Best Accounting Practices for Wire Transfers
Cash management is an accounting function that deals with all transactions involving a company's cash resources. Wire transfers are a common form of cash transactions. Companies rely on banks to electronically transfer funds between a company's bank account and a third party. The accounting department is responsible for tracking these transfers and ensuring that no improprieties exist in the transactions. Many companies develop specific accounting policies and procedures to handle these transfers.
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Authorization
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Wire transfers usually require specific authorization from the business owner or a manager. Controllers and accounting supervisors will not initiate wire transfers without this authorization. This practice ensures that there is no inappropriate use of company funds by employees. In larger organizations, accountants may not be responsible for initiating wire transfers. The chief operating officer or chief financial officer can have the responsibility for wire transfers relating to business operations.
Zero-Balance Accounts
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Zero-balance accounts do not carry a daily cash balance. Accounting departments use these accounts to ensure the company does not lose money if their wire transfer account is compromised by an outside source. Sending money electronically has the unfortunate potential for wire fraud or identity theft. Many businesses provide businesses or customers with transfer account information to receive payment for goods or services. Unscrupulous individuals may use this information for personal gain. Zero-balance bank accounts can limit and/or prohibit financial loss for companies.
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Reconciliation
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Reconciliation is the process accountants go through to verify that all transactions on a bank statement match the company's general ledger. Accountants use electronic or paper statements to compare with the general ledger account. Many banks also offer online access to bank accounts so accountants can review the information on a daily basis. Although the information is not often in a real-time format, it allows companies to have a method to review wire transfers in a timely manner. Companies can also issue cancellations or stop payments online to cancel wire transfers.
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