I would like to improve our petty cash system and I am trying to draw up a policy for it.
I am struggling with a couple of things:
How do you disburse cash if you don't know the cost beforehand? e.g. employee needs to send a parcel recorded delivery but obviously can't know the cost until at the post office. You could ask the employee to pay first out of their own money, and then reimburse once they return with a receipt, but that doesn't seem workable as the employee may not have money and/or feel happy paying first.
I suppose you could disburse from petty cash say £20.00 for something expected to cost less and then have the custodian check that whoever spends the money returns with a RECEIPT and CHANGE totalling £20.00.
Currently the system being used is not working as staff dip in to the petty cash and forget to leave receipts. It's always a few quid out (under/over).
For me the key to a good petty cash system is in limiting the number of people who can 'dip into' it. In any of the place I have worked the aim has always been to minimise the need to use petty cash. For instance in your example could the Royal Mail online postage or smart stamp service? We always had the money leaving the tin only when the receipt went in, so the employee paid for the item and got the money back.
I find that the best way to control Petty Cash is to have one or two designated petty cash key holders! Keep the petty cash in a locked tin. This way not any old staff member can access it, and the designated key holders can follow the rules better.
I would use receipt and change method. Make a note when say £20 was withdrawn and leave it in the tin or on an excel spreadsheet and then when the expense has been incurred and a receipt received you can put the change back into the petty cash tin and record the expense in your cashbook. All should balance nicely.
Keep a consistent cash float as well, e.g at the end of the week check to make sure that £30 is in the tin ready for the following week. If not top it up my withdrawing cash from the bank and record in the cashbook.
If there are no receipts, have petty cash slips in the till to describe what the expense was spent on.
For a petty cash system to work it must be controlled by one individual.
Everything taken out of it must be accounted for in a journal.
The employee is given (say) £20 advance from the petty cash tin in order to enact their purchase.
They sign their name against the date, time, amount and printed name.
When they have completed their purchase they return the change and the receipt to petty cash.
The best form of journal is three columns. Cash out, Cash in, Receipts.
The actual running of the petty cash system should use the Imprest system.
How often the funds are replenished is very much down to the individual business.
The most that I've ever seen kept in petty cash is £150.
Hope that helps,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I hate petty cash with a vengeance. I have one employed job at which I work for 9 hrs a week (3 mornings x 3 hours) and I am "in charge" of the petty cash but obviously I'm not there all the time and people want cash when I'm not around so either the Centre Manager or the Project Manager (with whom I share an office) deal with it. The Centre Manager does all the paperwork correctly - completes the advances spreadsheet and leaves the envelope with the returned cash and petty cash request and receipts for when I'm next in. The Project Manager is not as meticulous. The petty cash never balances - can be surplus or deficit - when surplus it gets stuck in the 'slush fund' envelope and when deficit it's removed from 'slush fund' back to petty cash. Not correct but works in its way - as I said hate it because I don't like errors.
I also 'take care of' the petty (or not so petty) cash for one of my clients. There the admin person receives a £50 per weekwhich works on the imprest system and deals with all the minor amounts of cash required and I keep a separate tin for the larger amounts of things like subsistence payments paid to the artists in cash and to top up the imprest. In an emergency there is one other person in the office who knows where the spare key to my petty cash tin is so it works really well.
Of my other clients there's only one which has petty cash and if it doesn't balance the deficit - which it usually is goes to the DLA.
The key to running an efficient petty cash system is for there to be only one person in charge of it but in many cases this is not possible.
I would have to agree with many of Shamus' points. Particularly having 1 or very few people able to have access to the petty cash and keeping an accurate record anytime money goes in or out. By keeping an accurate journal it will be much easier to see where the money is going.
