Refreshments like beverages, snacks, transportation costs, or cab fares for employees also fall under the umbrella. It covers postage and handling office repairs and maintenance services. A lack of rigorous controls over petty cash transactions can cultivate an environment susceptible to fraudulent activities. Using a petty cash book is critical to ensuring that petty cash is sufficient and properly spent. Although paper-based petty cash books may be sufficient for certain transactions, digital petty cash books offer many advantages.
Managing Petty Cash Across Multiple Branches
While a small business might need just $50, a large retained earnings company department might start with $150. Though the petty fund is available in cash and can be considered cash on hand, the cash on hand is not always petty cash. The frequency at which petty cash is withdrawn differs hugely from organization to organization.
What is Petty Cash?
The key or combination should not be made readily available to all employees. Only the business owner and the petty cash custodian should have access. Alongside a disbursement log, company policies should mandate receipts for every purchase. A designated employee, like an office manager or finance assistant, petty cash should handle petty cash.
Exchange the Receipt For a New Check
Our policy states that petty cash reimbursements shouldn’t exceed 10% of the fund balance. However, we can also specify that certain expenses are always chargeable to petty cash, even if they’re above $50. Having a petty cash fund speeds up reimbursements and is an important best practice in cash management. It enables your employees to Accounting for Churches perform quick errands without using personal money.
How to keep your petty cash book tidy
- This process will help you ensure that all of the money in your petty cash fund has been properly accounted for and that there are no discrepancies.
- In the UK, the HMRC sets rates for things like meal and mileage expense claims , but your company may not specify a number.
- There’s usually a petty cash custodian who’s responsible for managing the amount.
- The custodian is tasked to overlook and safeguard the account by issuing cash, approving reimbursements, and recording the debits and credits to the account.
- Another business owner walks into your office at 10 a.m., and you decide you need some refreshments for the meeting.
- This sum is the total withdrawn from the account during that time period.
Most companies tackle the handling of petty cash with a petty cash log book of sorts; maybe an Excel or paper spreadsheet, or notebook that people tend to doodle in. Essentially some place to record how much has been removed for purchases. Luckily, there are some software alternatives (we’ll get into that later) to avoid things getting lost. Most businesses set their own maximum rate for expenses that can be paid with the petty cash fund, say £25.
