What is petty cash, and why is it risky?
Petty cash is a small amount of cash kept in an office for minor, urgent purchases, such as fuel for a generator, a taxi or a printer cartridge. Field offices often need it because banks and suppliers are far away.
Cash is easy to lose and easy to take. It leaves little trail unless you create one. Good controls protect both the money and the staff who handle it.
How does an imprest system work?
An imprest system keeps a fixed float. At any time, cash in the box plus signed vouchers should equal the float.
For example, with a float of 500, if the box holds 140 in cash and vouchers worth 360, the books balance. To top up, you present the 360 of vouchers, they are approved, and you get 360 in cash. The box is back to 500.
This rule makes missing money visible. If cash plus vouchers does not equal the float, something is wrong.
What controls should you set?
Use these controls:
- Name one custodian for each float. Nobody else has the key.
- Set a float limit. Keep it as small as practical.
- Set a limit per payment. Anything above it goes through a normal payment request.
- Use numbered vouchers. Each payment has a voucher with date, amount, purpose, budget line and the receiver’s signature.
- Attach the receipt to the voucher.
- Require approval. A manager, not the custodian, approves each voucher.
- Lock the cash. Use a safe or a locked box, kept out of sight.
- Keep it separate. Never mix petty cash with personal money or other funds.
How often should you count the cash?
Count at least once a week, and after every top-up. Do surprise counts too. The count should be done by someone other than the custodian, with the custodian present.
Use a simple count sheet:
| Item | Amount |
|---|---|
| Cash counted | |
| Vouchers not yet reimbursed | |
| Total | |
| Float | |
| Difference |
Sign and date it. Any difference, even a small one, needs a note. A repeated difference is a warning sign.
How do you handle the accounting?
Each approved voucher becomes an expense on the correct project, budget line and fund. Post the top-up on the day you approve it, not months later. Close the petty cash book at month end, and reconcile it to the ledger. Our guide to month-end closing shows where this check fits.
What are common problems?
- The custodian approves their own vouchers.
- Vouchers are written later from memory.
- The float is used as a loan to staff.
- Receipts are missing, and nobody checks.
- The float is far larger than the monthly need.
A worked example
A field office keeps a float of 600. The limit per payment is 50. In a normal week, the custodian pays for fuel, local transport and small repairs. Each payment has a numbered voucher, a receipt and the signature of the person who received the cash.
On Friday, the office manager counts the box with the custodian. Cash in the box is 210. Vouchers not yet reimbursed total 385. The sum is 595, so the count is 5 short of the float. The manager writes the difference on the count sheet and asks the custodian to check the vouchers. They find a taxi receipt for 5 that was never turned into a voucher. The voucher is written, signed and approved, and the books balance.
Next, the custodian submits the vouchers for a top-up of 390. The finance officer checks each one against policy, posts the expense to the right project and budget line, and releases the cash. The box returns to 600.
Rules for special cases
- Payments above the limit. Send them through the normal payment request process, not through the float.
- Advances to staff. Do not use petty cash for these. Use the advance process.
- Lost or stolen cash. Report it the same day to the manager and to finance. Record it, and follow your policy on investigation.
- Custodian leave. Count the box, hand it over with both people present and sign the count sheet.
- Donor rules. Some donors do not accept cash payments above a set amount or for certain items. Check before you pay.
How to review the control yearly
At year end, ask: is the float the right size? Did counts happen on time? How many vouchers lacked receipts? Did any differences repeat? Share the answers with the head of finance, and adjust the float and limits. If a field office never uses its float, reduce it or close it, since cash that sits unused is risk without benefit.
Where EMPOBase fits
EMPOBase has a Petty Cash feature in the Finance module, along with Cash Advances & Claims and the General Ledger. Approved spending ends as posted ledger entries tied to a project and budget line. Approval limits are set by your organisation. EMPOBase does not count your physical cash, so the count and the safe remain a process in your office. See the platform overview.