Petty Cash

Setting up a Bank Account called Petty Cash is a common approach (unless you have lots of employees or lots of transactions). Obviously it’s not really a Bank Account but you can manage it as though it were.

Every time you go to the ‘petty cash tin’ it’s as if you are making a withdrawal to get cash out to go and buy things and then every now and then you make a big deposit to reimburse it. You should track this so you record it somewhere as a list of cash in and cash out, just like a bank statement.

There are several methods and the following are by no means all of them. However, they will give you some ideas to think about.

Method 1 – Treat Petty Cash like Bank Account

Storing the information in Saasu as a Bank Account allows you to track and check the balance left in Petty Cash easily. To do this, you run the General Ledger report filtered for this Bank Account with the appropriate date range. When you top up your petty cash, do a Bank Transfer from your Business bank account to the Petty Cash bank account (or from whichever Bank Account the money came from). This petty cash method works well until you have lots of transactions, in which case there can be a lot of data entry to keep it up to date.

Method 2 – Run a Summary Spreadsheet and enter the Totals in as an Invoice

Another method which you can use when there are lots of transactions is where businesses keep all their petty cash expense on a spreadsheet with a running total. They just book the cheque reimbursements into their accounting system as invoice transactions where required (each line item in the invoice being the Account total for each type of expense). Our experience is that this takes about the same amount of time if you record your expenses properly.

Method 3 – Avoid Petty Cash using Employee Reimbursements

Businesses may end up going to an employee reimbursement method to reduce petty cash usage. Staff pay for several things themselves and get reimbursed in their pay or by separate cheque or direct deposit using this method. This means the employee fills in an expense claim form before each pay period and you would just book a transaction for each employee as an invoice transaction (again, each line item in the invoice being the Account total for each type of expense). The idea being that the petty cash tin gets a lot less use. The employee also becomes responsible and accountable for their expenses. The by-product is less data entry for tracking petty cash. If there are only a few transactions to track, this method would create more work so it’s a case of picking the method that best suits your business.