Cash transactions have been on the decline for decades and plummeted even more in recent years due to the pandemic. The amount of petty cash should not exceed a few hundred dollars, and it may even be much less based on the size of your company and your expected need. Make sure you keep a record of your petty cash float so you can perform petty cash reconciliations in the future. While most businesses usually have a strategy for managing general expenses, petty cash is often too small to be taken seriously. And when the petty cash custodian (aka your finance team) changes hands, the record-keeping is also likely to change, making it harder for auditors to follow. Without proper accountancy training, key stakeholders are left to their own devices on how to run the petty cash.
Next, total the amount of all the outstanding slips (plus attached receipts). This figure should be the same as the withdrawn sum you calculated from the account starting and ending balances. And the amount of cash you have in your storage box or drawer should be the same as the current balance of the account. Petty cash refers specifically to money—literally, coins and bills—that a company keeps on hand for small outlays, usually because using cash is easier than using a check or credit card. The Internal Revenue Service (IRS) recommends filing out petty cash slips and attaching them to receipts to record and document petty cash expenses. By having a petty cash cashier and a petty cash custodian, the dual-process helps to keep the funds secure and ensure that only those authorized have access to it.
This involves submitting a petty cash request form to the accounting department, along with receipts for any purchases made since the last replenishment. For example, a petty cash card for businesses makes each transaction trackable, and holds employees accountable for the small expenses that they are incurring. If every employee has access to petty cash, bad or nonexistent record keeping usually results.
A petty cash fund between $100 and $500 is sufficient for many small businesses. Most people use petty cash for things like buying office supplies, paying for postage, and so on. Petty cash is a small amount of cash kept on hand to cover small, and often unexpected, expenses that pop up during a business day. You might use money from the petty cash fund to pay for minor expenses such as postage, Uber fares, or reimburse someone $10 for bringing in a box of donuts.
The QuickBooks blog covers a wide range of business-related topics – it’s all part of our mission to help small businesses grow. Jane stops to pick up two boxes of donuts, leaving her with $5 in her wallet. Fortunately, her office has a petty cash fund, which her boss immediately reimburses her from, so Jane doesn’t have to submit an expense report and wait petty cash for weeks to be reimbursed. Your postage machine just stopped working, and you need to send one of your employees to the post office fast to get some stamps. The only problem is she has no cash and her credit card is maxed out. Ideally, people in this role will be comfortable handling business expenses and have experience with financial statements.
As mentioned, petty cash can make things nice and convenient but does carry certain risks. If you follow some best practices, you can reduce the risks that come with petty cash, and protect yourself and your employees. Keeping a small amount of cash in your office or at your store makes it much easier for office managers, bookkeepers, and supervisors to cover occasional small purchases or expenses. As part of its 2022 annual report, Microsoft reported $104.8 billion of cash, cash equivalents, and investments as of June 30, 2022.
If you plan on establishing a petty cash fund, it’s essential to implement the policies detailed above. Taking such precautions can help prevent fraud, theft, https://www.bookstime.com/ and accidental misuse of your company’s funds. Whether you have a million dollars or a hundred, recommended accounting practices remain the same.