Imagine this situation. You need to make a quick cash purchase for your organization but don’t have the time or resources to go through the standard expense reporting process. That’s where petty cash comes in. Petty cash is a small amount of money organizations keep for minor expenses like office supplies. However, petty cash can quickly become a hassle without proper management, leading to financial mismanagement.
That’s why we’ve created this guide to help you.
- The importance of petty cash management
- Why it’s necessary to have a system in place
- Steps you can take to create and manage a petty cash voucher system
- Best practices to ensure accuracy and compliance with accounting regulations
So, let’s understand how petty cash vouchers work and the steps you can take to make them work in the best manner for your organization.
What is a petty cash voucher?
A petty cash voucher is a document that records the expenses of an organization. Petty cash funds are small amounts for incidental expenses like office supplies and employee reimbursements. It help track and document expenses paid from the petty cash fund.
A petty cash voucher typically includes details like the date, the amount of money spent, the reason for the expenditure, and the signature of the person authorizing the expenditure. They are often used in conjunction with a petty cash log.
The petty cash log tracks the petty cash expenses over time. It thus becomes easier to reconcile the petty cash fund and verify that all expenses are accounted for. The petty cash custodian can go for replenishing the fund once it’s over.
Importance of petty cash vouchers
Here are some reasons why they are essential for accurate financial bookkeeping:
It provides a simple and effective way to document petty cash funds’ use accurately.
They ensure petty cash is used for legitimate business expenses, not personal expenditures.
They eliminate discrepancies and enable easy and accurate reconciliation of petty cash funds.
They help maintain accountability and transparency in using petty cash funds and subsequent cash balance.
Petty cash receipts enable easy tracking of expenses and ensure compliance with financial statements and regulations.
How to use a petty cash voucher?
Here’s a step-by-step guide on how to use a petty cash voucher:
- Request a petty cash voucher
The petty cash voucher is available with the accounting or the finance department.
- Fill out the form
Include the date, the amount of money requested, and a description of the payable item.
- Receive the petty cash
Once the form is approved, you will receive the amount of cash requested.
- Make the purchase
Once you have received the petty cash, you can make the purchase.
- Record the purchase
When you have made the purchase, you should record it on the petty cash voucher. Include the date, the amount of money spent, and a description of the item purchased.
- Return the petty cash voucher
Once you have completed the purchase and recorded the details, return the voucher to the accounting or finance departments.
How do petty cash vouchers work?
Here’s a detailed guide on its functioning:
When people need to withdraw money from the petty cash expense account, they fill out the voucher. They need to provide information about the amount of money taken, personal information, and a legitimate reason. The voucher also serves as a receipt for the withdrawal, providing a record of the transaction.
Once the form is filled out, the person taking the money should sign it and submit it to the person responsible for the petty cash fund. The person responsible for the petty cash fund then reviews the voucher and verifies if the amount requested is within the budgeted amount.
If the request is approved, the person should sign the voucher and deduct the amount from the petty cash fund. The person responsible for the fund should also keep a record of all the vouchers issued for accounting purposes.
Petty cash voucher format
How to create a petty cash voucher?
Here’s a step-by-step guide to creating one:
- Get the voucher form
- Record the date and the reason for the expense
- List the details of the transaction
- Attach supporting documents
- Sign and date the form
- Have the form approved
- File the form
How to fill out a petty cash voucher?
Filling out a petty cash voucher is a simple process, but a few important steps must be taken to ensure accuracy and compliance with balance sheets and financial regulations.
Let’s look at them in detail:
- Enter the date and amount of the voucher
- Describe the purpose of the voucher and provide a detailed explanation of where the money is going
- Include the name of the person receiving the funds and their contact information
- Record the name of the person authorizing the voucher
- Record the name of the person disbursing the funds
- Enter the voucher’s total amount and ensure it matches the amount entered in the first step
- Sign the voucher and have it approved by the appropriate authority
- Make a copy of the voucher for future records
Approving petty cash vouchers
Approving petty cash vouchers is vital to managing your company’s finances. It is important to have a proper system to ensure all payments are authorized and documented properly. One of the important aspects of the approval process is that it must be consistent. The petty cash custodian should know the process and the criteria for approving petty cash transactions.
A systematic approach to petty cash disbursements also reduces the risk of fraud. You can ensure that all payments are legitimate and not misused when you require a thorough review of each transaction. Lastly, you can also improve the efficiency of the financial operations of your company. You can streamline the payments and ensure they get processed quickly and accurately.
How does petty cash software make petty cash management easy?
A petty cash software simplifies petty cash management by automating the process and providing an efficient way to track and manage expenditures. It helps streamline the process of recording, tracking, and reconciling each transaction.
A petty cash software also helps create expense reports and track receipts. It ensures all transactions are accounted for, and all necessary documents and receipts are kept for audit purposes. Additionally, the software can help to prevent fraud and ensure accurate accounting of funds.
Future Read: 10 Best Expense Reporting Software Systems and Tools
Streamline petty cash voucher management today with Happay
Happay offers a seamless petty cash management solution that simplifies the process of managing petty cash.
Happy offers a cloud-based platform that replaces cash with cards, allowing you to:
- Easily disburse funds
- Customise control
- Track expenses across different locations with a cloud-based platform
Happay’s petty cash management solution reduces the risk of fraud and theft by eliminating the need to keep large amounts of cash. You can also track expenses in real-time and view detailed reports. Ultimately, you can easily and securely manage and control your petty cash expenses.
Suggested Read: Solving Top 5 Branch Petty Cash Problems with Happay
A petty cash voucher allows you to track small daily purchases and expenses that are typically too small to process through the normal accounting system. It will be helpful for your company to have a system for tracking these small purchases.
You can ensure your organization is not overspending on items that may not be necessary. The use of these vouchers is relatively straightforward, and the information can be used to help the company manage its budget and finances more effectively.
Consider investing in a petty cash management solution today to streamline your finances, ensure accurate record-keeping of every expense, and comply with applicable regulations.
Columnar petty cash books and imprest petty cash books are two types of petty cash books. A columnar petty cash book is a record of transactions maintained in a columnar format. In contrast, an imprest petty cash book records transactions in a ledger format.
The main difference between a petty cash voucher and a payment voucher is the purpose behind them. It documents the spending of small amounts of cash from a petty cash fund and provides an audit trail on petty cash spending. A payment voucher records a payment made to a vendor or supplier for goods or services and ensures that payment is made correctly and on time.
The accounting journal entries for a petty cash voucher consists of two parts: a debit to the petty cash account and a credit to the cash account. The petty cash account is debited for the voucher amount, and the cash account is credited with the same amount. This reduces the cash available in the petty cash fund and records the transaction. The journal entry’s total amount should match the voucher’s total amount.
Typically, the manager or supervisor of the department is responsible for approving these vouchers. Depending on the organization, other senior-level staff members may also be involved in the process. The individual responsible for approving vouchers must be familiar with the organization’s petty cash policies and procedures to replenish new funds.
No. It cannot be used for non-business-related expenses. It is traditionally used for business-related expenses like office supplies. A company should have a robust petty cash management system to prevent the misuse of funds.
Here are some potential consequences of not properly managing them
1. Loss of funds
2. Lack of accountability
3. Internal fraud
4. Poor financial records
There are several petty cash management solutions, like the one offered by Happay. It simplifies petty cash management by replacing cash with cards. The solution makes it easy to track petty cash transactions, maintain an audit trail, and generate reports to help monitor cash flow.