Petty Cash

Petty cash template
Most small businesses use a petty cash system; it is money withdrawn from the bank account and used to purchase sundry small items.

Procedures should be put in place so that employees know the authorisation that is required, the cash is secure, and the expenses are 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 more significant business will need to run a full system. It may include vouchers, spreadsheets, logs, templates and seeking authorisation.

Petty Cash Voucher

Petty cash voucher template

A voucher is used as a detailed record when money is withdrawn. We have produced a Free Microsoft Excel 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  • Date the money is withdrawn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 of withdrawal
  • Attach any receipts to the voucher
  • Make sure the voucher is authorised by the correct person

If the voucher is for 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 company for withdrawing money and the authority which needs to be obtained.

Petty Cash Procedures

Procedures will need to be put 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 This amount will need to be withdrawn from the bank.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 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  • When money is withdrawn from the box fill out a form or voucher.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 &pound35 remaining in the box.

Petty Cash Reconciliation

You will need to complete a reconciliation on a regular basis; this will ensure that money is not missing and that the vouchers are correct. The reconciliation can either be done when the petty cash box has not got much money left, each month or on a more regular basis.

Start with an opening balance, then list all the money received or spent. The balance can then be calculated and should equal the funds remaining in the float.

Record 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.

Accounting Records

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.

Petty Cash Book

Stationery or online shops stock vouchers and books to assist with the task. They can make it easy to set up a system and keeping all the records in one place.

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

Free Excel Petty Cash template

Petty Cash Excel Template

We have created a Microsoft Excel 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

 

Alternatives to Petty Cash

There are a couple of other options instead of a petty cash system:

Issue bank debit cards to people. The main problem with this is that you may not receive all the receipts and have lots of transactions through the bank which are not recognised.

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

Security

Security is important as keeping it 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 it securely.

Return from petty cash to Business Accounting Basics page.