Petty cash funds are used primarily for small expenses in the business. Because of its accessibility, petty cash funds tend to be susceptible to abuse and misuse. It is important to trust your employees when they would be using the fund but it is also right to take precautions. Through the use of petty cash policies, petty cash funds are used effectively and efficiently.
Every business has a petty cash or a petty cash fund that is used for business operations like in giving change or in business travels. It can be noted that it uses the term “petty” which actually fits its definition since petty cash fund is used for transactions paid in small amounts. However, the amount of a business’ petty cash fund can vary depending on what it is used for.
Few examples of what could be bought with a petty cash fund are that it could be used to buy coffee refills for the office’s coffeemaker, to pay for parking fees in a corporate building, or to pay for terminal fees on boat and plane rides during business travels.
One of the common reasons why businesses would be using petty cash is in giving change to customers. There are some customers who would pay in big amounts and there are also no nearby stores where you can break their bills. Another reason that it is used to pay for purchases and transactions that are small enough to be in a check. It can be used to buy food and beverage supplies for the office pantry or for office supplies.
Now you might think that since petty cash comes from the term “petty” which could mean little to you, do not be fooled by its ‘pettiness’. There are some things that we describe as “small but terrible” and petty cash perfectly fits that definition. The purchases and transactions you make using the petty cash come in small bits and pieces but once you add it at all up, the amount of money you spent and used from the petty cash fund might surprise you. Just because it’s only worth more or less than a dollar does not mean that it won’t greatly affect your entire petty cash fund. This is when the role of petty cash policies comes into play. Petty cash policies in the workplace can help you and your employees regulate the use of the petty cash fund.
Through petty cash policies, you will be able to have a mandatory recording of all the transactions and purchases made using the petty cash fund. Failure to record all transactions and purchases means that you are like throwing away potential business expenses. Keeping track of the transactions and purchases made using the petty cash fund should be a mandatory part of the record keeping system of your business and if not, it cannot be used to deduct as one of the expenses of your business.
The purpose of petty cash policies is to provide you and your employee’s step-by-step guidelines in establishing, managing, and administering the use of the petty cash fund. The purpose of petty cash funds is to provide you and your employees would have an accessible cash fund to be used for purchases and transactions that come in small amounts.
It is a reality that there is always a good and bad side to everything. No matter how useful petty cash funds may be in every business, there are also some downsides to using it.
Not all businesses make its credit card accessible to all employees, and because of that, petty cash funds would come in handy. When employees are asked to buy things here and there in small amounts, they do not have to use their own money and wait for an indefinite time to be reimbursed since there is a petty cash fund that they can get money from.
We are living in a time where using petty cash could be outdated. At some point, the petty cash system has been deemed as inefficient since it is not a feasible option when employees would have to make transactions and purchases that come with a big price tag. There will really come a time that the employee would have to use his personal money in case the petty cash fund would not anymore be enough for the purchases and transaction he or she is ordered to make. It is especially inefficient for big companies where it is harder to track the purchases and transactions and this raised the red flag since the petty cash fund can be used for questionable purchases and transactions.
It is aforementioned that the use of petty cash system in this generation is pretty outdated but there are still existing businesses that are still making use of this method.
Using a petty cash system is convenient for some business owners and their employees so that they do not have to make lengthy requests or use the company’s debit or credit card for just the purpose of just buying bond paper refills.
For business owners who are still using the petty cash system find this system convenient, efficient and smart since there are low dollar expenses that could be purchased and transacted in or for the workplace on a daily basis and if your business
Having mentioned the advantages and disadvantages of petty cash policies, it is only right to have to list down the do’s and don’ts for your petty cash policy in order to have your business lean more on the advantageous side:
Keep a minimum amount in your office or at the conspicuous part of your workplace s that your employees would find it easy to access. However, store it in a safe place since it is also susceptible to abuse.
Have a minimum and maximum balance for the petty cash fund. Make sure it is not small enough to buy even just a single sachet of coffee. And make sure they petty cash fund is not that big that it could already buy a new coffee machine.
There is a big chance that your employees would be using the petty cash fund for non-business related reasons. Preparing for this does not mean you do not trust your employees; it’s just a method of precaution. Make sure to make your employees aware of the purpose and importance of your petty cash policies to make them feel that they are accountable for whatever the petty cash fund is spent on. Provide a list that could and could not be spent with the petty cash fund so that your employees would be aware and would have a guideline when they would be buying things and supplies for the office.
Do not give every employee a direct access to the petty cash fund; instead, have someone assigned as a petty cash custodian who will be determining whether the purchase or the transaction of an employee is appropriate and valid, and who will also be the one responsible for tracking the expenses, especially the receipts.
While it is advisable to keep petty cash funds within rich, make sure it is not that accessible to just anyone who comes in and out o your workplace. Even if petty cash comes from the term ‘petty’ does not mean that a petty cash fund is unimportant. It is important that is why you have to keep it in a safe place during the day and as the work day ends, keep it in a locked safe that you or your petty cash custodian has the key.
Do not forget to keep track of all the receipts. This is one solid proof that a purchase or a transaction has been made. Losing the receipts would mean that you are simply throwing away the petty cash fund.