As more and more businesses focus on their digital presence, you may worry that cash has become obsolete. But brick and mortar storefronts and business locations are far from gone, and where there are brick and mortar stores, there is a need for cash on hand. If your business has any physical presence, it’s important to have petty cash available. In today’s blog, we’ll break down everything you need to know about petty cash.
What Is Petty Cash?
“Petty” in this case does not mean insignificant so much as it means “small” or “petite.” Petty cash refers to a small amount of cash that businesses keep on hand for instances that require cash transactions. It is often kept in a drawer or at the bottom of the cash register. Petty cash is necessary if you have physical interactions with customers or need to make cash transactions for the operations of your business.
Why Does Your Business Need Petty Cash?
According to the 2021 Diary of Consumer Payment Choice, about 19% of customer transactions in 2020 were done with cash. Keep in mind that this is even in the beginning of the COVID-19 pandemic. Of course this means that most transactions were done by card or payment app, but almost 1 in 5 transactions were still made with cash. Without petty cash, business owners won’t be able to give their customers change back for their purchases.
You may also need to order lunch for the office, leave a tip, or quickly buy office supplies that have run out. Though office supplies can be bought online, the process of getting this through usually takes a few days. The exact cost of the supplies has to be given to accounting to approve, the supplies have to be ordered, and then they need to be delivered. In all that time, your business still lacks key supplies. If, however, you can run to a store and buy the supplies you need with petty cash, you can bring the receipt back to accounting and have those supplies the same day.
Tips For Keeping Petty Cash
If you have a physical storefront or office, petty cash is a must. But what are the best practices for keeping and using petty cash? Here are a few of our tips:
- Set a maximum amount for petty cash. As the name implies, petty cash should only be a little. Just the cash you need for certain emergencies. For most businesses, $200 should be enough when it comes to petty cash, but it’s a good idea to take stock of your needs before setting your max.
- Keep petty cash secure. Petty cash is easy to steal or abuse, so it’s important to keep it secure. This may mean locking up the petty cash or appointing a custodian over the petty cash, so that all other employees need permission in order to use it.
- Keep all of your receipts. It’s important to have all of your finances accounted for in business, and that includes petty cash. Make sure that if you use petty cash for any transaction, you get a receipt, so that you are able to refill the cash accordingly when you need to.
Looking for more help managing the finances for your small business? Bottom Line Consulting has you covered with consulting, bookkeeping, invoice management, and more. Contact us today to set up an appointment.