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.