It’s often said that the small things are the big things, and that is especially true when it comes to petty cash. With the advent of various cash advance apps on the market, it’s drawn a lot of attention back to the concept of petty cash and how you can manage it effectively.
In this article, we thought we’d explore this topic and see how your business can use petty cash to improve the overall functioning of your organization.
What is Petty Cash?
Petty cash refers to small amounts of money that a business will deliberately keep in cash for smaller outlays that don’t require a check. Often a business will keep this on the office floor in a locked drawer or something so that it can be easily accessible when needed, but it’s not a large enough sum to draw unwanted attention.
Why is Petty Cash Important?
Petty cash is an important piece of the workings of an organization for some of the following reasons:
- The main advantage of petty cash is the speed at which you can spend it. Instead of having to get approvals, vet vendors, and make electronic payments – you can spend that money immediately when there is an urgent need.
- Building on the point above, the convenience makes a huge difference as well. Your team has full mandate to spend that petty cash when it makes sense and this can be done easily and efficiently, without fuss.
- Having a little bit of cash on hand to look after your staff is a very human thing to do – and it demonstrates that as an organization, you want to ensure that there is a good working environment that knows how to have fun too. Having a bit of cash on hand to be spontaneous is worth its weight in gold.
Those three factors speak not only to the financial benefits of having some cash on hand but also to the message that you’re sending to your employees by doing it. It’s very symbolic of the organization that you want to run and that psychology goes a lot further than we realize.
When Should Petty Cash Be Used?
Petty cash, by its nature, is used for small, spontaneous expenses that can help to improve the quality of the lives of your employees. Here are some examples:
- Replenishing office supplies.
- Thank you cards for employees and/or customers.
- Birthday gifts for employees.
- Flowers for the office.
- Lunch for the team after a goal is met.
- Reimbursing employees for business expenses.
- Pay for parking for an important meeting.
- Coffee for guests.
- And so on…
The list goes on and on but the beauty is that petty cash is completely discretionary. You can spend it on whatever is going to make the difference for you in your specific circumstances.
How to Manage Petty Cash
Will all that being said, we still want to put some structures in place to ensure that the petty cash is not abused. Managing your petty cash effectively will ensure that it achieves the desired result without compromising on your expense management more generally. Here are some key principles to keep in mind in order to manage your petty cash properly:
Set a Limit on Purchases Done From Petty Cash
To manage the financial impact of your petty cash, it’s important to set a limit on the amount of money that can be spent in any one budget cycle. This will depend on your company’s financial strength and the size of your team, but by setting a limit you minimize the risk of abuse and you ensure that it can be used by multiple people rather than one person simply cleaning it out in one go.
Have a Petty Cash Policy
A key aspect of getting your petty cash right is to have clear expectations that everyone can understand and abide by. To do this, you should have a petty cash policy in place which lays out the guidelines, rules, and objectives of the petty cash function. This will help team members to use it more effectively and it will also stand as an objective measure of the concept if something happens to go wrong.
Register All Petty Cash Movements
To manage your petty cash effectively, you should record all transactions in and out so that you can always do a reconciliation. Tracking these movements will help you to spot suspicious activity, as well as to monitor the impact that it’s having on your team morale. From here, you have the data to then adjust your policy, raise or lower the limit, or any other range of things – to make better use of the cash itself.
If you follow these pillars, you’ll find that your petty cash becomes a wonderful treasure trove for your team without becoming something that gets out of control.
Improve Your Petty Cash Management
Here at Jenji, our expense management tool has been crucial in effectively managing the petty cash operations of our clients. But, excitingly, we can take things one step further. Through Jenji, you can transform your expense management software into a fully-featured cash advance app that provides all the benefits of petty cash without any of the fuss.
Our app eliminates the need for paper reconciliations, digitizing the policies, guidelines, and actual petty cash transactions that you execute on a day-to-day basis. It does this all in a way that is extremely intuitive and easy for anyone to use. Thus, giving you back valuable time and resources that you can deploy on higher-level tasks.
It’s a great solution for businesses of all kinds and we’d love to share it with you. If this sounds of interest, be sure to get in touch today, and let’s explore how Jenji can revolutionize how your company handles expenses.