Business is always all about transactions. Whether you are running a small scale business or large enterprise, you will have to spend on various expenditures, at least on a daily basis. According to business experts, when your business is involved in a large exchange of cash, it’s always prudent that you issue out a check. Nonetheless, there are some small transactions that don’t necessarily require the issuance of a check, hence the need for petty cash.
What is petty cash?
A Petty Cash simply refers to on-hand cash that companies use to pay for minor or unexpected expenses. These expenses may include office supplies, lunch, reimbursements, office supplies, newspapers, to mention a few. Many times, the petty cash is often tracked, and all money used recorded down for evaluation. Through tracking and evaluation, the company or business is able to know exactly where the money from the petty cash kitty went to or was used. When money is released from the kitty, a petty cash receipt is often issued as a proof of transparency and liability.
Usually, the amount that each company regard as petty cash does vary. In most situations, you’ll find company’s having their petty cash ranging from $50 to $200. Despite the amount, however, petty cash is one major tool that businesses and companies use to achieve financial transparency and accountability.
Why is Petty Cash so important for your business?
Well, the primary purpose of petty cash is to provide your business with enough cash to run its minor expenditures. At the same time, it helps document and tracks whether or not the cash was put into good use. According to experts, documenting small expenses can mean a lot for a company/business, especially if not claimed. Let’s take a look at this example for more insight:
Assuming an office of five workers decides to take pizza for lunch for a month. A pizza for five workers can cost up to $40. If translated into a month, that’s over $1,000. In this case, if such expenses are not recorded down, it could mean a loss equivalent to $1,000.
Can Petty Cash be tracked online?
With the continued advancement of digital technology, every form of transaction is becoming a reality. And therefore, smart business owners are embracing the use of this technology. That being said, it is possible to track petty cash online- thanks to the business card credits, debits, and apps. In fact, the use of credit/debit cards has made it easy for businesses and companies to track and monitor most minor expenses.
What is a Petty Cash Receipt, and what are its components?
Simply put, a Petty Cash Receipt is a document where all funds taken out of petty cash account are recorded. This type of receipt is common in businesses or companies that engage in frequent payment of small expenses. If at all you are planning to write a Petty Cash Receipt for your business, be sure to include the following critical components:
Before thinking of anything else, it’s prudent that you first include a simple heading of your receipt. At the same time, be sure to include the name of the business or company using or issuing the receipt.
Instructions for use
Once you’ve indicated your title or heading, you need to highlight instruction guidelines that guide you on how to fill it.
The name and signature of the recipient
In this section, you will indicate the identity of the individual or party receiving the petty cash. Also, he or she is supposed to append their signature to bind it.
The date requested
The date in which the petty cash funds were requested should then be indicated under this subheading.
The date of receipt and amount
This basically refers to the date in which the funds were issued out. Again, you will need to provide the amount that the recipient was issued.
Describe the use
Under this section, you need to give a brief explanation in which the cash released will be or was put into use.
The Remaining Balance
Be sure to indicate the amount of cash remaining in the petty cash kitty.
Custodians name and signature
A custodian is an individual responsible for storing and managing petty cash. Therefore, at the end of your petty cash receipt, you need to have some blank space for the custodian to write his/her name and signature. Once signed, it will prove that the custodian is aware and has approved the transaction.
Petty Cash Templates
Are you looking for a way to track and manage your minor expenses effectively? Well, we have got you covered. You can download our Petty Cash Templates and use them for your needs. Our templates are easily customizable and editable to suit your preference. Besides, they can make the colors match that of your business theme. Also, you can add serial numbers, address information, business logos, among others.
How does one make sure all the petty cash transactions are recorded?
As stated earlier, failure to record a petty cash transaction can cause financial harm to the operations of your company/business. Therefore, it’s always up to the business owner to establish policies that guide the use of petty cash. While it may seem tricky for some business owners, the following tips can help you set up ways of managing petty cash effectively.
- Only give out your debit cards to trusted and reliable employees.
- Demand that those employees using their cars for work-related purposes to install a tracker.
- If the worker goes out for business transactions, always demand that they screenshot the receipt of purchase and send the photos either to you or to the bookkeeping department.
How to manage Petty Cash
At the end of every month, it’s always recommended that the custodian to establish a journal entry where all the disbursements are written down. As a custodian, make sure that all the expenses over that period are logged under various categories for clarity purposes. Again, ensure that the total number of receipts are equal to the amount initially deposited in the petty cash account. This will help you determine whether or not there was a purchase that was missed or unaccounted for.
Again, the receipts should always add up to the initial account balance before the reimbursements were made. Lastly, the custodian must ensure that the amount reimbursed equates to the total petty cash receipts in order to balance the funds to its initial amount.