A number of business owners make the terrible mistake of thinking that petty cash is insignificant and doesn’t need much of management. Petty cash is the small amount of cash that is spent on small company expenses like daily coffee runs, staff birthday celebrations, postage costs etc. However, just because petty cash doesn’t constitute a huge amount of money, doesn’t mean that it’s not important to track and manage it. All the little company expenses add up to make a pretty good amount. And, when properly managed, petty cash helps you keep an accurate record of all the finances of your company.
Take a look at some tips and tricks for efficient petty cash management:
- Separate Petty Cash Fund
Keep the petty cash fund separate from other expenses. This fund helps you meet small cash expenses of your company. Maintain a detailed log for each and every expense to make the financial audits easier for your company.
2. Allow Restricted Access
Not everyone in your office should have access to petty cash. Keep it locked in the cashier’s drawer and stay vigilant about the petty cash to avoid theft. Also, put a limit on the expenses covered by petty cash. Ideally, petty cash should only be used for smaller expenses.
3. Save the Receipts
Save all the receipts from your expenditures. This helps you in keeping a proper track of all of your expenses. There are many small expenses that you often forget about but the receipts help you recalling and tracking them.
4. Use a Software
It’s always best to use a good software to manage the petty cash expenses. However, if you do not want to opt for a software, you can still track the expenses manually by categorizing them under different sections like entertainment, office supplies etc.
5. Detailed Records
Maintain detailed records for all the payments using petty cash. The person using the petty cash should fill out details like the name of the individual handling petty cash, amount withdrawn, VAT charged for the purchase if any and the purpose.
6. Don’t Leave it Unsupervised
Being a highly liquid asset, petty cash can be easily stolen. Even if your employees are trustworthy, don’t leave the cash unsupervised on the desk or unlocked. A customer or an office visitor can also steal the cash if left unsupervised. Assign the responsibility of keeping the petty cash safe to one or two employees and they should be the only ones having the keys.
7. Specify the Expenses
There are chances of petty cash being spent on non-business activities. To prevent this, explain clearly to your employees the things on which petty cash can be spent. It’s good to have a written document for petty cash policy along with examples of appropriate expenses.
8. Refill Schedule
Checking and refilling the petty cash fund after every time you spend money is a tedious and time consuming job. Based on the frequency of your expenses, set up a schedule for checking all the records and making the refill. You can perform this task weekly, monthly or quarterly depending on your expenses.