Could you be losing over £350 a year?
Posted on 25th April 2019 at 14:53
Research by Argos for Business says that errors in managing petty cash could be costing small businesses in the UK an average of £355 a year. With over five million businesses across the country that could amount to almost £1.8billion.
Lost receipts and complicated processes are the biggest problems. More than one in 10 (15%) of those surveyed said that they didn’t know how their employers keep track of petty cash.
Petty cash is often used for the wrong things too. For example, the research showed that some businesses used petty cash to buy assets – even a used ice cream van in one example. Petty cash should only be used for small, occasional costs such as refreshments or parking fees.
What is petty cash?
Petty cash is the common type of ‘imprest system’ – this means that there is a fixed amount reserved for the account to cover specific costs. When the money has been spent or falls to a certain level, it will be topped up from another account
What you can do to improve petty cash management
1. Have a clear process – Decide how much petty cash your business needs to run smoothly and who will be responsible for it – ideally just a couple of people. Write down a process that makes it clear what petty cash should and shouldn’t be used for, and how to record money taken out of petty cash and receipts and change returned.
2. Make everyone aware – It’s a good idea to create a short checklist so that everyone knows what they should do.
3. Regular reconciliation - Make sure that your petty cash is regularly reconciled to make sure that you have receipts to cover expenditure. If possible, this should be done every day.
4. Minimise the use of cash – It’s much easier to keep track on small expenses paid for using a business debit or credit card. This will help to minimise the amount of petty cash you need to hold and will help to keep track of expenses.
Benefits of an effective petty cash process
Like all your other business expenses, money spent form your petty cash account should be allocated correctly. This makes sure that you have an accurate picture of your business expenses and that you are including all your allowable expenses in your company accounts.
If you are registered for VAT, then you will be sure your returns are accurate too.
Digitising your receipts
A mobile app like Hubdoc can be used to photograph receipts and immediately forward them to a dedicated email address so that they be easily uploaded to your accounting software, like Xero. This will minimise errors and you can be confident that all your records are safely stored. You won’t have to search in pockets, vehicles or drawers to find them anymore.
If you would like help or advice to set up your petty cash process, just get in touch.
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