Petty Cash Accounts for Your Small Business
Every business needs unexpected cash on almost a weekly basis. Whether it’s money to pay the postman when he brings a letter or package COD, money to buy a few emergency stamps to get the mail out, or money for some office supplies needed before the next delivery, businesses need to keep some cash on hand, called petty cash, for unexpected expenses.
You certainly don’t want to have a lot of cash sitting around in the office, but you should keep $50 to $100 in a petty cash box. If you find that you’re faced with cash expenses more or less often than you initially expected, you can adjust the amount kept in petty cash accordingly.
No matter how much you keep in petty cash, be sure you set up a good control system that requires anyone who uses the cash to write a voucher that specifies how much was used and why. If possible, you should also ask that a cash receipt from the store or post office, for example, be attached to the voucher in order to justify the cash withdrawal.
In most cases, a staff person buys something for the business and then gets reimbursed for that expense. If the expense is small enough, you can reimburse it by using the petty cash fund. If the expense is more than a few dollars, you’d likely ask the person to fill out an expense account form and get reimbursed by check. Petty cash usually is used for minor expenses of $5 to $10 or less.
The best control for petty cash is to pick one person in the office to manage the use of petty cash. Before giving that person more cash, he or she should be able to prove the absence of cash used and why it was used.