How to Manage Petty Cash for Business Expenses

Having cash on hand eliminates significant time in writing out and using up cheques. This helps with small payments on account of expenses like stationery, coolie hire, refreshments to guests, etc. which cannot be paid through cheques. Additionally, certain vendors or brands don’t accept debit or credit cards under a certain amount. 

Petty Cash is indispensable but managing it is time-consuming and cost inefficient. It is interesting to find that in a survey conducted for a sample of 585 finance professionals, 53% of organizations reported that the biggest pain point related to managing expenses and Petty Cash is employees losing paper receipts or submitting without receipts. 

In this blog, we will explore how a Petty Cash system works and how it can be managed better. 

How a Petty Cash system works 

Petty Cash is kept on the imprest system. An amount is fixed, which after a specific period of time or once money is spent, is replenished. This replenishment generally comes from another account source. 

The initial amount for setting up the Petty Cash system comes from the business checking account which determines how much money will be required each day, both to give change to customers and also for small cash payments. This can be done by keeping track of expenditures over a period, using an average amount for each week. 

Each transaction is documented in the same way as other business income and expenses. This includes the date, amount, payee details and purpose of business expenditure. Using Petty Cash vouchers or logs will help identify these expenses which can later be used to offset the income for tax purposes. 

A custodian is necessary for overseeing the Petty Cash. This includes checking the account periodically so that the balance doesn’t get too low. When the Petty Cash goes below a pre-set amount, it should be replenished. 

Managing Discrepancies 

An important use of the Petty Cash drawer is generating change. If this is customary at one’s place of business, it becomes necessary to do a mini audit at the end of each day. Start with beginning balance, cash in, cash out against transactions and ending cash. 

Make sure each of the transactions is documented and are as specific as possible, so there is no doubt that the transaction was business-related. At the end of each day, record the final amount. The difference should tally with cash payments and with the total of Petty Cash expenses paid. 

Keeping track of transactions 

Having a Petty Cash policy section within the employee policies and procedures manual will go a long way. Other questions to be considered while using this system are: 

1. The amount

• How much money should be kept in the account?
• What is going to be the minimum balance to be maintained before replenishment? 
• Which account is going to be used to replenish Petty Cash?  

2. The custodian 

• Who oversees recording transactions? 
• Who replenishes the account? 

3. The location 

• Where is Petty Cash kept?

4. The transactions 

• How are the Petty Cash transactions going to be recorded?
• Where are the records kept? 
•  Who is responsible for adding the Petty Cash records to your business accounting system? 

As with any cash asset, accounting controls are necessary with the required systems to protect against theft and misuse. Ground rules such as the following will help in mitigating this: 

• The person who is recording the transactions should be different from the person entering the transactions into the accounting system. 
• The location of Petty Cash should be secure. 
• Occasional surprise audits are required to check the credibility of the transactions.

Petty Cash and taxes 

Petty Cash is not just about convenience; it’s also about compliance. Proper documentation of Petty Cash Expenses is crucial for accurate tax reporting. Each expense should be accompanied by a receipt or voucher, detailing the amount, date, and purpose. This ensures that all expenditures are legitimate business expenses and can be claimed accordingly. 

Failure to maintain proper records can lead to discrepancies during audits and potential penalties. Therefore, it’s essential to treat Petty Cash with the same level of scrutiny as larger financial transactions. 

Simplify Petty Cash Management with automation 

Managing Petty Cash manually can be a daunting task, especially for businesses with multiple branches or departments. Automation offers a solution to this challenge by streamlining the entire process. 

Automated Petty Cash Management systems allow for real-time tracking of expenses, digital receipt storage, and seamless integration with accounting software. This not only reduces the risk of errors and fraud but also saves time and resources. 

By adopting Petty Cash Management Software like BROME, businesses can eliminate manual errors and gain real-time control over branch-level expenses.

BROME: A Smarter Way to Manage Recurring Branch Expenses 

It started with a monthly review meeting. 
The numbers looked solid – revenues were on track, customer acquisition was steady, and vendor payments were streamlined. But then came the outlier: unexplained, rising miscellaneous expenses across branches. 

The CFO leaned forward and asked the question no one had an answer to: 
“What’s going on with petty cash?” 

That question uncovered something most businesses don’t talk about often enough. 

Not vendor fraud. Not accounting errors. But a lack of visibility around Petty Cash Expenses – small spends that added up fast and stayed off the radar too long. 

Every branch had a Petty Cash drawer – for things like last-minute courier charges, refreshments, or emergency repairs. Necessary? Absolutely. Accounted for? Not really. 

Receipts went missing. Logs weren’t updated. Spends were rarely categorized. No one had the time or the system to stay on top of it. 

Despite being small in value, Petty Cash Expenses were creating a big gap in control, visibility, and ultimately, trust. 

That’s when the business turned to BROME – Branch Recurring Operating Monthly Expenses, a solution built to take the guesswork (and paperwork) out of managing Petty Cash across multiple locations. 

Instead of physical cash drawers or patchy reimbursement processes, BROME digitized the entire ecosystem: 

• Branches received pre-approved digital funds 
• Each Petty Cash Expense was tracked in real time 
• Digital receipts replaced stapled bills 
• Finance teams gained instant visibility across all locations 

What used to take hours of follow-up, reconciliations, and internal audits was now handled with just a few clicks. 

In a world where traditional Petty Cash Management relies too heavily on manual work—paper vouchers, handwritten logs, Excel trackers – BROME makes real-time control, compliance, and visibility a reality.