Petty cash funds are a necessary feature of a busy workplace.
Although corporate credit cards have de-emphasized the need for bloated petty cash accounts, there are still many business purchases that require small amounts of actual currency.
The evolution of electronic recordkeeping solutions hasn't done much to address the potential for petty cash abuses. Regardless of the amount of technology that is applied to the problem, petty cash continues to be a source of aggravation for business owners and managers.
The best way to manage a small business petty cash account is to create a policy built around a petty cash record. Petty cash records are simple forms that record petty cash distributions and hold individual employees accountable for purchases. To minimize the potential for abuse, you'll need to integrate a petty cash record into a step-by-step management process that is monitored by your accounting department.
- Establish a fund. If you haven't done so already, your first step is to establish a petty cash fund. There is a bit of a balancing act involved with this. You'll want to stock the fund with enough cash to meet at least a week's worth of petty cash requirements. At the same time, recognize that petty cash boxes aren't completely secure and the whole fund could disappear in a heartbeat.
- Distribute vouchers. When an employee needs cash to make a purchase, the petty cash account administrator fills out a voucher for the amount of the distribution. This voucher is your company's record that cash has left the fund.
- Record distributions. In addition to completing a voucher, the fund administrator should record petty cash distributions on a petty cash record form that is stored separately from the petty cash box. When receipts and/or change are returned, the form is updated to reflect the completion of the transaction.
- Collect receipts. Petty cash vouchers eventually translate into purchase receipts and change. Extra money is returned to the petty cash box and vouchers are collected for later processing. When the petty cash account is depleted, the administrator submits the vouchers to the accounting department in exchange for additional cash resources.
- Export to accounting. Petty cash administrators need to work closely with the accounting department to make sure the fund is properly maintained. The petty cash record should be approved by an accounting supervisor and any discrepancies should be investigated immediately.