Even though people are moving towards a cashless society, companies must keep petty cash for small expenses in the workplace.
FREMONT, CA: Even though people are rapidly moving toward a cashless economy, there are still situations when a company needs a small quantity of cash on hand. In the workplace, employees may have small expenses like purchasing a bottle from the corner store.
It's easier to manage small expenses with cash instead of writing a check or using the company credit card. When this happens, having a petty cash fund at the office can come in handy.
What is a Petty Cash Fund?
As the name suggests, petty cash is used for minor purchases that are easiest to make with money. This fund permits employees to be conveniently and quickly reimbursed for the expenses they make on behalf of the company. The majority of the time, this is for office supplies or other little costs.
What is Petty Cash Management?
Companies can use a petty cash management system to determine that funds are handled properly. It acts as a protection for that asset by serving as an internal control. A business can be vulnerable to theft if it does not have a system in place to manage small cash.
Keeping track of the petty cash ensures accountability and makes it easy to enter those business expenses into the accounting system. Despite the little amounts flowing through the petty cash fund, these small expenses can pile up over time. Most businesses don't want to remove such deductions from their financial accounts or lose sight of where their resources are being spent.
How to maintain a Petty Cash Management System
Appoint someone as petty cash custodian
Only one individual should be in charge of the fund at a time. A small business may only need one petty cash fund, but larger companies may require one for each department or office. Every fund must have its custodian. The custodian will be in charge of distributing the funds, keeping track of such disbursements, and seeking fund replenishment as necessary.
Fund the account
To get the fund rolling, it is necessary to cash a check in an amount that looks acceptable for the company's size and volume of the expected transaction. The money must be small enough to be unappealing to thieves but large enough to last a month.
Secure the funds
Petty cash should be kept in a secured box or a locking drawer of a filing cabinet. The only people who should have access to the key are the appointed custodian and the business owner, CFO, or controller.
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