Do you have any cash around the office for quick lunches or buying supplies?
Most businesses can benefit from having a little cash in the office for small incidentals. The trick is to account for everything and keep it safe.
- get a nice metal LOCKING cash box
- put a pen and small notebook inside
- decide on an amount to initially set up your fund. Depending on the size of your business, you may want $50 or $100 in there.
- keep the box locked at all times, and put in a safe place, either an out of the way drawer or cabinet.
- Keep your key in a safe place as well. You may want to give a trusted employee a duplicate key if someone else will need access, and you may want a duplicate key to keep elsewhere, in case your gets lost.
Now your petty cash fund is set up – and ready for use.
Make sure your petty cash fund is used for actual business expenses. This is not for personal use.
As an aside, any business lunches should be documented as to date, persons attending, and business purpose. A business is allowed to supply a meal for employees if they are in the business location and working. These meals would be 100% deductible. Other business lunches are 50% deductible. You grabbing fast food while out servicing customers is not a business expense, and is not a deductible business expense. Keep this in mind.
Things I’ve seen clients use petty cash for are a trip down the street for batteries or office supplies, window cleaning or snow shoveling, and a holiday lunch for the office.
Here’s the steps to take when using your petty cash.
- when you take cash out, use a slip of paper and write down the date, the amount, the reason. For example, June 20, $10, cleaning supplies.
- put the slip of paper and the receipt back in the cash box.
- once a week (or month if you don’t use it often) count all your cash and receipts. If you initially put $50 in the box, your cash and receipts should add up to $50. If not, a big red flag pops up! Possibly someone took cash and didn’t put in a slip. Start asking. If it adds up, the system is working.
- write a check to yourself, go to the bank and cash it. Put the money into your cash box. You have just replenished your petty cash fund.
Then you’re ready to go again!
As you keep using this process, it will get to be second nature to you. And you will be able to back up each business transaction with a receipt. Remember, if there’s no paper documentation, it didn’t happen.