What is petty cash? Think of all the trivial business expenses like stamps and stationary, things that are impractical to pay by card or cheque. These transactions are made easier by using petty cash, a small amount of money that is kept securely at your business premises.
From getting your petty cash fund to keeping it safe, we’ve answered the questions you might have regarding petty cash below.
- How Do I Start a Petty Cash Fund?
- What Can I Use Petty Cash For?
- Who is Responsible for Petty Cash?
- How Do I Keep Petty Cash Safe?
- How do I Track Petty Cash Transactions?
- What's the Difference Between Petty Cash and Cash on Hand?
When starting a petty cash fund, an amount is agreed upon and referred to as a ‘float’. It usually depends on the number of expenditures you need to cover. Petty cash typically includes different notes and coins to make it easier to reimburse.
Most businesses that have a fund and employ other individuals should also have a usage policy to go with it, outlining procedures and what’s acceptable uses for the fund. It also includes things like an agreed maximum transaction spend.
2. What Can I Use Petty Cash For?
You can use the petty cash for whatever you like as long as it's business-related, make sure you document all your transactions accurately. Be as specific as possible, so there’s no doubt that it was a business expenditure when it comes to tax time.
Petty cash can cover things like coffee runs and birthday cards for staff, so it’s essential to have enough on hand for these little expenditures.
Don’t keep replenishing your petty fund without looking at the books every so often. If you’re spending lots of one particular thing like postage stamps, it might be beneficial to bulk buy instead.
3. Who is Responsible for Petty Cash?
If you’re self-employed, then you’re responsible when it comes to looking after the petty cash fund. You’ll need to check the balance periodically and replenish the petty cash fund back to the approved amount whenever necessary.
Keeping an accurate record of these transactions is essential.
4. How Do I Keep Petty Cash Safe?
You want to make sure your petty cash is safe and accessible for all your small business needs. Purchasing a small lockbox is advised as it can help keep your money safe. Plus, they fit perfectly into drawers and filing cabinets. You can easily find them at office supplies stores or online. Make sure it’s secure with a combination or key to deter potential thieves.
Petty cash can be easily stolen if not properly secured. It should only be accessible by you or the designated employee.
5. How do I Track Petty Cash Transactions?
You may think because petty cash amounts are small, they don’t need documenting. However, these little costs can all add up. That’s why any business needs to make sure it accounts for all small purchases so that it can deduct them as business expenses.
Make sure there’s a receipt for all petty cash purchases and that you record them in your books on a regular basis. A petty cash log will need to be made so you have detailed accounts of all deposits and withdrawals from the fund. Keep track using a spreadsheet or a bookkeeping app.
6. What's the Difference Between Petty Cash and Cash on Hand?
Petty cash is a part of your money on hand, which also includes all the other funds you have accessible. This includes the cash that hasn’t been deposited to the bank yet or smaller coins for change.
Cash on hand means the real money you have on your person and in the petty cash fund. However, on a balance sheet, the same term can be used to describe all of the liquid funds your business has saved and borrowed, including money in the bank and large bills in your safe.
It can sometimes be tricky to keep track of all these different types of expenditure, that’s why we’ve created these helpful templates to make it easier.
Keep Track of Every Business Transactions With Your Very Own Templates
When managing little-and-often finances like petty cash, it can be a challenge to keep the books accurate. If you’re looking for a way to track and document accurately, then we’ve got some templates to help you out.
The pack includes templates for petty cash, profit and loss and more. To get your own, click on the link below.