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This response discussion post only needs to be 100 words. Management has the option of utilizing a number of methods for controlling cash within their business. For example, they can set up a petty cash fund for minor transactions and disbursements associated with certain expenditures such as postages, taxi fares, or toll payments (Porter, 2018). Additionally, management can create internal controls designed to protect assets like cash. A company needs strong internal controls and separation of duties so that the work of one department acts as a check on another in protecting their assets (Porter, 2018).

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In managing a business's finances, strict control over cash is paramount. Implementing a petty cash fund is one strategy that allows for quick access to cash for minor expenses. This method streamlines operations by enabling employees to handle small transactions without cumbersome approval processes (Porter, 2018). However, it is essential to limit the amounts involved; for example, petty cash funds can be used for things like postage and minor office supplies, but large purchases must receive prior approval.

Internal controls are another vital element in cash management. These controls consist of policies and procedures that safeguard a company’s assets, including cash. By establishing a clear separation of duties, companies ensure that no single employee has total control over cash handling processes. This separation acts as a safeguard against theft and error, fostering a culture of accountability (Kenton, 2020). At my company, employees can purchase office supplies up to a certain limit of $200 without managerial approval. This allows for flexibility while maintaining financial oversight.

For larger purchases, like printers that exceed $5,000, a two-level approval process is required. This ensures that significant expenditures are scrutinized and justified, contributing to the company’s financial health. All transactions are documented and reviewed annually, ensuring a clear audit trail and maintaining transparency in financial reporting (Kenton, 2020). This practice not only supports accurate bookkeeping but also identifies any discrepancies that might arise over time.

Fitbit, Inc. serves as an illustrative example of the importance of cash management and internal controls. As reported in their recent filings, Fitbit holds a cash balance of $518 million, which is notably low compared to historical figures. This situation raises concerns, particularly as it coincides with negative retained earnings, indicating potential operational issues. In contrast, in 2015, Fitbit had a cash balance of $664 million alongside positive retained earnings, reflecting a more favorable financial situation. Maintaining a healthy cash balance alongside appropriate working capital is critical to organizational stability and growth.

The recent merger with Google Inc. presents an opportunity for Fitbit to improve its financial standing and operational performance. However, the importance of maintaining robust internal controls cannot be overstated. Ensuring that employees have defined limits on their expenditures helps to prevent financial mismanagement, reinforcing a structure of accountability and ethical conduct (Porter & Norton, 2018).

Ultimately, effective cash management through established petty cash protocols and internal controls creates a secure financial environment for companies. This dual approach supports operational efficiency while safeguarding against potential abuses. Success in modern business requires not only financial resources but also robust mechanisms to ensure those resources are managed properly and ethically.

References

• Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.).
• Fitbit, Inc. (2020). 2019 annual report. Retrieved from https://investor.fitbit.com
• Kenton, W. (2020). Understanding Internal Controls. Retrieved January 20, 2021, from https://www.investopedia.com/terms/i/internal-controls.asp