Recently, we were in the process of implementing a new customer on our 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 ensure 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.

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, give me a call at 919-232-2320 or e-mail me at gsanders@edmundsgovtech.com to learn how a business review could help improve your operation.