Cash disbursements are simply the outflow of cash from a business used to make payments. Most businesses make significant cash disbursements by physical or electronic check, but some also maintain petty cash funds. Businesses should maintain tight controls around cash disbursements to deter the chances of fraud.
Cash Disbursement Basics
Cash disbursements cover a wide range of company expenses, including amounts owed to vendors, customers, employees and lenders. Payments generally are made in the form of a physical check, electronic check, ACH debit or even in cash. Most small businesses maintain a petty cash fund to disburse cash for small office expenses. The manager generally puts a dollar limit on the petty cash fund, like $100 or $200, and a bookkeeper reconciles the fund periodically.
Controls for Cash Disbursement
Managing cash disbursements requires a business to have sound internal controls. Unauthorized payments in the wrong amount or to the wrong person are a common source of fraud for small businesses. To deter this, managers should attempt to separate cash handling, recordkeeping and custody of physical assets. Doing so makes it harder for someone to make an unauthorized cash disbursement and get away with it.