Understanding Petty Cash and its Management Method

Understanding Petty Cash and its Management Method


Understanding Petty Cash and its Management Method

Financial statements are closely related to petty cash. Given this is part of it. Every business must have financial books.

The goal is to make company management easier. In addition, you can evaluate the development of the business. Without financial reports, of course it will be difficult.

Financial management will also produce accurate data. That way, you can plan your strategy for the future. So that way, the company’s progress can grow rapidly.

Therefore, the existence of petty cash also does not need to be ignored. Because, by managing small funds and recording them properly will be very helpful. Especially in preparing financial statements.

Petty Cash and Its Definition

Petty cash is the funds used to finance the company’s operations or matters related to it. That is, spending with a small amount.

That way, you also need bookkeeping for this. The goal is to make it easier for companies to record finances. The bookkeeping can be done manually or using an accounting application.

This type of cash is commonly referred to as petty cash. In general, it is managed by the Secretariat Bureau or entry-level finance officer. The goal is to support the task of implementing the field.

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An example of petty cash is a special amount of money for routine expenses and the amount is relatively small. So, with petty cash, the secretariat does not have to ask for money for small fund needs.

Because, basically every company would need a small amount of funds for several purposes. Below are the characteristics of petty cash that you need to know.

  • The amount is limited in accordance with the provisions of financial management. Each company certainly has a different petty cash nominal, because the operational needs are not the same.
  • Used to fund small and routine transactions every day or within a certain time.
  • Saved in petty cash box.
  • It is handled or refilled by cashiers.
  • The role of petty cash is very important for the company’s operational activities.

Purpose Petty Cash

In financial management, petty cash has several specific purposes. It’s a good idea to get to know more about it, especially the purpose for which it’s made.

1. Preventing Payment Allocation Errors

You have to differentiate between small and large corporate finances. That way there will be no allocation of payments. Because certain payments have their own books.

So, if you only need a small fund, it doesn’t have to be a core company that handles it. That’s because the direction that should be on petty cash. In this way, finances are also more coordinated.

Also read: Recommended Android Invoice Applications for Businesses

2. Petty Cash Can Handle Company Equipment

Equipment within the company tends to use small funds. So, if the supplies run out, it can be handled immediately with petty cash. The amount of expenditure will also be recorded in a special book.

3. Incidental Policy Determination Becomes Faster

If you want to issue a sudden policy for the company or so-called incidental policy. Thus, policy analysis becomes easier, because small and large cash are in different books.

That way, you can make decisions faster. Because, it already has a solid foundation, so it will minimize problems in the future.

4. Lighten the Work of Employees

The existence of petty cash also aims to ease the work of employees. Because, you can make performance reports easier with the petty cash bookkeeping.

Function of Petty Cash

Once you know the purpose, then further identify the various functions and benefits. That way, you will better understand that his existence is indeed important.

1. Improving Customer Service

One example of this function is like holding a meeting in the office. Of course, it requires consumption as a complement to these activities. Employees who handle this need not be confused about where the funds come from.

With petty cash, consumption funds can be taken from there. After that, it remains only to record how much money was spent and for what.

So, reporting will be clear later and the service will still offer the best. That way, coworkers who attend the meeting will feel satisfied because they are served well.

2. Accountants are Easier to Record Finances

Petty cash also serves to ease the task of accountants. This is because the task is quite heavy, one of which is making financial reports within a certain period.

With petty cash bookkeeping, it will certainly make the job easier. All you have to do is analyze and recap financial data in every area of ​​the company.

3. Issue Company Emergency Fund

When one of the divisions needs funds quickly, of course, it is not possible to apply to the core company. Moreover, it only requires funds with a small nominal.

So, if there is petty cash in the division, it can get funds quickly. Emergency needs will also be handled immediately and will not take long.

Also read: Use Stock and Sales App For Time Efficiency

Petty Cash Management Method

The petty cash journal entry has two methods, namely fixed and variable. The method includes the stages of managing the existing funds. That way, there will be no errors in the report later.

1. Fixed Method or Imprest Fund System

Petty cash bookkeeping with this method means that the number of cash accounts is always fixed. For recording each transaction is also not directly on the books of cash.

However, by collecting proof of the transfer of these expenses. From this evidence, a recording will be made. The characteristics of the fixed method are as follows.

  • The manager or petty cash holder collects proof of transfer of various transactions from the cash fund.
  • Estimate the amount of payments that will occur in order to meet the needs within a certain time.
  • Then, after the petty cash runs out, the cashier will refill it. The nominal is in accordance with the money spent.

That way, the account amount will return to the initial nominal with a fixed amount. Therefore, this way of managing is called the fixed method. This step will also make finances more organized.

2. Variable Method or Fluctuating Fund System

If you use this method, the cash control will fluctuate. Usually, the amount will adjust to the needs. So, the number of subsequent fillings does not have to be the same.

That way, there are times when petty cash has larger or smaller amounts of funds. If you don’t really understand it, then you can see the following characteristics.

  • Cash replenishment must be recorded in the debit of the petty cash account.
  • Evidence and amount of disbursement must be recorded in the cash book. You do this by debiting the accounts related to the use of the petty cash credit.
  • The nominal amount of cash funds is based on the development of activities in the use of funds.

With the description of the characteristics of the two methods, of course you have found a clear difference. As for which one is better, it depends on what is considered easier.

As previously mentioned, petty cash bookkeeping can also be done through an accounting application. However, you don’t understand how and each one is confused about it.

So, there is no need to worry because the services of the Sterling Team are ready to help you. So, the next one will better understand how to take advantage of current technological developments.

Sterling Team and iREAP POS, Make it Easy for You!

The Sterling Team includes a partnership that you don’t need to doubt anymore. With his various achievements in serving previous companies, it can already be proven.

You can visit our main site if you want to establish cooperation. That way, petty cash management and bookkeeping will be easier. We also provide an application called iREAP POS. This application will make it easier for you to manage your petty cash later.

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