Though Keeping an eye on petty cash may seem like a small issue in operation of small businesses, the regulation of it is of great importance. If you manage it wisely, petty cash can be particularly useful when it comes to making small daily, weekly or monthly purchases. It includes stationery, traveling, or fixing small damages. Although it has its advantages, when not well dealt with, it causes disorganization and even issues with finances. However, you are at the right place.
In this article, you will learn top 6 petty cash tips you should embrace to enhance effective petty cash management.
1. Develop Standard For Petty Cash
Why It’s Important:
Adopting a clear policy on petty cash gives a guideline on how it is supposed to be used. Moreover, It can also eliminate the potential misuse.
How to Implement:
Clearly state the intention of petty cash, and what costs are allowed to be paid out of it. On top of that, all the employees who handle petty cash should be conversant with the policy.
2. Appoint a Responsible Custodian
Why It’s Important:
There must always be a person who is in charge of handling them.
How to Implement:
Select a competent and reliable employee to be in charge of the petty cash fund. This particular individual has to document each withdrawal, the receipt of the money. And, he/she needs to ensure the replenishment of the fund.
3. Maintain Accurate Records
Why It’s Important:
Documentation is crucial in monitoring and controlling the money spent to track accurate records.
How to Implement:
Ensure that every cash transaction is accompanied by a receipt and the custodian records the transactions in a petty cash book or a spread sheet. Above all, the log should contain the date of the cash, the amount, the reason for withdrawal and the beneficiary.
4. Petty Cash is for Small and Unnoticed Expenses
Why It’s Important:
It is meant for small, unexpected and frequent expenditures hence one should avoid using it for big purchases.
How to Implement:
It is for purchases of office stationery, small repairs, or small amounts of employee’s allowances. Nonetheless, making large purchases should not be done using it.
5. Encourage the Use of Approval Templates
Why It’s Important:
Approval process assures that the expenditure is made appropriately without any misuse of the money.
How to Implement:
Always need some initial signoff, such as a supervisor’s signature on a petty cash voucher or receipt form. In such way, this just puts an additional layer of protection and maintains the control.
6. Conduct Surprise Audits
Why It’s Important:
This is because surprise audits assist in pointing out irregularities in use of the PettyCash or possible misuse.
How to Implement:
Sometimes, randomly and without any warning, somebody must tally up the petty fund. Check receipts & audit log and money with cashier to ensure they are in good order. Besides, address any discrepancies immediately.
FastLane HR Suggestion
Petty cash is one of the essential assets when it comes to accommodating minor expenses in a business. However, it is also a risky aspect that should be well monitored to avoid any form of embezzlement or wastage. Therefore, Small business owners should ensure to set proper policies, proper custodians of PettyCash, to maintain efficient record-keeping. You can apply the following points to keep your business operations smooth and efficient.
For your Business Financial and human resource matter, you can contact FastLane HR to get the best the solution.
To fill up a voucher, follow these steps:
Enter the Date of the transaction. Write the Amount of cash disbursed. Describe the Purpose of the expense. List the Recipient who received the cash. Attach the Receipt to the voucher. Sign the Voucher as approval and have the recipient sign it if required.
The amount of money kept in a petty cash account typically ranges from $100 to $500, depending on the business's size and needs.
Balance the PettyCash fund regularly, ideally weekly or monthly, to ensure accuracy and address any discrepancies promptly.