Petty cash reimbursement
Petty Cash reimbursement is a common practice in organizations that enables the replenishment of Petty Cash funds and allows employees to get reimbursed for expenses they pay from their pocket. Petty cash funds are used to make small cash disbursements, and the size of the fund depends on the company’s needs.
Organizations must have policies and procedures for creating, disbursing, and replenishing petty cash funds to ensure proper petty cash management. This article breaks down everything you need to know practices about petty cash reimbursement and how it can help you manage your finances effectively.
Quick Read: Petty Cash Meaning: A Guide to Record, Manage and Example
What is petty cash reimbursement?
Petty cash reimbursement helps employees get reimbursed for small expenses they pay from their pocket. Additionally, it is also about replenishing the petty cash fund. Petty cash is a small amount of money kept on hand to pay for minor expenses that are too small to be paid from a credit card or bank account.
Petty cash funds are established by transferring a specified amount from the general account to a person given custodial responsibility for the fund. The fund size depends on the company’s needs but should be large enough to last at least three to four weeks.
How to reimburse petty cash?
The petty cash custodian should record the cash transfer from the petty cash fund to reimburse petty cash. The amount reimbursed should be based on the exact amount of petty cash expenditures indicated on the original receipts. It’s best to have a written petty cash policy and examples of reasonable expenses to avoid misuse.
Quick Read: A Guide to Travel Expense Reimbursement
Petty cash reimbursement process
The petty cash reimbursement process involves the following steps to ensure the funds are used appropriately and accurately accounted for.
Here is a step-by-step guide:
- Assign a petty cash custodian responsible for managing the petty cash fund
- Determine the money needed for the petty cash fund and transfer it from the company’s bank account to the petty cash fund
- Create a log to record all transactions made into or out of the petty cash fund, including the business purpose.
- When an employee needs to make a purchase using petty cash, they should submit a request to the petty cash custodian along with cash receipts or other supporting documentation
- The petty cash custodian reviews and approves the request if it meets company policies and procedures
- The employee makes the purchase using the approved amount of petty cash and obtains a receipt
- The employee submits the receipt and a completed form to request reimbursement from the petty cash fund
- The petty cash reimbursement form should include the date, amount, purpose, and payment recipient
- The petty cash custodian reviews and approves the voucher form before reimbursing the employee from the petty cash fund
Quick Read: Petty Cash Accounting: 6 Steps to Setup, Reconciliation, Challenges
Petty cash reimbursement example
Let’s consider the example of an employee buying office supplies from a local store. They can pay for it using their own money and submit the receipt to the company’s petty cash fund.
The petty cash fund custodian will reimburse the employee for the amount spent. This transaction will be recorded in the petty cash book as an expense, and the amount will later be replenished when needed.
Petty cash reimbursement procedures and policy
Petty cash reimbursement procedures and policies ensure the use of petty cash is properly documented and authorized. Petty cash disbursements require a form that notes the payee’s name, amount, date, and purpose.
Any available receipts should be attached to the petty cash slips. The people responsible for receiving money from the fund must sign all petty cash cards.
Reimbursement forms require a petty cash voucher, which shows the nature of the expenditure. The voucher should be signed by the requestor and approved by the custodian.
The reimbursement form must include details such as the date of reimbursement, cost center name and number, employee name, amount of reimbursement, and authorized approval.
How to monitor and evaluate your petty cash reimbursement system?
Here are some steps you can take to monitor and evaluate your petty cash reimbursement system:
- Establish a petty cash account
Create a petty cash account in the asset section of your chart of accounts. This will help you track the amount of money in the fund.
- Choose a system
Decide on an ordinary or imprest system for managing your petty cash. Under the ordinary system, a lump sum amount of cash is given to the custodian. Under the imprest system, a fixed amount of money is given to the petty cashier, who must submit receipts for all petty cash expenses.
- Assign responsibility
Choose a trusted employee to act as the petty cash custodian who monitors, tracks, and records the cash expenses. The custodian should have reasonable access to the location of the petty cash fund.
- Keep records
The custodian should maintain accurate records of all transactions related to the petty cash fund. Use a petty cash book or spreadsheet to record all expenses and replenishment.
- Review regularly
Regularly review your petty cash transactions to ensure they are accurate and legitimate. Analyze trends in spending and identify areas for improvement.
Quick Read: Imprest Cash: Definition and Uses
Best practices for effective petty cash reimbursement
Effective petty cash reimbursement requires following best practices to ensure accuracy and accountability. These include:
- Establishing a petty cash account with proper documentation
- Keeping petty cash locked away safely when not in use
- Setting a limit per individual purchase
- Submitting a reimbursement request form with supporting invoices and authorized approval
- Not using petty cash funds as an operating fund for general business expenses
How does petty cash management software help with the reimbursement process?
A petty cash management software can help monitor and evaluate your petty cash reimbursement system in the following ways.
- Allows you to track the cash by creating a petty cash account in the asset section of your chart of accounts
- Serves as an internal control to protect that asset and ensure funds get used appropriately
- Helps record transactions and establish rules to restrict overspending, keeping track of petty cash usage for small transactions in daily business operations
- Enables the recording of taking cash from petty cash as an expense with petty cash as the payment account
- Digital ways of working provide a faster and secure way to manage petty cash costs and employee reimbursements. They also protect against risks such as fraud, error, and compliance
Must Read: Solving Top 5 Branch Petty Cash Problems with Happay
List of best petty cash management software
Here’s a list of some of the best petty cash software solutions on the market.
1. Happay
Happay is one of the best petty cash management software solutions. It offers prepaid cards that eliminate the need for cash. This makes it easier to track expenses and reduces the risk of cash theft.
2. Spendesk
It offers a spend management software and smart debit cards that help manage small expenses.
3. MYND
It has petty cash management solutions ideal for organizations with multiple locations. They offer a centralized and paperless approach to managing petty cash.
4. Expenzing
Expenzing Imprest Manager is a cloud-based software that keeps track of all petty cash transactions and provides complete visibility into funds’ current and past status.
Streamlining your petty cash management with Happay
Streamlining your petty cash reimbursement with Happay is an effective way to manage your finances. With Happay, you have access to prepaid cards and petty cash management software that can help you manage and control your business’s expenses.
Happay is designed specifically for businesses with multiple branches and can easily disburse funds. The platform allows you to customize control and track expenses. Prepaid cards ensure you are always in control of your business’s expenditure.
Happay’s powerful analytics help you track and monitor expenses in real time, helping you identify trends and spot anomalies. It ensures your team sticks to its budget and does not overspend.
You can also generate real-time reports to help you keep track of expenses for budgeting and forecasting. With Happay, you can easily and quickly reimburse petty cash without any hassle.
Bottom line
It is essential to manage petty cash reimbursements to keep track of expenses, ensure accuracy, and comply with regulations. Furthermore, it helps prevent overspending and chances of cash theft.
Using a petty cash management software to manage petty cash reimbursement helps automate the process and make it more efficient. It also allows for more accurate tracking of expenses and can help your organization stay on top of its finances.
FAQ’s
The following steps should be taken to record the reimbursement of the petty cash fund:
1. Begin by recording the total amount of cash from the petty cash fund.
2. Record the individual transactions that make up the total amount.
3. Once all transactions are recorded, the petty cash fund should be replenished with the total amount taken out.
4. Record the petty cash fund replenishment in the journal with a debit to the cash account and a credit to the petty cash account.
Petty cash funds should be reimbursed as soon as the funds are used. The fund should also be reconciled to ensure that the amount of petty cash matches the funds reimbursed. The reimbursements should be done at regular intervals, such as monthly or quarterly.
A cash reimbursement is a payment from an employer to an employee for out-of-pocket expenses related to their job duties. These can include travel expenses, meals, entertainment, and other costs incurred while conducting business. The reimbursement happens after the employee has provided proof of the expense as a receipt.
Petty cash is a small amount of cash kept on hand by an organization for making small payments. Petty cash is usually kept in a cash box and used for small purchases. A cash reimbursement is a payment made to an employee or other individual for business-related expenses. Cash reimbursements are typically made after an employee has submitted an expense report, itemizing the expenses they have paid out-of-pocket.
A petty cash fund is a small amount to cover minor, unforeseen expenses. Petty cash funds help organizations provide employees a convenient way to pay for items too small to justify writing a cheque. Examples of expenses commonly paid for with petty cash funds include postage and small office supplies.
The conditions for petty cash reimbursement must be clearly outlined in an organization’s policy document.
The conditions should include the following information:
1. The amount of the petty cash reimbursement request
2. The purpose of the expenditure
3. The item(s) purchased and the vendor details
4. The date of the expenditure
5. A receipt for the items purchased
6. A valid reason for the expenditure
7. An authorization from the responsible party for the expenditure
Petty cash replenishment is when a business refills the money in the petty cash fund after it has been used up. This is usually done by transferring money from the business’s main bank account to the petty cash account.
Reimbursement is when a business refunds an employee for an expense they incurred on behalf of the business. It could be in the form of a direct deposit, cheque, or cash payment. The employee will usually provide receipts for the expense, which are then used to reimburse them for their costs.
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