A Guide to Petty Cash Fund

Petty cash template

A petty cash fund is used by many small businesses. It’s when money is taken from the bank account to pay for small amounts of cash expenses like coffee, postage stamps, or stationery.

The term refers to a set amount of cash that you’ve placed in a secure location, typically a safe, lockable box or drawer. In other words, petty cash funds are kept readily available but not usually accessible.

They may be used to purchase office supplies and small items, so they allow for greater flexibility in your business’s purchases than if you were to rely solely on a standard bank account.

How Much Cash on Hand should I keep?

The amount of cash kept is often determined by the size of an organisation and its frequency of using it. A small company can get away with £50, while larger companies may need £100 or more.

Large businesses keep more in the kitty because they use it more frequently than smaller businesses. They also ensure there are enough funds so that they won’t run out when needed.

What is a Petty Cash Voucher?

It is a form or slip that usually accompanies a withdrawal of funds from the petty cash. The money will have been withdrawn for a specific, identifiable purpose and the voucher records these details together with an explanation of what was purchased and how much it cost.

How to Complete a Petty Cash Voucher?

Many organisations have a standard method that should be followed for each withdrawal. However, it can vary depending on the size of your business.

We have created a Free Microsoft Excel voucher template for you to download and use.

The voucher will need to show the following information:

  • A unique voucher number
  • The date the money is withdrawn
  • Details of the transaction, include as much information as possible
  • The total amount of withdrawal
  • Attach any receipts to the voucher
  • Make sure the correct person authorises the voucher
Petty cash voucher template

If the voucher is for an advance, ensure that the correct details are recorded. When the change and receipt are returned you may need to update the information.

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

Petty Cash Vouchers Example

petty cash voucher example

The above voucher shows 50.00 was taken from the petty cash fund, change of 14.52 was returned and the remaining 35.48 was spent and the receipt was attached to the voucher.

Petty Cash Transactions

Petty Cash is a small amount of cash, small enough to be kept in a petty cash drawer or safe, used to conduct “small” transactions that are within the scope of your company’s activity. For example, you can use it at the grocery store, cafe or for office supplies. Several different transactions are done in petty cash.

The transactions include:

  • Taking money from the bank account
  • Giving an advance for a payment
  • Reimbursing an employee of purchases
  • Providing change to a client
  • Making a sale by cash

Petty Cash Receipts

Receipts are documents that show proof of purchase. In order to make sure you have an accurate record of your purchases, the petty cash receipts should always match up with a specific voucher and attached.

You should also issue a cash receipt when receiving cash from customers. It can be a simple form, or cash receipt books are available.

How do I Manage Petty Cash Procedures?

Business owners should have procedures in place to ensure that employees are aware of how to handle small expenses By establishing these procedures in advance, it will provide staff with a clear understanding of what they should do in the event that they need to use petty cash.

  • 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 companies 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 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 tins are available to purchase from Amazon.

What to Do if Petty Cash Fund is Running Low?

If the petty cash fund is running low, the process for replenishing it is as follows:

You can write a cheque and cash it at a bank.

You can also withdraw money from a cash point. The money will be recorded in a petty cash book.

Petty Cash Account Reconciliation

It is important to regularly reconcile the petty cash box in order to ensure that no money is missing and that all vouchers are correct. The reconciliation can be done monthly, or more regularly if needed.

To do the reconciliation, start by calculating the petty cash account opening balance. Then list all the money that has been received or spent. The balance should equal the actual cash remaining in the float.

When you receive money in your petty cash tin, you need to make sure that you keep track of it. This means recording all the vouchers and money received in a book or 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 accounts should always equal the money in the box.

Petty Cash Accounting Records

When you are dealing with petty cash, it is important to keep accurate records of all the transactions. This will help you to keep track of your expenses and ensure that your balance does not get too low. The best way to do this is by recording all the transactions in a book, or in some good accounting software.

The figures are recorded by posting the expenses to the profit and loss account and reducing the petty cash balance on the balance sheet.

If you are recording money 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.

Is Petty Cash an Asset?

Petty cash funds are part of the assets of an organisation. They work in a similar way to a bank account and will have a general ledger code allocated for it.

However, the small nature of these accounts means they are often overlooked by auditors and small business owners.

Petty Cash Book

A petty cash book is a record of all transactions that involve petty cash. Using a book can make it easy to set up a system and keep all the records in one place. Books are available online and in stationery shops.

Excel Petty Cash Log Template

Petty Cash Excel Template

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

Designed to assist in managing your business’s petty cash log; this free template is easy to use and will save time on your reconciliation.

Free Petty Cash Log Excel Template

What are the Alternatives to Petty Cash

There are a few different options instead of handling cash.

Employees may be issued with bank debit cards. This has the disadvantage of not obtaining all receipts and having a high number of transactions that aren’t recognised in the bank. It might also provide an employee with limitless cash that isn’t agreed upon.

A payment card for expenses may be a more secure and convenient option than cash. This has the benefit of keeping track of all expenditures and restricting how much they can spend.

Use business expenses to claim back payments for sundry items, although this means staff are out of pocket until they are paid expenses.

Petty Cash Security

As a business owner, it is important to keep your petty cash safe and secure to avoid theft. This can be done by implementing a few simple security measures, such as keeping the cash in a locked box or safe with limited access, making one person responsible for looking after it, and investing in a secure safe if you need to store a larger amount on site.

Return from petty cash to Business Accounting Basics page.