Petty cash: running a float that still reconciles at the end of the month

Petty cash is a small amount of money kept on hand for expenses too minor to run through the normal purchasing process — postage, a taxi, milk for the office, an urgent part from the shop down the road. It is the smallest thing in the accounts and generates a wildly disproportionate share of the awkward conversations, because it is the only asset in the business that anyone can put in a pocket.

The mechanics are simple and worth getting right on the first day rather than the day something is missing. Almost every petty cash problem traces to one of two failures: no single custodian, or no reconciliation between top-ups.

The imprest system, which is the whole method

1. Fix a float — a round amount appropriate to your spending, often the equivalent of a few weeks of small purchases.
2. Every payment out is exchanged for a receipt or a signed voucher that goes in the tin. The tin always contains cash plus paperwork totalling the float.
3. At top-up, count the cash, add up the vouchers, and confirm the two reach the float. That reconciliation is the control; without it the float is just a drawer.
4. Reimburse exactly the amount spent, restoring the float to its original figure. The reimbursement is a single accounting entry with the vouchers as support.
5. Post the vouchers to the right expense categories at that point, not months later when nobody remembers what the twelve for the hardware shop was.

One custodian, one key, one signature. Shared responsibility for cash is the arrangement in which a shortfall belongs to nobody, and it puts every person with access under suspicion when something goes missing. A single named custodian protects the people without the key at least as much as it protects the money.

The rules worth writing down

• A maximum per transaction — beyond it, use the normal purchasing route. Without a ceiling, petty cash quietly becomes a way to bypass approval.
• What it may never be used for: wages, personal loans to staff, advances against expenses, anything requiring a formal contract.
• No IOUs in the tin. A note saying somebody will pay it back is not cash and not a receipt.
• A receipt for everything, with a signed voucher where a receipt genuinely cannot exist.
• Where the tin lives and who holds the key, in writing.
• A surprise count by somebody other than the custodian, once a quarter. This is a normal control and should be presented that way rather than as an accusation.

Whether you need it at all

Most offices that still run a cash float do so out of habit. Between company cards with per-transaction limits, prepaid cards issued to a team, and reimbursement of the occasional personal expense, the cases genuinely requiring physical cash have shrunk to a few: cash-only suppliers, markets, tips, and places where card acceptance is unreliable. If none of those describe your week, closing the float removes a control burden entirely — and the reimbursement route is covered in expense claim and reimbursement forms.

Recording it

Ettex Books holds petty cash as its own account, so the float, the top-ups and the categorised expenses sit in the ledger rather than in a notebook next to the tin. The receipts themselves belong in Ettex Files attached to the reimbursement entry, which is what makes a surprise count or a year-end query answerable in minutes. The underlying bookkeeping mechanics are covered in accounting t chart.

What we do not do: there is no cash-counting integration, no receipt scanning with automatic extraction, and no card issuance. Receipts are attached rather than read, and the count is done by a person — which for an amount this small is the appropriate level of technology.