By: Audry Lewis, Administrative Assistant
We have all heard of the term petty cash, but do we know what it means and are we taking the right steps when it comes to accounting for it? In this article we will go over what petty cash is, what to have on hand, and how should we be using it.
What is petty cash? A cash fund for paying small and unplanned expenses such as office supplies, postage or even reimbursing employees for expenses. A business will have petty cash on hand when an expense is too small for a check to be written or it is easier to pay with cash.
How much petty cash should you have available? How much petty cash you have available will be different for every company so it is best to keep an amount that you know will cover small office expenses for about a month or two. Having around $50 – $500 is a good range for most small businesses. It should be small enough that employees won’t be tempted to steal it, but large enough that you don’t have to replenish it often.
Should petty cash be available to everyone? Depending on the size of your business it can become very easy for money to be unaccounted for so having a specific employee in charge of the petty cash would be best practice for everyone. When there is more than one person handling the cash, it can become a challenge to know where the money went and what it was spent on. Therefore, it is very important to have employees keep records and receipts. It would also be a good idea to give employees vouchers that they can fill out and return with the receipts for better record keeping.
Where should petty cash be kept? Since petty cash can become misplaced it is best practice to keep it in a safe location such as a safe or locked cabinet somewhere that you know only one person would be able to get into it.
How often should petty cash be replenished? It is best to replenish every 30 days or at the end of an accounting period so that everything is accurately recorded. To start you will first need to count the cash that is remaining and count all receipts/vouchers from employees. The remaining cash and receipts/vouchers should equal the amount of petty cash that was originally available. The petty cash fund will need to be replenished by writing a check to Cash and cashing it at the bank. You should ask the teller for small, varying dollar bills such as some 1’s, 5’s, 10’s and 20’s.
For further information and questions on petty cash or any other accounting questions, please contact any of our experienced accountants at Holbrook & Manter.