PETTY CASH MANAGEMENT

Pre-reading info : This article is best for Finance Management level guideline, and good for staff knowledge.


Petty cash fund is a small cash account purposed to cover recurring or small emergency purchases for the company.

Petty Cash Characteristic

• Usually it’s a certain small amount which is set to not exceed or lower than $200.00 to $500.00 per day. Different company may vary.
• Covering small repetitive day to day transaction.
• It’s saved in a small box or ampelove
• Handled by junior finance custodian

Petty Cash Procedure

Regardless materiality fund involved in it, petty cash play such vital role within company’s operation. Small recurring transaction happened everyday, since the opening of day till the closing day. Therefore a neat and clear procedure for petty cash fund is required. There is no reason for management to not control it properly. Inappropriate treatment on petty cash may disrupt the whole operation.

Here are some guidelines and tips for an effective petty cash management and procedure :

Petty Cash Fund Float

On the initial opening of petty cash account, management should set an absolute fund float, different company may set different level of fund float for petty cash. In term of amount determination, management should take the day to day recurring small transaction as a measurement in order to set the maximum and minimum petty cash balance.

It is not good for the company’s operation, having disruption because of insufficient small cash fund. Usually it is set in within $200.00 to $500.00 per day. In term of changing on petty cash float fund set, management should always keep custodian updated, trained, certified and designated appropriately.

Petty Cash Custodian

minimum of couple custodian may required to keep the petty cash. One custodian is always not the right number for petty cash. When a custodian leaving another custodian should replace her/him to keep the petty cash traffic running smoothly, and physical count to be written down into a paper as a transfer of responsibility.

Petty cash Custodian should has basic accounting skill, able to handle day to day small purchasing, a consistent honest person is a must, able to do a simple spreadsheet. Management should provide sufficient training prior to custodian designation, give intensive knowledge of petty cash and purchase requisition procedure, provide continuous petty cash reconciliation skill.

Petty Cash Fund Flow

Once the fund float and designated have defined, management may put the certain amount into the petty cash account. Drawn from the checking account in cash and submit it to the petty cash custodian, custodian should put a signature for the cash receipt and a declaration that they took the responsibility for safeguarding and its utilization should be made at once.

Custodian should keep the petty cash balance to be not lower than the minimum level set by the management. Whenever petty cash balance is desired to be over or less then the petty cash fund float level set, custodian should send a memo (in the case that the balance is more than the float should be) or a petty cash request (in the case that petty cash is desired to be lower than the float should be) to the financial controller for approval.

Petty Cash Disbursement

Department should submit a purchase requisition form to the Financial controller for approval. And petty cash custodian should only disbursed upon Financial Controller approval. Custodian should always generate a payment slip before money is delivered.

Petty Cash Record and Petty Cash Reconciliation

An appropriate petty cash record should be maintain consistently. While petty cash reconciliation need to be performed every closing and opening day. Petty cash physical count is performed prior to the reconciliation and custodian shift change.

Any unbalance amount occurred during the reconciliation should be tracked back and fixed before the closing. An official note for physical count and reconciliation should be made and filed upon Financial Controller approval, and petty cash allowed to be closed.

Related Topic : Cash Management, Petty Cash tips for custodian, Petty Cash reconciliation review and tips.
Related tools : Petty Cash spreadsheet, Petty Cash Reconciliation spreadsheet, Purchase requisition Form.