A workshop owner keeps a tin of cash for small daily costs such as fuel, water and minor repairs. At month-end, the tin holds less than expected. Nobody knows where the difference went.
Small amounts add up quickly. How closely do you track yours?
Petty cash is easy to overlook because the amounts are small. A little here and there rarely feels worth recording. Yet a loose system for small cash often reflects how the business handles larger sums.
What Petty Cash Is For
Petty cash covers small, routine payments that are too minor for a bank transfer. Examples include stationery, a delivery fee or a quick repair.
It is not meant for wages, large purchases or personal use. Keeping it for small items makes it easier to control.
A clear rule helps staff know what is allowed. For example, you might decide that petty cash covers items below a certain amount, and anything above that goes through the bank.
Think about who needs access. In many businesses, one person is enough. The fewer hands in the tin, the easier it is to explain any difference.
Setting Up a Float
A float is the fixed amount you keep in the tin. Choose an amount that covers your small costs for a week or two.
Give one person responsibility for the tin and keep it locked away. Record the opening amount on the day you start.
Avoid keeping more than you need. Large balances raise the risk without adding much benefit.
Choose a secure place for the tin, such as a locked drawer or cabinet. Keep the key with the person responsible, not in the tin.
Write the float amount on the first voucher so everyone starts from the same figure. Review the amount every few months to see whether it still fits.
Recording Every Payment
Every payment from the tin should have a voucher. A voucher is a short form that explains where the money went.
- The date and amount
- What the money was spent on
- Who received it, and who approved it
- The receipt attached, or a signed note if none was given
Number the vouchers in order, so a missing one is easy to spot. A gap in the numbers is a good reason to ask questions.
Keep the vouchers in a folder or envelope, never loose in the tin. If a receipt is missing, write a note explaining why and have a second person sign it. Missing receipts should be the exception, not the habit.
Topping Up and Counting
When the cash runs low, add up all the vouchers since the last top-up. Reimburse exactly that amount, so the tin returns to its original float.
At any moment, the cash in the tin plus the vouchers should equal the float. If they do not, investigate straight away rather than waiting for month-end.
Count the tin regularly. Occasionally, ask a second person to count it too.
Hand over the vouchers when you ask for the top-up, and mark them as paid. This stops the same voucher from being claimed twice. Your accountant can then enter the totals into the books under the right headings.
Habits That Prevent Problems
Do not allow IOUs or informal loans from the tin. They blur the records and are rarely repaid on time.
Set a limit for what can be paid from petty cash, and require approval above it. Review totals each month to spot patterns, such as the same cost growing quietly.
Where possible, consider whether regular small costs could be paid another way. How often does your tin balance on the first count?
Talk to your team about why the rules exist. People follow a process more willingly when they understand it protects them as well. Keep the rules short and visible near the tin.
If the tin is often empty, review it. Frequent top-ups may mean the float is too small, or that more costs are going through petty cash than you realised.
Make Small Spending Visible
JS Morlu Gambia can help you set up a simple petty cash routine and record it properly in your books. Our accounting team can review your vouchers, float size and approval steps. Where cash is involved, clear procedures can help you spot differences early, so small leaks do not grow into larger problems.