Petty cash is an essential and convenient way for you to deal with necessary expenses on the spot. However, it’s easy to overspend the petty cash or ignore the allotted budget altogether. This could lead to running out of petty cash, and worse, draining your overall business budget. Let’s go over ways to avoid this and efficiently manage petty cash.
Open a Petty Cash Account
Like any other kind of budget, you’ll want to know where your petty cash money is so you can track its use. Don’t let the name petty deceive you. Having petty cash set aside will help ensure that you aren’t tapping crucial funds that are set aside for specific purposes, while also having money ready to use for key purchases. Petty cash can also be a useful resource in emergency situations. However, if you don’t have a reliable way for you to monitor the amount, you could easily run out of petty cash. Having a specific bank account set up for petty cash will give you easy access to use and track the money. This also lets you put a cap on how much money you allot to petty cash.
Make a Petty Cash Budget
Before you even opening that new petty cash bank account, make sure you have an initial budget in place. Consider how many times you find yourself needing to pay for non-essentials. Are you doing this often or just only once a week? What about other accounts, do you have money set aside specifically for supply purchases, salaries, or other items? Thinking about how you actually use money will help you dictate how much petty cash you should have set aside. Start with a medium sized amount and see how it works.
While you should try to maintain a set amount of petty cash, this doesn’t mean you can’t alter the amount base on need. One way to determine your petty cash budget is to make a list of specific expenses petty cash can cover. If you find that you’re not really using the petty cash, you can always transfer that money to other accounts, or alternatively, you can add more to the petty cash budget.
If you keep petty cash onsite at the office, make you have a designated space within the money drawer to store the money. The last thing you want is to mix money so be sure to clearly indicate which section of your safe or drawer is only for petty cash. Get into the habit of counting your petty cash to make sure all the money is accounted for. This will help you track its use and replenish the money when necessary.
Limit Access to Petty Cash
Limiting who has access to the petty cash has clear security benefits but another of the major advantage is that this will help you keep the petty cash more organized with fewer people actually using the money. By designating only a few people who can use the petty cash, the amount of withdrawals is limited. Your staff will be able to record their exact amounts and reconcile them more accurately.