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What is Petty Cash?
Tricia Christensen
Tricia Christensen
Most businesses require a small amount of cash on hand for certain expenses like office supplies and the like. This is usually called petty cash, and the word petty is a pronunciation corruption of the French petit, which means little or small. The majority of small businesses have a petty cash fund of around $100 US Dollars (USD). Larger business, especially those that have numerous departments, may have a significant amount of this cash held by various custodians.
Business owners might think that it would hardly be necessary for the modern business to have a petty cash supply, since it is so easy to use things like business ATM or credit cards. However, the advantage of cash is that any employee can use it, whereas company cards tend to be limited to a few users at most. Petty cash saves the necessity of giving more employees access to credit cards, and maximizes the number of employees who can be employed to run an errand to obtain some small thing for the business.
As with any business expense, petty cash must be tracked carefully. When employees use it, they must furnish receipts for their purchases. Many business owners or cash custodians also have to keep a log book of expenditures. Alternately, sometimes funds are recorded through a voucher system. People may make small purchases with their own money and be reimbursed by filling out a voucher. Each voucher is a way of tracking expenses to make certain they add up.
The business of making sure cash adds up is very important. Not tracking where the cash goes can easily lead to abuses. Usually businesses must make certain that amount of any receipts or vouchers plus the cash always equal the total amount of petty cash allowable. As vouchers or receipts begin to increase and cash decreases, the business replenishes the cash amount and makes certain all expenditures have been duly recorded per the accounting method used by the company.
Another thing that’s important is making sure cash is stored in a safe location. Cash is obviously unsecure when left in an open location, and ought to be kept in a safe, a cash box or something like a locked drawer. Usually one person has access to it and is called the custodian. In some businesses like retail stores, there is a significant amount of cash on hand, available in registers. It is possible that petty cash will be kept in the register, or the employer might simply use register funds for small expenses, leaving vouchers or receipts that will allow anyone to balance the register funds evenly when the store or register closes.
Tricia Christensen
Tricia has a Literature degree from Sonoma State University and has been a frequent WiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.
Learn more...
Tricia Christensen
Tricia has a Literature degree from Sonoma State University and has been a frequent WiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.
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![Businesses typically keep petty cash on hand for expenses like office supplies.]()
By: neirfyBusinesses typically keep petty cash on hand for expenses like office supplies. -
![Retail businesses may elect to keep petty cash in the cash drawer.]()
By: Christy ThompsonRetail businesses may elect to keep petty cash in the cash drawer. -
![Some people collect petty cash to deposit in a bank account later.]()
By: Africa StudioSome people collect petty cash to deposit in a bank account later. -
![An imprest fund is a type of cash reserve that is set aside to manage minor expenses that may be incurred during the day to day operation of a company.]()
By: Kautz15An imprest fund is a type of cash reserve that is set aside to manage minor expenses that may be incurred during the day to day operation of a company.
Discussion Comments
I am in charge of the office's incoming and outgoing communication. It is a very challenging job for me since I am writing all letters for my first time ever. Admittedly I am a beginner in letter writing and a college undergrad, so to speak. Lately, I was asked to make a requisition for a petty cash fund addressed to the city mayor and I knew nothing about the term. Thanks for the articles in this site. They have helped me a lot.
I worked for a restaurant for a while and we didn't have a proper store of petty cash, but we did always have cash in the register. Occasionally we would run out of an ingredient and a cook would be sent to a local grocery store with maybe $40 in cash out of the register.
They were supposed to bring back the required supplies as well as a receipt and any change. The accounting was worked out by the manager at the end of the night. I used to love going on these grocery store runs because it got me out of the kitchen and out into the fresh air. It was kind of like taking an extended break. Petty cash has more benefits than we realize!
@Gravois - I agree with everything you said about the benefits of petty cash, but there can be problems as well. I used to work for a business that kept a few hundred dollars petty cash on hand at all times. The boss kept this in a small locked box in a desk drawer.
One day somebody stole it, box and all. Because the money was in cash, there was really no way to figure out who had taken the money or what they had spent it on. After it was stolen, the mood around the workplace became very suspicious.
Not only did the boss stop keeping petty cash in the office, he stopped spending petty cash on things that the employees appreciated like free lunches or coffee drinks. That simple theft ended up having a huge effect on how people felt about their jobs.
I used to work for a small business and the owner kept about $500 petty cash on hand at all times. Most of the time it just sat there, but occasionally he would send someone out to buy doughnuts for all the employees or to get pizza and sodas for a company party.
The owner was the only person with a company credit card, so it was easier to send other people out with cash. There were also a few restaurants in the area that didn't take cards so cash was vital. Having petty cash on hand was a nice contingency. Most of the time we didn't need it but it was really convenient when we did.
Its like they say, cash is king. It is sometimes easy to forget this these days. There are so many cards, account numbers, money orders and transfers that we sometimes loose sight of the fact that cash is the easiest and most direct way to pay from most things. It can be inconvenient to carry around a wallet full of bills, but you know with complete certainty that they can be used by anyone at any time for any purpose.
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