Free business accounting basics and bookkeeping support for small business

Petty Cash

Most small businesses need to use petty cash - money withdrawn from the bank and used to buy sundry items.

It is important to put procedures in place, so that emploees now what authorisation is required and the expense is correctly recorded in the accounting system.

If you are just a one man band, you may find it more convenient to have a note book with you and make a note of any cash spent.

Petty cash voucher

A petty cash voucher is used as a detailed record whenever some money is withdrawn.

The petty cash voucher will need to show the following information:

A unique voucher number
Date the money is withdrawn
Details of the transaction, include as much information as possible.
Total amount that is withdrawn
Attach any receipts to the voucher
Make sure the voucher is authorised by the correct person

If the petty cash voucher is used as an advance, ensure that the correct details are recorded when the change and receipt are returned.

In larger businesses a form may be used. The information required on the form will depend on the procedures of the business for withdrawing cash and the authority which needs to be obtained.

Petty cash procedures

You will need to put petty cash procedures in place and ensure that staff are made aware of them.

Use a locked box and make sure that only a few people know where the box and key are stored.
Choose an appropriate float amount, this will vary from business to business, most businesses keep £100. This amount will need to be withdrawn from the bank
Put the money in the box and record your transaction in either a petty cash book or in an excel template
When money is withdrawn from the box fill out a petty cash form or voucher.
The money in the box plus the vouchers should always equal the original amount of money in the box. If you have a £100 float and the vouchers add up to £65 you should have £35 remaining in the box

Petty Cash Reconciliation

You will need to do the petty cash reconciliation on a regular basis; this will ensure that money is not missing and that the vouchers have been completed correctly. The reconciliation can either be completed when the box is low, each month or on a more regular basis.

Record all the petty cash vouchers and money received in a petty cash book or in an excel template. The vouchers will need to be filed in date order and kept as part of your accounting records. If you are using bookkeeping software, record the figures in your accounts. The balance in your records should always equal the money in the box.

Accounting records

The Petty cash balance is recorded by posting the expenses to the profit and loss account and reducing the petty cash balance in the balance sheet.

If you are recording money being withdrawn from the bank you will need to reduce the bank balance and increase your petty cash balance. These transactions will automatically be completed for you with some good bookkeeping software.

Petty Cash Book

Petty cash books and vouchers for recording your cash transactions can be purchased from good stationers.

Free Excel Petty Cash template

We have created a Microsoft Excel petty cash template, which you can download for your small business.

Designed to assist in managing your businesses petty cash, this free template works with Microsoft Excel 2003 or Microsoft Excel 2007, is easy to use and will save time on your reconciliation.

Download your FREE Excel Petty Cash template

Petty Cash and Security

Keeping Petty Cash in an office is a tempting target unless it is kept secure. Make sure that petty cash is kept under lock and key at all times with limited access. It is usually a good idea to make one person responsible for looking after petty cash.

A locking cash box is usually a good idea, but if you are keeping cash on business premises overnight it is probably well worth investing in a secure safe and installing this securely so that it cannot easily be moved or tampered with.