Mishandling of petty cash costs UK businesses £1.8billion a year, this amount of money could potentially employ an extra 72,000 people into the UK workforce. The biggest problem with management of petty cash was misplacing receipts, followed by 12 per cent of employees who blamed overly-complicated processes. Healthcare (17 per cent) and retail (12 per cent) were the largest sectors said to be affected by the issue. In most companies, the attention is focused primarily on the big financial expenditures and petty cash may seem just too petty for attention to be paid to it. But silently it can be wreaking havoc and once you add up the figures it starts to become clear that it can be a costly problem.
With more than five million SMEs in the UK and an average of 240 employees each, it’s clear to see how the figures can accumulate. The importance of management and reconciliation of receipts can become a complicated process for everyone.
How can you better manage your petty cash process?
Set up an account – The first vital step to organising your petty cash expenditure is to set up a petty cash account; this way you can segregate this particular money into one place. Depending on the size of your company, decide whether it’s more efficient to segregate all the cash into one account or have multiple accounts if you have a large company with different departments.
Assign responsibility – Have one or two people who will be responsible for taking care of petty cash, from collating and filing of receipts to logging them in the system. Having someone accountable for the total expenditure makes it easier to keep track of such a tricky task. You could have several people who are in charge but remember the more people involved the more complicated the process could be so try and keep the number of people responsible at a minimum.
Create guidelines – Make suitable guidelines on how you’ll handle petty cash and make this a company policy so that all your employees are clear on what they need to do and how the process works afterwards. To ensure consistency whilst maintaining your books and petty cash account, make sure your dedicated staff are trained on how to maintain the account to eliminate the risk of confusion.
Maintain entry – Whether the account is handled by one person or a few people ensuring documentation of petty cash is a must. Falling behind and not keeping track of petty cash can increase the risk of incorrect accounts. By maintaining a clean timely record, you can avoid any discrepancies and misunderstandings in the future which in the long term will save you time and stress. Make sure you have a file where a record of the receipts are kept and a safe drawer or cashbox for the cash.
Pay attention – Don’t let money slip through your fingers and out of the company; decide the right amount for petty cash. Be constantly aware of where it’s being spent and whether this amount needs to be increased or decreased. Monitor this and reflect on your records whether it be every month, quarter or year, adjust the limit accordingly for the period and keep everyone notified.
Be flexible – Setting aside a certain budget or limit for your petty cash fund is mandatory for every company and so is attempting to stick to the assigned budget; this helps avoid the situation of any useless expense or overusing expense. However be open to adjusting and adding to your cash fund if the situation arises as maintaining rigidity will be a bad idea in some situations.