By Brian E. Ravencraft, CPA, CGMA is a Principal with Holbrook & Manter, CPAs
Petty cash is defined by Wikipedia as a small amount of discretionary cash funds used for expenditures where it is not sensible to write a check because of convenience and the cost of writing, signing and cashing the check. So, while petty cash is a small amount of money, it can also be stolen or abused, so it is best to have some rules to handle it.
- Set a reasonable amount for petty cash. Estimate how much you would need to cover small office expenses for about a month. You want the amount to be as small as possible, without having to replenish too often.
- Have a set of rules on how petty cash can be spent. Put the policy in writing and give some good examples of what petty cash can be used for — making change, small office supplies, postage, etc.