Petty cash refers to a small amount of cash that is kept on hand by a business or organization for making small purchases or handling minor expenses. Petty cash is typically used for expenses that are too small to justify writing a check or using a credit card, such as buying office supplies, paying for parking or postage, or providing snacks for a meeting. To manage petty cash, a petty cash fund is typically established, which is a designated amount of cash that is kept in a secure location and is managed by a designated employee or department. The petty cash fund is replenished on a regular basis by reimbursing the employee or department for the expenses that have been paid out of the fund.
How to keep a Petty Cash account
Petty cash is a small amount of money that a company keeps on hand to make small purchases or reimburse employees for small expenses. Keeping a petty cash account is important for maintaining accurate financial records and ensuring that the cash is used appropriately. Here are the basic steps to keep a petty cash account:
- Establish a petty cash fund: Determine the amount of money that will be needed for the petty cash fund and transfer that amount from your company’s main account into a separate account designated for petty cash.
- Assign a custodian: Designate one person to be the custodian of the petty cash fund. This person will be responsible for managing and safeguarding the cash.
- Set up a petty cash log: Use a petty cash log to track all transactions involving the petty cash fund. The log should include the date, the amount of the transaction, a brief description of the purpose of the transaction, and the name of the person who received the cash.
- Require receipts: Require that all transactions involving petty cash be accompanied by a receipt. This will provide evidence of the purpose of the transaction and help prevent fraudulent activity.
- Replenish the fund: As the petty cash fund is used up, the custodian should request that the main account be replenished with the amount of cash that was spent, along with supporting documentation of the transactions.
- Reconcile the account: At regular intervals, the petty cash account should be reconciled to ensure that the cash balance matches the amount in the petty cash log. Any discrepancies should be investigated and resolved.
By following these basic steps, you can keep an accurate and well-managed petty cash account. The software can greatly improve the efficiency and accuracy of tracking and accounting for petty cash. Petty cash management software can be used to record and track all transactions related to petty cash. This can include the date, description, amount, and category of the transaction, making it easy to keep track of all expenses.
The software can also help reconcile petty cash transactions with actual cash on hand. This ensures that there is always an accurate record of the balance, and helps identify any discrepancies that need to be addressed. With software, it is easy to generate reports that show how petty cash was spent, who spent it, and for what purpose. These reports can be used to help manage budgets, plan for future expenses, and identify areas where spending can be reduced.
Using software to manage petty cash can also improve security. Many programs offer features such as user access controls, which allow you to limit who can access and modify petty cash transactions. Petty cash management software can also be integrated with other financial systems, such as accounting software, making it easier to track and reconcile all financial transactions in one place.
Using software to manage petty cash can save time, reduce errors, and improve the accuracy and transparency of financial reporting. A petty cash account can be kept very easily by choosing good software.