When To Use Petty Cash

Petty Cash

As the old saying goes. “You’ve got to spend money to make money.” Anyone who runs a business knows that a day that goes by where you DON’T have to spend money on something is a rarity. And for those daily costs of doing business, having a supply of petty cash on hand to handle it can make your life a whole lot easier.

At Hacker Accounting, we know how businesses can put their petty cash to good use. Here a few things to keep in mind when it comes to managing your petty cash.

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$25 And Under Rule

It is best to use petty cash to cover small expenses. Ones that don’t exceed $25.00. This can include foodstuffs for the office, taxi fare, office supplies, postage, decorations for office parties, etc. Note that this is a rule of thumb we suggest. The needs of every business vary. You may end up needing to pay larger sums for certain items with petty cash.

When Cards And Checks Aren’t Necessary

For small transactions it’s often best to use cash. Using cards and checks can trigger additional fees that can add up over the long run. The added benefit of using discretionary funds is that it’s limited: Someone using $50 worth of petty cash only has $50 to play with. Someone with the company credit card, on the other hand, could do numerous unauthorized transactions with it and it could be a month or two before anyone catches on.

This can be especially important if you work in an environment in which there are lots of small transactions happening from day to day. Even if it’s something as simple as buying coffee for a client meeting, you are better off using petty cash. It’s easier to track your expenses that way than to hand out the company card left and right.

You Run A Tight Ship

Petty cash is only as effective as the system set up to oversee it. There can be a large margin of error if you aren’t careful. Money could get lost, misplaced, stolen, or misappropriated without accurate record-keeping. If your company has the resources and discipline to put someone reliable in charge of your petty cash, you can track it and account for all your discretionary funds. If you don’t have someone you can trust to handle your petty cash or lack the infrastructure needed to successfully manage it, you should only use petty cash with extreme caution.

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Looking for experienced bookkeepers and accountants to help take your business to the next level? Give Hacker Accounting a call at 602-375-5251.


Chris Hacker
Chris has been working in the bookkeeping and accounting field for over 15 years preparing business, income and payroll taxes. Chris has a bachelor’s degree from Arizona State and is an Enrolled Agent with the Internal Revenue Service.