Maintaining a petty cash fund is 90 percent record keeping. The other 10 percent is controlling who is allowed to access the funds. No matter what type of business you're in and no matter what you use your petty cash for, following these two principles along with some simple budgeting procedures will keep your petty cash fund balanced.
File Proof of All Purchases
When running a petty cash fund, the first thing you need to do is establish an efficient and functional record keeping system. You should get receipts and invoices for every single transaction where petty cash is used and make copies of them. This ensures you have two separate files in case you lose a receipt. Don't just stuff your receipts in a folder, but file them chronologically and consider putting the receipts in separate folders for each month.
Establish Acceptable Uses for Petty Cash
Don't use petty cash indiscriminately. You should have specific guidelines set for what you can use the cash for and what you can't. For example, buying alcohol with funds would usually be an unacceptable use, even if the alcohol was for a business-sponsored social event. To protect yourself and anyone else with access to the cash, you should have written rules about what are acceptable expenses.
Always keep your petty cash fund locked up. You can keep it in anything from a drawer to a closet to a safe, but avoid keeping it in portable boxes or other storage containers that can be moved or carried away easily. Don't give out keys or combinations to more than a few people. Ideally, you should only give one or two people a key, and have anyone else ask these key-holders for any cash they need.
Perform Periodic Audits
To ensure your petty cash is appropriately used, perform periodic audits. Effective audits are unannounced and the purpose is to randomly check on the records, accounting procedures and control of your petty cash fund. Without audits, petty cash funds may be prone to misuse or poor management. The simplest way perform an audit is to have a manager who doesn't have access to the cash check in on the fund every few weeks or so.
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