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The age of cashless payments is changing the way people pay for goods and services, and it’s even predicted that leather wallets might become obsolete in the coming years as the world moves away from paper money. 

Despite the rise of digital wallets and mobile apps offering various electronic payment options, it still makes good sense for most businesses to maintain a petty cash float. The question is, how much should you keep in the float and how should it be managed? 

Here’s how petty cash works and how you can manage it easily using an outsourced bookkeeping solution.

Petty Cash 101

There are times when your business needs to buy a small item discretionary item like coffee or other refreshments for the staff kitchen or a few extra pens or printer ink. It doesn’t always make sense to wait for a purchase approval or requisition and the company credit card may not be available to complete the purchase. 

That’s why businesses have traditionally maintained a small petty cash float to use for regular small office expenditures. Petty cash from the French term ‘petite’, which means small, is quite simply a small reserve of cash kept on hand for small outlays.

Maintaining a Petty Cash Float

  • Petty cash is withdrawn from the company’s main account and kept as a float.
  • Maintain accountability by recording every transaction in a petty cash log – who withdrew the money, how much and when. This can be done using excel so that expenses can be assigned to the correct category in the financial statements at the end of each month.
  • The amount you choose to hold on your premises in petty cash will depend on the size of your business and how often you make small discretionary purchases. 
  • For the sake of safety, it’s recommended that you don’t keep more than R5 000 – R10 000 in petty cash at any given time. 
  • Establish a replenishment point so that when your petty cash drops to 20% of its total value, you can top it up again.

If this process sounds complicated and time consuming, the good news is that an outsourced bookkeeping solution can help you deal with the management of petty cash with ease. Here’s how petty cash management should be carried out.

Managing petty cash the smart way

While the convenience of having cash on hand is an easy substitute for corporate cards and far less stringent without the need to file an expense report, having a float of cash lying around the office comes with its share of risks. Unfortunately, some employees may find it difficult to resist the temptation to help themselves to some of it.

To maintain 100% accountability it’s essential to manage your petty cash correctly.

  • As the petty cash float is used up, a specific employee, sometimes known as the petty cash custodian, should record every transaction and match it with the receipt for the items purchased.

Petty cash should be reconciled regularly, and any inconsistencies reported to management as soon as possible.

Managing small amounts of money is just as important as keeping an eye on the large figures.  An outsourced bookkeeping solution like the one offered by Bletchleys will help you account for every cent, maximise your profitability, and avoid headaches during tax season. Contact our team today to learn more about petty cash management or other best practice accounting solutions.

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