How to ensure that your business uses petty cash appropriately

Most businesses and organizations have a petty cash fund.Setting up the petty cash fund is not a particularly difficult procedure to undertake.However, it is more difficult to ensure that petty cash is used appropriately by yourself and other people in your business or organization.

Petty cash funds are an important part of a business' finance plan.Petty cash funds can be used when something needs to be purchased, and can't be bought through normal purchasing methods such as using your purchasing card or a purchase order.Petty cash funds can be a convenient way to buy the things that you need.However, petty cash funds also provide a great opportunity for abuse of the petty cash fund's ease of use.

It is important to regulate the use of your petty cash fund to ensure that it is not used inappropriately.Here are 5 tips to help you ensure that your petty cash is used in the way that it is intended.

5 tips to ensure that petty cash is used appropriately

1.Come up with specific guidelines on when and how petty cash may be used.

The first step to ensuring that your petty cash is used in the right way is to establish the various ways that petty cash may be used.Determine what purchases can be made with purchasing orders or your purchase card.Then make a list of other types of purchases that will have to be made at some point or another.This will give you a starting place for drawing up your list of requirements for the use of petty cash.

Here are some sample requirements for the appropriate use of petty cash.

• Petty cash may not be used to pay salaries.


• Petty cash is not to be used to pay for the services of any independent contractors.


• Petty cash is not to be used for the purchasing of any inventory.


• Petty cash is not to be used for the purchase of any equipment for the business.


• If your organization has any restricted services that must be approved by a panel or group, do not allow petty cash to be used for such services.


• Petty cash may not be used for any entertainment functions or expenses.This means no petty cash for the caterer, or for liquor.


• Petty cash may not be used for traveling expenses, save for cash necessities such as parking costs.


• Petty cash may not be used for any personal use, including but not limited to paying off speeding tickets or other violations.

2.Check to make sure that documentation of the use of petty cash is kept up to date.

It is important to come up with a way to document the use of petty cash.The most common and the easiest way is by keeping track of all receipts, whether register receipts or written invoices.Each receipt should have the date of purchase, the name of the company or vendor, a list of the items or services purchased, the price of each item, and the total cost.

Also ensure that the person who made the purchase signs the receipt.

Keep all receipts well filed so that you can go back and check if there seem to be any discrepancies.

3.Consistently maintain the documentation of the use of petty cash.

It is impossible to keep accurate records unless you have a uniform system of documentation.Come up with an easy to use system, and follow it scrupulously.

4.Draw up a list of requirements for reporting petty cash.

Another important way to ensure that petty cash is used appropriately is by having a clear and precise method for reporting petty cash.Designate a particular person to whom all petty cash purchases must be submitted.File these reports.Set a particular date for which all petty cash reports for the month are due.

5.Review the regulations regularly.

If nobody knows what the regulations are, then the ability to abuse the petty cash fund becomes easier.Keep everyone up to date, and don't allow for any bending of the rules.