Cash Control | AccountingWEB

Cash Control

Every business needs cash. Not cash in the sense of investment capital or even income. Cash in the sense of cold, hard currency for everyday things like stamps, office supplies and other incidental expenses. Many businesses refer to this type of cash as petty cash and, as useful as it is, petty cash can be a black hole for many businesses because they don’t really have control over it.


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Here are some tips for getting and keeping control of a petty cash fund:

  • Start the fund using a check written by an authorized bookkeeper or accountant. This way at least the starting amount is verifiable and appears in the companies financial records.

  • Store the cash is a locked, fireproof strong box or safe. Limit who has access to the box or safe, as well as the number of people able to open it.

  • Keep a journal or ledger with the cash. Vouchers may also be beneficial. Requiring employees seeking cash from the petty cash fund to submit a voucher and then recording the amount in the ledger means there are two individual paper trails that can be verified when balancing the books. Requiring receipts for vouchers, whenever possible, is also a good idea. Regularly reconcile cash, vouchers and ledgers.

  • Restrict the use of petty cash. Do not use petty cash for making change or allow employees to “borrow” from the fund. This is a common problem among small businesses, but it can lead to big problems because such “informal” transactions are not recorded in the ledger, nor do they require a voucher.

  • Create petty cash policies and share them with employees. List reimbursable expenses, expenses for which petty cash can be used, and the dollar limits on disbursements.

Following these simple rules can not only help companies maintain control of their petty cash, they can also help identify classes of expenses and expenditures that might otherwise go unrecognized.

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