number of voided payments, while not necessarily indicative of embezzlement, may often be the sign of a careless cashier.

Interestingly, Logics’ Central Cash Collections application includes a void payment edit list because, years ago, a very astute finance director had a feeling one of her cashiers was voiding too many payments and wanted a way for these to be monitored.

Have a second employee double check each deposit

Each cashier’s daily deposit should be double checked by another employee. This insures accuracy and accountability and sends a signal to your staff that honesty and integrity are essential.

Is it time to review your cash handling policy?

Have you reviewed your cash handling policy recently? If not, this might be a good time to do so.

If you don’t have one, I encourage you to develop and adopt one.

If you would like assistance developing or reviewing your cash handling policy, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

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© 2014 Gary Sanders

Cycle billing – should we or shouldn’t we…?

Has your utility grown to the point where you’re wondering if you should move from billing all your customers at one time to cycle billing?

Traditionally, utilities have made the move to cycle billing for one of three reasons. Let’s examine each of these reasons…

More balanced workload

Perhaps the most common reason for moving to cycle billing is an attempt to balance the office and staff workload.

Does your office get slammed with customers coming in to pay on the due date and cut-off date? If you’ve done all you can to reduce walk-in payments and the number of customers in your lobby on the due date is more than your office can manage, it’s probably time to consider cycle billing.

Billing twice a month, as compared to once a month, means half the volume on each due date and half the cut-offs on cut-off day. This is extremely helpful for smaller utilities with limited field staff to perform cut-offs and reconnects.

Length of time it takes to read meters

Another frequent reason for moving to cycle billing is the number of days it takes to read meters. In an attempt to minimize the days of exposure, many utilities have realized that billing more frequently than once a month makes sense.

However, as automated meter reading systems become increasingly popular, and more meters can be read in less time, this makes a less compelling case for cycle billing.

Improved cash flow

The third reason for moving to cycle billing is improved cash flow. The more frequently you bill, the more spread out your influx of cash will be.

This is especially true for utilities that bill less frequently than monthly. For example, utilities that bill bi-monthly often bill half their customers one month and the other half the next month. This provides a more steady cash flow from month to month.

Is it time to consider cycle billing?

Does one of the above scenarios describe your office? If it does, and you aren’t sure if cycle billing makes sense or not, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com to learn how a business review could assist you in evaluating the pros and cons of cycle billing.

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© 2013 Gary Sanders

Do you have a cash handling policy?

In a recent posting on a listserv I subscribe to, someone inquired if any other jurisdictions have a policy that requires employees who handle cash to make up shortages from personal funds.

Most offices I’m familiar with have cash over and short accounts that track cash overages and shortages incurred by cashiers. I don’t know of any utilities or local governments that require cashiers to make up cash shortages. If they did, would the same cashier be entitled to keep any overages? I think it’s pretty easy to see why that wouldn’t be a good idea!

Even the best cashiers make mistakes

When making change, even the best cashiers make mistakes so an occasional cash overage or shortage is to be expected. However, repeated overages and shortages may be indicative of an employee who either isn’t diligent in doing their job or is just plain dishonest. The best way to deal with this is to follow good internal controls and have a cash handling policy in place.

Internal controls

Ideally, every cashier should have their own cash drawer. I realize that many smaller offices share a single cash drawer, but if you are experiencing cash balancing problems the only way to identify the responsible party is for each cashier to be accountable for their cash.

Hand written receipts should be avoided. This is 2012 and if your software isn’t capable of generating a receipt for all types of payments, including small cash purchases such as making copies or notarizing documents, it’s time to look for new software!

At the end of the day, cash should be counted by the cashier and double checked by a supervisor. Totals for cash, checks, money orders and credit cards should be verified against the day’s collection reports and matched to the bank deposit.

Elements of a good cash handling policy

A good cash handling policy should identify quantifiable measures to determine if a cashier’s performance measures up to acceptable standards. These measures include:

  • ŸNumber of overages/shortages within an established time period (i.e. 30 days)
  • Number of overages/shortages exceeding a specific amount (i.e. $5.00) within an established time period
  • Cumulative overages/shortages exceeding a set amount (i.e. $50.00) within an established time period

It should also establish a limit for any single shortage (i.e. $100.00) that is immediately reported and investigated.

The policy should also clearly state what actions (i.e. additional training, probation or termination) will be taken if the employee’s handling of cash does not improve.

Is it time to review your cash handling policy?

Have you reviewed your cash handling policy recently? If not, this might be a good time to do so.

If you don’t have one, I encourage you to develop and adopt one.

If you would like assistance developing or reviewing your cash handling policy, please give me a call at 919-232-2320 or e-mail me at gsanders@logicssolutions.com.

© 2012 Gary Sanders