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Hi Torben
My understanding is that cash based transactions are easier to hide, mislay or distort which is why they are considered as potentially a higher risk. I must stress that this is my opinion and how I approach it, as I am not an expert.
If you think of your bank statements as a primary source of record that is because all the transactions in and out are recorded and are checked when you reconcile the bank account/s. A cheque/bacs/card payment made payable to a company usually only ends up with that company, shows on their statement and is therefore accounted for. You can also usually trace where or who it came from.
If someone is handling cash in the scenarios we outlined and similar, it is harder to easily identify if not all of it makes it to the bank!!! And bare cash is also more tempting perhaps to some employees as well. And the origins of the cash can be anonymous as it does not display its' origin like a cheque etc. So you have potential for not paying tax on the hidden money and also for dirty money to be laundered through a business as "takings".
That is not to say that all cash based businesses are acting inappropriately or are "dodgy"; it simply means that you have identified the potential and therefore the risk and will be watchful for it.
It would be good for you to attend your local regional seminar when it comes around, if you haven't been to one before as MLR is always discussed.
Also a quick email or call to our MLR expert, ICB director of compliance, Ray Cross at the Institute will help you to feel more confident about the process. It is still evolving and we are all constantly learning from experience too.
Best wishes
Jan
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