A Petty Cash Guide for Small Businesses




Petty cash is a dedicated, small amount of company cash that is used for your business’

small expenses. It covers small and everyday expenditures, such as reimbursing an

employee for buying coffees for the team, or office supplies.


It is important to manage your petty cash as it is part of the process of accounting and

bookkeeping. Although petty cash consists of small amounts being spent, it is crucial that it

is recorded and tracked as it could quickly add up.


In this guide, we will discuss the ins and outs of petty cash, to help you navigate petty cash

for your business.


What Exactly Is Petty Cash?


The definition of petty cash is ‘a small amount of money that businesses allocate to cover

small and everyday expenditures.’ In large corporations, each department might have its

own petty cash fund, but this likely isn’t necessary for a small business.


Many people like it because of the convenience element, as it is often regarded as an easy

and quick way to pay for things. It is also relatively simple to understand. It saves the hassle

of expecting others to pay out-of-pocket for work-related items.


Petty cash is stored in a secure box that must be kept in a safe place. It is sometimes

confused with the term ‘cash on hand.’ Cash on hand refers to cash that a business has

access to. While petty cash may be a part of that, it covers a wider range of finances.


How Do I Manage Petty Cash?


While there are many ways to manage petty cash, here are some important tips that we

recommend.


  • Create a petty cash policy – decide who in your organisation will be responsible for dealing with petty cash. Make sure the person who is responsible knows exactly what they are doing so nothing goes wrong, for example, some written receipts being thrown away. It is also worth setting a limit to keep the system running smoothly and to prevent anyone from going overboard with the spending.

  • Use a petty cash book – you can pick a petty cash book up very cheaply online or from a stationery shop, or there are petty cash templates available online. There are sections for the date, purchases, money paid in, amounts, and descriptions of the purchases. This will help you to see your petty cash details clearly, in order and all in one place.

  • Consider doing it digitally – many people find doing things the digital way is the most effective in this day and age. Doing it this way means you won’t have to rely on handwritten notes or physical paperwork. Much online software is available that can be used to manage petty cash, such as Xero, Spendesk or Web expenses. Managing your petty cash digitally will also mean you can do it from anywhere, not just in the office.


How Is Petty Cash Reconciled?


It is important to reconcile your petty cash expenses at least monthly, as it is part of the

accounting and bookkeeping process. Reconciliation means ensuring that what is recorded

in your petty cash book matches the amount in the petty cash box. It is an important

process as it will check that everything matches, but also show you if anything is missing or

might have gone wrong.

To reconcile it…

  • Calculate the opening balance

  • List all the money that has been spent or received

  • The new balance should match the amount in the box.


To Conclude

Thank you for reading our article and we hope that you have come away from it feeling well

informed on petty cash. If you are interested in having somebody manage and record your

expenses for you, get in touch with us today. We offer accounting and bookkeeping services

that are designed to support you and benefit your business.