What is Petty Cash


What is Petty cash? It is when a business keeps a small amount of money to spend on sundry items.

The money could be used to purchase various items, including refreshments, stationery, books, postage, etc. without having to use a debit card or write a cheque.



How to Run a Petty Cash System

What is petty cash

Petty Cash Template

Decide how much money will be in the float and withdraw it from the bank. The amount will depend on how often you use it and how much you will spend. Some small businesses decide on £50 or £100, but for your business, it may be less or even more.

Find a suitable place to keep the funds. You may choose that a locked tin is a solution or just an envelope in a drawer. If it is for a larger business make sure that it is in a safe place, away from where people may find it.

Develop a system for withdrawing cash. For a small business, you may just take the money required. A larger company will need to use a form or petty cash voucher to authorise the withdrawal of funds.

After the purchasing, the items, return any change and receipts to the fund. If you are using a voucher system or form, attach the receipt to it.

The total of the cash and the receipts available should always equal the original float amount.

What is Petty Cash – example

Business A has a float of £100. Mr. Smith is requested to send a letter next day delivery. As he does not know how much the post will be, he signs a voucher to record that he has withdrawn £5. The amount now left is £95.

The cost of sending his letter is £1.25, he returns the change to the fund and attaches the receipt to the voucher.

The petty cash now has £98.75 and a receipt for £1.25, which equals the original amount.