Any business, large or small, has a category of expenses that are too small and fragmented, on a daily basis. Expenses such as paying to a postal carrier the 20 cents due on a letter being delivered, or $14 delivery payment for bakery goods ordered for a company’s early morning meeting. Bookkeeping of all these expenses might be tiresome for an accountant, eventually leading to complex and confusing calculations. Petty Cash is essentially a solution to this problem. It is basically an account where small amount of money is kept for purchases or reimbursements too small for rigorous bookkeeping procedures. Usually the amount of money kept is about $100, and as it decreases to some level, a bookkeeper replenishes the exact spent amount from a bank account of a company.
Main benefits of Petty Cash:
- Systematic approach to petty expenses.
- Reduced number of transactions. Small expenses are recorded in Petty Cash, thereby reducing the number of transactions in cash.
- Less errors. Elimination of small transactions from main accounts reduces the probability of miscalculations.
- Control on petty expenses. Separate framework for small expenses gives a clearer picture, and hence, control over small, yet consequential expenses.
- Accessible to employees.
In Accounting & Finance module of kpi.com, there is a Petty Cash account in Charts of Accounts for users to take advantage of it. After filling up Petty Cash account for further use, expenses in Expense Claims section can be paid from this account. In reports, transactions related to Petty Cash account will appear separately in appropriate sections.
Click here and see a short video of how Petty Cash works in kpi.com