Throughout the day, quite a number of petty expenses are done especially for bigger organizations and having a book to record everything in is essential so you don’t lose track of your money and you don’t end up having questions about daily expenditures.
When your organization has an actual book for petty expenses, all your cashier would have to do is list down everything right after every transaction. The amount, date and purpose (for expenses) would have to be listed down so your record will be comprehensive and complete.
Typically this kind of book or log is created for small payments or transactions which involve small amounts so that everything is recorded, no matter how small. Some examples of such small payments are bus, taxi or car fare, stamps and postage, payments for coffee or tea and others.
Importance of Having a Petty Cash Log
In all kinds of businesses, it would be very important to have your own petty cash log to monitor and record all your transactions. Especially when dealing with smaller amounts, which could go unnoticed, having a log or a record would allow you to keep track of everything as the small amounts pile up. Here are the important reasons why it would be beneficial to have such a book or log for your petty expenses:
- It is a very systematic way for you to maintain documentation of all petty payments and expenses which occur in your business on a daily basis.
- It would provide the information needed with regards to small transactions which have been made and recorded by different people a lot more quickly and easily.
- It can serve as a reference if you’d like to compare expenses between two time periods and it would aid in controlling your petty expenses more efficiently.
- It lessens the amount of work of the head cashier in the business as he/she would not have to be the one to handle the smaller transactions. Therefore, your head cashier would have more time to effectively manage and even control the bigger and more major cash transactions in the business.
- Having this kind of log book would aid in making your main cash book a lot more informative. This is because it would only include major transactions so it would be a lot cleaner, clearer and possibly more detailed.
- It helps in keeping records of cash transactions current and up-to-date because the task of actually recording the transactions is divided, thus made a lot easier.
- It saves you a lot of time since payments doesn’t have to be recorded separately. all transactions are written down in real time then the posting is made periodically at a certain time.
- Having this kind of cash system would also lessen the need to write checks for small amounts, which is quite inconvenient. You’d be able to conveniently complete a transaction using cash right then and there.
As you can see, having a record of your small transactions is very important as it would make work a lot easier and a lot more convenient. Think about starting this system in your own business then you can start creating your own log which will be used by the persons you will assign on a day to day basis. Before you start making your log, it would be helpful to learn about the different types, which would serve different purposes.
Types of Petty Cash Logs
Though you can make your own petty cash log template, learning about the different types can help you out immensely. You may find out that certain types might apply to your business more effectively and so you can format your log the same way. Here are the different types:
This type of log is the most basic and is similar to a single cask log. You’d only have to make a column for the amount and a column for the date. The amount which is received from the head cashier is written down on the debit side of the log and the petty payments made by the cashier are written down on the credit side of the log. Then at the end of the day, you can compute the total funds you have left in your box.
With this type of log, you’d have to create a separate column for each of the headings of expenses in the credit part of your log. The debit part of your log would only include one column, which would be the cash received from the cashier. Remember that only small amounts should be recorded in the log and if you have this type of log, you’d have to specify this to the person you would put in charge of your funds.
This type of log would contain a lot of columns for amounts of money so you can record daily expenses and it should have a debit and credit side. All the particulars such as receipts and expenses are recorded together in a column which you can name “particulars.” Another column would contain dates for debit and credit records.
In the debit side, the amount of money received from the head cashier is recorded. The credit side would contain more columns, as required. Expenses would be recorded in a classified method, arranged according to the chronological dates of the transactions. A total amount can also be added in the credit side to see the whole amount recorded for expenses.
Any cash spent to purchase or payment is written on separate columns, referred to as the ledger column. The difference between the amount of money in the receipts and the total amount of money payments is referred to as the balance, which is always a debit balance.
Similar to a columnar log, this type would also have a lot of columns in the credit sire and just one column in the debit side along with a particular column and a column for the date.
When using this kind of system, the head cashier would provide a fixed amount of cash or funds to the petty cashier in advance to be able to cover any expenditures for a particular period. When the period is over, the petty cashier would have to submit a statement of expenditures incurred to the head cashier. With this system, it would be important to note that the total amount of expenditures should not exceed the amount given by the head cashier.
The head cashier then verifies the statement and pays the total amount based on the receipts of the expenditures to the petty cashier to fill up the amount lost from the fund. Having a log would make things a lot easier for both the cashiers.
Now that you know the different types of logs and systems which you can employ, you can decide which one would be ideal for your business. Before we look into establishing a system in your business, let’s take a look at some tips and tricks for handling petty cash.
Tips and Tricks for Handling Petty Cash
To be able to successfully make your petty system work, you’d have to learn a few tricks which would help you out. These tricks can guide you and help you out so you can effectively start using your log book to record all the transactions. Read on and learn new things:
Establish a Reasonable Amount for Your Fund
Think about all your daily expenses and set an amount for your fund. It should be enough to cover all small expenses in your business daily but not too big that the people who work for you might be tempted to steal it. Also make sure that the amount you set won’t require replenishing too frequently so you don’t have to be stuck with a tedious task.
Identify Where the Cash Can Be Used
Since this fund is readily available, your employees may have the tendency to start spending it on things for the office, but not really related to your business. It’s important to identify when the cash is to be used and emphasize that if it’s not for those purposes, the cash must not be utilized. You can stick a list on your cash box so your employees won’t forget and won’t have any reason to spend the money in any other way.
Require Your Employees to Record Everything
Just because the transactions involved in this system are small, your employees might forget to record them or consciously neglect writing them down, especially if the amount is insignificant. However, this may cause problems for you in the long run so stress the importance of recording everything to your employees and make sure they do it. If you need to, do random checks so your employees are kept on their toes and they would record everything in the off chance that you show up and check the log.
Don’t Give All Your Employees Access to the Funds
Petty cash systems aren’t for everyone. Make sure to only involve the people who have been in your business the longest or those whom you really trust. You can assign the task to one or two of your employees to ensure that the log is neat and you know exactly who is accountable when there are any discrepancies.
Never Leave Your Funds Unsupervised
These funds are very liquid, meaning they are very much prone to theft. Even if you have an office full of trusted employees, leaving any kind of cash out in the open may tempt anyone, whether it’s one of your employees or maybe one of your customers. Make sure your box is locked away, only accessible to those who are in charge of it.
Following these tips or at least using them to guide you would definitely help out in establishing your petty cash system and keeping a good log of all the transactions. Now let’s learn to actually establish a good system where you will be able to use your log book. Whether you decide to make a petty cash form or an actual book, the steps would be the same and the outcome would result in how well you manage the whole system.
Establishing a System for Your Petty Cash
Now that you have enough information about petty cash log, it’s time to learn how to establish a petty cash system in your business. After you’ve established such a system, you can start creating a petty cash log template which will be handled by your cashier or whoever you’d want to be in charge of it in your business. Take a look at these useful steps:
- Get a lock box for your business to place all the petty cash which is received each and every day. Make sure it would be able to hold all the cash as well as the receipts for daily transactions.
- Make sure the lock is sturdy and can only be opened with a key. You should have the key and you can give a duplicate to a person in your business whom you can trust.
- Assign someone in your business to be in charge of the petty cash fund. Find a good place to keep your box wherein it is accessible to your staff but your customers cannot see it.
- The task of the person in charge would be to disburse the cash in return for receipts, restock the cash fund as needed and record all transactions in the petty cash form or log which you’ve provided.
- Consider where you will keep your cash box. You can place it in a drawer, out of sight but easy for the assigned person to get to. To add to the security, you can also place it in a drawer which has its own lock so that you don’t have to worry when one of your staff needs to step out for a few minutes.
- Establish the cash limits for each day. Remember that petty cash refers to small amounts which mean that you should be setting a limit for expenses or withdrawals.
- Make sure to deposit cash into your cash fund too to establish the whole fund. The initial deposit should be enough to cover the usual day to day expenses as well as a little extra for unforeseen circumstances. Deposit a good amount which isn’t too big that it might encourage theft.
- The denominations in your cash box should not be big as you might need it to give change for small amounts. Having huge denominations might cause trouble or confusion.
- Create your log for all the petty transactions. Orient the person in charge in how to use the cash box, the funds and even the log. Pay more attention to demonstrating how the log should be used so you will be able to keep track of all the transactions and compare the amount with what is in the box to check for any discrepancies.
- If you are working in a bigger organization or company, establish the fund you’ve created on all the accounting records and books of your organization. Petty accounts can also be counted as assets so it would be useful to include them in your books.
- Once you’ve ironed out all the details of the fun, the box and the log, you can start using the money. As long as there is enough cash in the box, your business can begin using the money for daily transactions as long as they are minimal.
- Make use of receipts when dealing with payments and customers. You can even ask for the name of the purchaser to place it on the receipt before placing it in the box.
- Petty expenses can also include advance payments to be able to purchase something which is needed immediately. You can come up with a system wherein the person who needs a cash advance would have to approach the person who is in charge of the funds and submit the receipts accordingly, for recording purposes.
- Once you have started using the fund, make sure you replenish the cash regularly or as needed. It would be a good idea to use a new sheet to log transactions when you replenish funds so you are starting with a clean slate. As soon as the log is full or you are to start with a new one, you can submit the previous one to your accounting department or keep it for future reference.
- If your fund isn’t used that often, you can adjust the amount you add into it regularly. However if you find that the amount is not enough for the average daily expenditures, you may have to add the amount each time you replenish your fund.
- Regularly do accounting or checks of your log so that the information doesn’t pile up. Also when you do this regularly, you will be able to spot any discrepancies, errors or concerns which you can deal with earlier rather than later. You might run into problems if you discover some missing funds months after they’ve gone missing and you might not be able to trace where the money went.
- When you’re checking your fund, you have to make sure that all the amounts on the receipts are equal to the initial amount which you had placed in your box. As long as the amounts tally, it means you don’t have any reason to be alarmed or concerned.
Again, it’s important to note that you should log all your expenditures and make sure they come with the corresponding receipts. Doing this would ensure that your log is complete and accurate.
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