Are you planning on starting a business and are anxious about how you’ll handle your petty cash?
Petty cash refers to physical cash that a business keeps on hand, usually to cover minor expenses. However, if you don’t know how to manage petty cash you can end up losing monies needed to cover these expenses.
This quick guide will show you everything you need to know about petty cash management and how to create your petty cash fund.
Here’s what you should know:
Create a Petty Cash Fund
The first step is to create a petty cash fund for your business. You have to determine your average monthly expenses that you can easily pay in cash.
For example, you might spend an average of $600 per month on a few basic expenses which you don’t have to pay online. You’ll want to ensure that you have this amount in cash on hand at all times.
Assign someone from your team to set aside this money per month. You can request them to take out a portion, such as $150 per week, to ensure that the money is available by the end of the month.
Here are some of the methods to acquire petty cash:
- Take a small percentage in cash from every sale
- Take a small percentage of everyone’s tips for petty cash
- Make sure you check if this practice is permitted in your state
- Withdraw the amount from your company’s bank account each week
Make sure you keep records of how much petty cash your company holds on a daily basis.
Petty Cash Management
Now let’s look at how to manage your petty cash to ensure you cover your expenses and never go above your limit.
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This helps you keep track of how much petty cash you’ve got on hand and how much you’ve spent. It’s a lot more efficient than recording your petty cash by hand.
To manage your petty cash, keep a book or spreadsheet within the app solely for keeping records. At the beginning and end of each workday, there should be a record of how much petty cash is available. Appoint a custodian to oversee this book.
Ensure that each time petty cash comes in and out that the respective employee signs or initials their name. This keeps a record of how brought in the petty cash and who spent it.
At the top of each page, write a maximum amount of how much to spend each week. At the end of each month, check if these limits were ever crossed.
That’s How to Handle Petty Cash
Now you know how to handle petty cash and how it benefits your business. This is a great way to cover your company’s minor expenses but you have to ensure you know how to manage it.
First, decide how you’ll build your petty cash fund. Set a routine of putting aside money each week for this fund.
Use an app to keep records of how much petty cash comes in and out. Within the app, your employees can record how much petty cash they’ve deposited and spent.
You can find more business tips on our blog.