The term “petty cash” refers to a small amount of money which is a reserve amount for quick everyday office purchases and expenses. These expenses include the purchase of office supplies, payment of food for a meeting, etc. Every business should keep separate funds for such small day-to-day expenses and keep a proper track of how much money is spent on them. However, if these small amounts are not well accounted for, a lot of funds can go unclaimed and misused.
A Petty cash management system helps businesses ensure that all their funds for small expenses are spent correctly and not misused. Also, all transactions should have a systematic record. This proper management will strengthen the internal controls of a business and protect them against any fraud or theft. Also, businesses should take a hard look at the business expenses and understand its importance.
Here are 3 ways in which you can easily manage petty cash system:
A proper system should be placed in order to keep a record of all your petty cash spending. It becomes much easier to manage petty cash if your business follows certain policies and systems. A specific person is recording every single transaction and monitor if the funds are coming in use for correct things.
Every business knows how they function and what their everyday requirements are. Businesses should plan their small spends so that they don’t go overboard. Planning your expenses can help minimize the opportunity of fraud and embezzlement in your business. Businesses must educate their employees about the importance of petty cash and its usage. Furthermore, implement strict policies so that the entire management is aware of the consequences in case of violation. In addition, businesses should allocate a limited amount only for these expenses and restore when needed.
Businesses should clearly define roles and responsibilities to their employees. Also, without the assignment of roles, there can be unnecessary confusion among them which can create mismanagement in recording transactions. The person who is responsible for this task must assure that all the compliance of all policies by the employees.
