- What is petty cash?
- Managing petty cash in a small business
- Petty cash accounting examples
- Tackling your small business’s accounting
What is petty cash?Petty cash is a small amount of money, often between $50 and $200, that companies keep on-hand for expenses that don’t require writing a check. You might use petty cash to reimburse an employee for coffee they bought for a meeting, or to purchase a new box of pens for the reception desk — we’ll cover a more detailed example in a section further down. Petty cash is important to keep tabs on because it’s easy to spend without thinking much about it. And, unfortunately, petty cash is also easily pilfered because it’s a liquid asset — it is cash after all. The best way to keep track of how much your business is spending with petty cash, and to ensure you’re not losing any to fraud, is to maintain a ledger with information about petty cash expenses. Let’s dive into the basics of petty cash management.
Managing petty cash in a small businessManaging your business’s petty cash accounting is the first step in making sure you don’t overspend or lose money due to fraud and pilfering. One way to manage your petty cash is to determine a set amount that is kept in the lockbox or register intended for small purchases. The IRS recommends a simple petty cash accounting procedure like this to keep track of small expenses:
- Decide on the total amount your petty cash fund should consistently have.
- Every time an employee spends money from the petty cash fund, they fill out a petty cash slip.
- These are slips, often available at office supply stores, that detail information about the payment.
- Information includes how the money was spent, who spent it, the amount spent, and the general company account that will be charged to reimburse the petty cash fund.
- Employees attach receipts to petty cash slips to verify spending.
- At the end of the day, count up the amount on the slips and the amount of cash remaining in the safe or register to ensure that they equal the total you designated.
Petty cash accounting examplesLet’s clarify petty cash accounting procedures with a simple, every-day example. Suppose that you run a small business making boutique housewares. Your petty cash fund has a consistent $175 in the lockbox for small daily purchases.
- Today, you have a meeting with a retailer that’s thinking of picking up your line of earthenware plates and bowls. To impress them, you have the administrative assistant Pablo run out for coffee to provide at the meeting, which comes out to $35.
- That same day, your office copier and runs out of ink. You have your intern Jane go pick up more ink, which costs $58.
Tackling your small business’s accountingSitting down to manage your small business’s accounting is often an unwanted hassle after a full day of running your company’s operations. If you’re having trouble keeping up with accounting needs, Community Tax can help. Our team of skilled accountants and seasoned tax professionals are trained in every area your business may need, including:
- Small Business Accounting: We know what small businesses need because we work with them — from petty cash to your annual budget, Community Tax can help you plan and save with our accounting for small businesses
- Bookkeeping: We can help you maintain a diligent record of all your business’s financial transactions, so that our accountants have all the data they need to work with when analyzing your overall financial situation.
- Tax Help: Small business taxes are a hassle, but Community Tax can help you make quick work of them. Our tax experts can help you file and see where you can save, as well as inform you about tax record retention and other crucial aspects of tax documentation. We can even help you navigate your way through an audit!
- Feel free to give us a call today at (844) 301-3727 for a free tax consultation and to find out more about how your business can benefit from small business accounting from Community Tax.