Small business management requires business owners to set various policies and procedures for their company’s operations. Accounting policies and procedures are an important part of small business management. Business owners create these policies and procedures to ensure all information is handled in a consistent manner. Small businesses with several employees often rely on policies and procedures to create an expected level of behavior in the company. Petty cash policies and procedures are an important part of small business management.


Petty cash is a small amount of money set aside for miscellaneous expenditures. Business owners recognize the need for petty cash because small financial expenditures often arise in business. Most small businesses maintain a small cash box for petty cash purposes. Business owners may designate an accounting employee to handle the petty cash. Accountants are usually responsible for reconciling the petty cash at the end of an accounting period. Accountants will also prepare journal entries for the company’s general ledger.

Employee Policies And Procedures

Business owners usually attempt to create simple petty cash policies and procedures. This ensures the petty cash function does not become a bureaucratic mess in the business. Employees must usually fill out a simple receipt detailing the amount of money taken from petty cash and what it was spent on. Employees should return any change along with an official receipt to the petty cash box. This information helps accountants reconcile petty cash.

Accounting Policies And Procedures

Accountants usually review all information in the petty cash box at the end of an accounting period. Larger business organizations may require accountants to conduct this process more frequently if the petty cash is used for several different purchases. Accountants will review the ending petty cash balance and all receipts for money spent during the accounting period. The sum of this information should equal the opening balance of the petty cash. Differences may require a deeper reconciliation process.


Petty cash policies and procedures help business owners limit the amount of time they spend on their accounts payable process. Accounts payable is responsible for writing checks and paying the company’s bills. Smaller or home-based businesses usually require the business owner to complete this function. Larger organizations often employ accounting clerks to work in accounts payable. Cutting checks for minor purchases can quickly become a waste of time. Setting up a petty cash box helps eliminate additional accounts payable work.


Business owners may consider using a petty cash box for each department or division in larger business organizations. Dollar amounts can be specific to each department or division based on the number of employees or need for petty cash. Business owners can delegate an operational manager to be responsible for the petty cash box in their department. Accountants can then check up on these managers to ensure all petty cash procedures are being followed by employees.