As a small business owner, you know how important it is to keep track of all your expenses. However, some expenses are too small to be paid by cheque or credit card. That’s where petty cash comes in. Petty cash is a small amount of money kept on hand for making small purchases that can’t be made by other means. Here’s how to set up and manage a petty cash fund for your small business.
- Determine the amount needed for your petty cash fund: Before you set up a petty cash fund, you need to determine how much money you will need to keep on hand. This will depend on the size and nature of your business. A good rule of thumb is to keep enough cash on hand to cover small purchases for a week or two.
- Choose a location for your petty cash fund: Your petty cash fund should be kept in a secure location, such as a locked drawer or cabinet. You should also keep a log book or spreadsheet to record all transactions from the petty cash fund.
- Determine who will manage the petty cash fund: You should designate a responsible employee to manage the petty cash fund. This person should be trustworthy and have good record-keeping skills.
- Set up a system for reimbursing petty cash expenses: All petty cash expenses should be documented with receipts and recorded in the log book or spreadsheet. At regular intervals, the petty cash fund should be reconciled with the recorded expenses, and any shortages or overages should be accounted for.
- Keep the petty cash fund replenished: The petty cash fund should be replenished regularly to ensure that there is always enough cash on hand. You should set a regular time to review and replenish the petty cash fund, such as once a week or once a month.
Setting up and managing a petty cash fund can be a bit of work, but it can be a valuable tool for small business owners. By keeping track of small expenses with petty cash, you can streamline your bookkeeping and reduce the administrative burden of tracking every single purchase. Just remember to keep accurate records and keep the fund replenished, and you’ll be on your way to a more efficient and organized small business.
If you’re in Ontario, Toronto, or any other Canadian city, and need help with setting up and managing a petty cash fund, reach out to a local bookkeeping or accounting professional who can guide you through the process.