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Petty Cash

Petty cash guide

Most small businesses need to use petty cash, this is money that is withdrawn from the bank account and used to buy small sundry items.

It is important to put procedures in place, so that employees know 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 notebook with you and make a note of any cash spent, but a larger business will need to run a full system. This may include vouchers, spreadsheets, templates and seeking authorisation.

Petty Cash Voucher

A voucher is used as a detailed record whenever some money is withdrawn. We have produced a Free Microsoft Excel petty cash voucher template for you to download.

The 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  • Date the money is withdrawn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  • Total amount that is withdrawn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 voucher is used as an advance, ensure that the correct details are recorded when the change and receipt are returned.

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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 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 This amount will need to be withdrawn from the bank.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  • When money is withdrawn from the box fill out a form or voucher.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 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

Petty Cash Excel Template

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

Designed to assist in managing your business's 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.

FREE Petty Cash Excel Template

Petty Cash and Security

Keeping Petty Cash in an office is a tempting target unless it is kept secure. Make sure that it 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 it.

A locking box is usually a good idea, but if you are keeping a lot of money 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.

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