The Problem with Petty Cash

July 20, 2022
hop keeper counting petty cash in shop stock photo

A cup of coffee, a quick supply run while on-site at a project, a thank you lunch for your team —  all expenses paid for out of your petty cash stash. It seems much easier to use cash for those small expenses. However, petty cash is fraught with problems that can wreak havoc within your organization.

Here are some common problems small businesses run into when using petty cash. 

Manual Processes

Your employees need petty cash to make necessary outside purchases. However, it is not a simple process to gain access to the actual cash. Employees have to request cash, usually by filling out a form. They have to keep it separate from their own cash and make sure their business and personal expenses don’t intermingle. After making the purchase, they need to get change and a receipt. Then, they need to hold on to both until they can fill out an expense report. This process has plenty of room for error.

Fraud

Keeping cash around in a business always comes with a high degree of risk. Petty cash logs need to be maintained by someone, and usually, while that cash is supposed to be “petty” — used in small amounts, the more petty cash transactions you have outside the office, the less petty — and less manageable — it gets. Managers may have trouble controlling how petty cash is spent, leading to overspending or misappropriation of funds.

Accounting with cash

Your finance department must spend precious time and resources tracking and matching receipts for all the cash transactions. They also must maintain budgets that now have a cash drain since more than projected was used to cover expenses in the field. As your business scales up, these problems only grow more pronounced. 

A Better Solution for Petty Cash

Eliminate the burden of cash with a simple prepaid business card. PEX prepaid cards offer each employee spending freedom. Yet, managers can control every cent that gets spent by specifying maximum expense amounts, types of acceptable expenses, and acceptable places to spend.  

Gain control of your budgets and expenses by funding cards by individual employee functions, customers, locations, or the time of day.  The PEX platform can track expense information for each employee and allocate new funds 24/7, wherever they are in the field.

With one simple change, you can get unprecedented control over your expenses, eliminating inefficiencies, and sharply reducing mistakes and fraudulent spending. You’ll also relieve your employees of annoying paperwork and burdensome manual procedures.

To learn more about special pricing for 1-800Accountant clients, head to PEX.

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.