Office Mentor

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Each business needs to keep track of petty cash expenses. They can grow as quickly as your business grows. Like a dripping faucet, petty cash can drain your tank pretty quickly, just one drip at a time.

The system you establish will vary if there's a single person or a dozen people accessing petty cash in an office. The need for people to have petty cash varies due to accessibility to vehicles and time.

It can be as simple as cash in a box with a form to track the expenses. Remember that your accountant will expect original receipts to accompany each expense claim.

When several people are making petty cash expense claims, it's important to create a policy that will act as a guide to make suitable claims. Internal theft can happen easily when petty cash is overlooked as a source of loss. Staff justify in their own minds that the company really needs a digital camera just before they leave for a holiday.

You may wish to create a policy for staff and a separate policy for managers. The roles are distinct and may require separate policies. Be clear in your expectations and make it a requirement that staff members discuss expenses over a certain amount. This amount will vary, depending on the size of the company.

You'll be wise to begin by writing a cheque for petty cash expenses that staff will cash. This cash will be kept at hand to make it easy to use company money, rather than their own money, for company expenses. It works well when it's worth about a month's worth of expenses. Staff can even use something as simple as an envelope with a form that tracks all their expenses.

When you design a form that assists people in recording and managing their own petty cash expenses, it will standardize this function.

When people use their debit or credit card to pay for expenses, it benefits them to record the expense immediately, as these expenses are difficult to keep track of when preparing the form at the end of the month.

Another challenge with petty cash is motivating staff and managers to submit their claims on a regular basis. It's easy to procrastinate around this small job.

Monthly petty cash claims are ideal, but quarterly is necessary. You must avoid a large expense claim that spans a longer period of time. You may want to motivate staff to submit their claims monthly by rewarding them with a chance to win a prize. The draw could be quarterly and it can even be lunch at a nearby restaurant.

It's all in good fun to win the free meal. It might sound silly, but it does help keep staff on track, and avoids using other tactics, like not paying the claims. This type of heavy-handed tactic creates unnecessary issues.

Take time to create a company policy and a form for your staff to use to clarify your expectations around petty cash. It will keep more money in your tank, to grow your business.

Elizabeth Verwey owns and operates Small Office Mentors. Elizabeth can be reached directly at 416-463-1713.