Recently, we were in the process of implementing a new customer on Logics’ Utility Management Software when one of our trainers called with a question. It seems this customer doesn’t maintain a petty cash fund and, instead, reimburses employee purchases from the cashier’s daily collections. Our trainer wanted to know how I suggested handling this.
Petty cash policy
My first response to our trainer was to convince the customer to discontinue using the daily cash till as petty cash and establish a petty cash fund. Having a petty cash fund provides better cash controls and oversight as to what is spent.
Here are some key elements of an effective petty cash fund policy:
- Establish a petty cash fund just large enough to cover the volume of cash purchases
- Impose a dollar limit on petty cash transactions
- Appoint one person as the petty cash custodian
- Store petty cash fund in a locked cash box or small safe
- Document all disbursements with a petty cash voucher and receipt for the item(s) purchased
- Reconcile and reimburse the petty cash fund at least monthly, but more frequently if needed
- Conduct periodic, spot audits of the petty cash fund to insure money isn’t being “borrowed” and replaced later
Alternative to a petty cash fund
Purchasing cards (p-cards) are an excellent alternative to maintaining a petty cash fund. P-cards allow your employees to make purchases at any establishment that accepts credit cards. Most purchasing cards allow the issuing organization to limit where and for how much the card can be used, providing effective purchasing controls.
If you’re interested in more information about p-cards, here is a link to the Government Finance Officers Association’s Best Practice for Purchasing Card Programs document.
Petty cash poll
How do you handle petty cash transactions? Please take this quick poll.
Once you’ve taken the poll, you can see the results to see how other utilities responded. I’ll publish the final results in the next issue.
Is your office operating efficiently?
If your office doesn’t have a petty cash fund policy, or doesn’t seem to be operating as efficiently as possible for another reason, please give me a call at 919-232-2320 or email me at firstname.lastname@example.org for more information about how a business review could help improve your operation.
© 2016 Gary Sanders