No matter the size, every business needs to keep some cash in hand for making last-minute, small purchases. Day-to-day petty cash expenses can add up undetected and give you unhappy surprises at the end of a financial year. One way to not let that happen is by keeping track of your petty cash spending on a regular basis. There are many ways to do that. Stay on top of small business accounting by operating a separate account for petty cash or use accounting software and services. Here are some useful tips.
How to keep track of petty cash
First things first, set aside a fixed amount every month for small purchases and consider what types of expenses you want to use the petty cash for. For instance, you may decide not to use the petty cash for personal spending or any purchase of more than $50. Or maybe you should have a separate cash box for keeping the amount allotted for monthly small purchases. Someone else in your office should be given the responsibility to keep a record of each and every transaction from the allotted amount. Also, you should ask all employees to provide a receipt for every transaction.
Avoid using petty cash for larger expenses
If your company frequently needs to hire airport shuttle service on an as-needed basis, you should not use the petty cash for the purpose. It is always a good idea to include the large, regular expenses in your annual or monthly budget.
Use accounting software and services
One good idea would be to use Xero accounting software for petty cash management. You simply need to set up a bank account for petty cash in Xero. This should not be a real bank account, but it would help keep track of your petty cash transactions and will make it easier to reconcile all the expenses later. So you do not need to name an actual bank or provide an actual account number when filling out a form for adding a petty cash bank account in Xero. However, you’ll be able to transfer money to the account from your real bank account. To record transactions in your petty cash account, you need to enter the amount either debited or credited to the account, after every transaction. Using accounting software makes it easy to manage or keep track of your petty cash.
You can also reconcile the petty cash account easily. All you need is to select “Reconcile Account” from the options available in drop down menu of “Manage Account” box. After that, you need to select all the items in Reconcile Account and then click on the “Mark as Reconciled” button. You’ll be able to check the actual available balance right away.
You’ll find a number of accounting software and services for petty cash management, but Xero is perhaps the best option for small businesses. It provides several benefits over most other options, and not forgetting training too. For instance, it gives you access to real time cash flow through a centralized dashboard and helps avoid any human errors in accounting.