Tiny quantities of money, called “petty cash,” are kept on hand for various internal and external business purposes. It’s crucial if you want to keep your personal money out of the equation and have honest financial records. Below you’ll find some further justifications for its value and guidelines for accurately recording petty cash transactions.
Why Should You Always Have Some Cash on Hand?
Companies need access to petty cash, or little quantities of cash, in order to carry out their regular weekly and daily operations. You may use this check as emergency cash to cover little expenses, rather than writing checks all the time.
The fact that these amounts are little shouldn’t make anybody think they aren’t significant to track. Although you probably wouldn’t go out of your way to keep track of amounts this little, it’s possible that they may add up to something important over time. The petty cash accessibility and accountability are both important for various reasons.
A large quantity of money might quickly be amassed via a series of little cash transactions. You will lose a lot of money that might have been claimed as business expenses if you don’t maintain records and monitor your little transactions. If you did that, you would effectively be wasting money.
In order to express gratitude for the hard work of their tiny team of five employees, someone orders pizza for the group once a month at a cost of £50. Each year, it adds up to £600, and if you don’t keep track of those small financial outflows, you’ll wind up losing that much money. Everything from taxi fares from flower delivery to minor home maintenance and workplace supplies might be covered by this.
Petty cash is a vital component of every thriving business because it allows employees to meet small, unexpected expenses without dipping into their own personal funds. Instead, you may immediately respond to urgent issues that arise.
Most importantly, however, when little charges keep popping up, the risk of a leak is rather high. This suggests that the two financial statements can have a sizable discrepancy.
Tips for Keeping Your Spare Change Under Control
You now know why it’s so important to keep track of petty cash, so let’s go over some quick steps you can take to start doing just that for your business.
Get yourself a safe or lock box.
An easy way to get a metal lockbox is to visit a store that specializes in office supplies. Place the newly-accessible funds here. Aside from that, it is a great spot to keep your receipts safe.
The best option is a tiny metal box that can fit in a drawer or on a shelf. Also, ensure its security by installing a lock that cannot be broken into, such as a combination lock or a key lock.
Give Responsibility Where It Is Due
If you’re a one-man show, you’re the one who has to take care of the petty cash. If you have a small team, it’s probably best to have only one person in charge of the petty cash box and account.
If you choose for the second option, be sure that the person allocated to handle the petty cash is easily available to anybody who may need to utilize it. One’s duties as custodian of the petty cash box include dispensing funds, filing away receipts, replenishing the fund, and keeping track of purchases.