Petty cash is defined as the little amount of cash that is kept by a business for its day to day requirements in a locker within its premises. As sometimes it requires time to reach bank for cash and money is needed often for some predictable or routine use, businesses retain some level of cash to cut the waiting time and make the operations smooth. Some uses of petty cash are refreshments for meetings, small reimbursements, etc.
Although less in amount, petty cash, however, needs to be maintained and managed the same way as bank accounts are managed by the company. This is because cash, less or more, affects the assets of a business, ultimately affecting its profitability.
To maintain and manage the petty cash, petty cash logs are used. A petty cash log is a log that keeps a track of petty cash sources and uses. The petty cash log has numerous benefits which are why companies often apply it for administering their petty cash. Some of these are:
- It lets the user record as well as review all the payments and generations of cash of the petty cash.
- It can be used to control the petty cash and avoid misuse of cash.
- As it is a formal document, it has the same importance as a bank record or statement and can be used as a reference.
- By tracking the sources and amounts of incoming cash, planning and budgeting of the cash can be made effective.
- The transactions can be traced to improve the earning and spending of petty cash, if possible.
- By having a proper record through the log, the differences in the balancing of sources and use with the available cash can be better understood as well as efforts can be made to manage the petty cash better.
Petty cash logs can be maintained manually or through the use of technology. The businesses, now few in number or small in nature, that opt for manual recording of cash logs print the log sheet and manually fill it at the end of the day or as transactions happen. On the other hand, the companies that consider manual recording a hassle, utilize the available technologies, software, applications or programs to track and record their petty cash transactions. This latter option not only makes the task easy and less time consuming but, improves the accuracy of cash management as well due to the reduced number of human errors.
Usually, the petty cash logs are administered on a daily basis as the cash is being generated or used on a day to day basis, as well. At the end of the day, after all the transactions have been recorded in the petty cash log, the available cash-in-hand is compared to the figures stated in the log. If they match, there is no issue. However, if there is a discrepancy, it needs to be fixed by reviewing the log sheet. For example, if the available cash is lower than what the log sheet states, the transactions will be checked again before closing for the day.
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Format: MS Excel [.xlsx]