Talking Cents

All about petty cash for small businesses

What is petty cash? It is for small and unplanned expenses. Sounds a little tricky for small business owners to track it… Fret not, read on for more tips on how to track petty cash.

Petty cash is considered to be a relatively important aspect of small businesses. Without properly tracking of it, it may lead to a poor financial management, thus giving an inaccurate picture of your business performance. Other than that, it may incur you with more costs due to wasteful spending or theft by dishonest employees.

Tighter control on who can and how to use will enhance better financial management.

1. Write a petty cash policy – in your petty cash policy, state what is and what is not acceptable to use cash fund. Stamps and cleaning supplies are usually covered by petty cash but not for employee’s personal expenses. Other than that, do include a withdrawal limit and a list of authorised employees who can approve and pay out withdrawals.

2. Set a fixed amount of petty cash – small business can easily decide on the right amount by using previous transactions.

3. Lock it – use a cash box and keep it properly. Most importantly, limit the number of people who have access to it so as to make sure every transaction is recorded and of course, it reduced theft.

4. Create a sign out form – record all disbursements by creating sign out list with details such as name, date, amount and purpose.

5. Reconcile – usually in small business context, it is effective to reconcile petty cash on a weekly basis. However, if your business does not have much petty cash transactions, you can do it on a monthly basis instead. The amount of money in the cash box and the receipts should tally as the amount started.