In the business world, financial responsibility requires tracking and managing all expenses. No matter the size of the company or the amount of the transaction, neglecting to monitor accounts can give you a fall sense of security regarding your business’s financial standings.
For that reason, keeping track of petty cash transactions is as important as tracking annual sales revenue or paying your utility bills. Without keeping accurate records you have no way of knowing if your accounts are accurate, if you’re wasting money, or if someone’s been skimming from the petty cash box.
Step 1: Get a Petty Cash Policy in Writing
Setting restrictions on petty cash ensures that larger purchases are still going through the appropriate channels for approval. Set a limit for how much can be taken from petty cash at one time, and limit access to a select number of employees who are responsible at all times for ensuring petty cash is balanced.
You may also want to limit what types of things can be purchased with petty cash. Ideally, the money in this fund is used for incidental purchases and emergencies. For example, cleaning supplies or buckets if the roof unexpectedly leaks.
Step 2: Set Your Budget
The maximum amount of money you keep in the petty cash box will vary from business to business, but it’s common to keep anywhere from $50 to $200 on hand. If your expenses grow with your business, you can always up the amount of cash on hand in the future. Just be sure to update your records to reflect the date and amount of the change.
Step 3: Keep All Receipts and Records
Any time an employee takes money from petty cash, it must be recorded. The employee taking the money should sign a record noting the withdrawal amount and date, and he should return the receipt and any change the same day.
No reimbursements should be given unless the purchase was approved and the employee has an itemized receipt from the original sale.
At the close of every day, the amount of cash in the box plus the sum of receipts should equal your starting cash balance.
Step 4: Reconcile Petty Cash Regularly
Some businesses will only use petty cash for purchases a few times a month while others might use it almost daily. Reconcile and replenish petty cash funds weekly if you use it often. Otherwise, an audit once a month will probably do.
Step 5: Make Sure Your Petty Cash Box Is Secure
It’s never a good idea to leave cash out for someone to take, no matter how much you trust your employees. Cash within reach can be too tempting for patrons and staff, so keep it in a cash box that’s locked tight and kept out of sight.
Limit access to the petty cash box. Not everyone needs to know the combination or have a key. By only allowing managers or supervisors to access the money, you can keep better tabs on your money and maintain control over how it’s spent.
What are your tips for managing petty cash in your business?