Procedures and processes: managing petty cash


Most companies will incur the occasional expense for a small item, often paid for using cash rather than issuing a cheque or using the business credit card. Such items may include stationery, milk for the office, or small travel expenditure. These items should be recorded accurately in a petty cash account. If the cost is larger it will be recorded in the cash book.

Dealing with petty cash

One person or team, depending on the company size, will generally be appointed as petty cash officer. The main cashier, which may be an accounting service or simply the person in charge of the bank account, will allocate a sum of money to the person or team in charge of petty cash, which is called a float. Any member of staff who has paid for small items out of their own money will be reimbursed by the petty cash officer, who records the transaction. The petty cash has to be balanced frequently. Transactions are recorded in the petty cash book, while the money is kept in a secure place. Petty cash vouchers are used for staff to claim back small expenditure.

Completing petty cash vouchers

A petty cash voucher has to be completed each time a person wants to claim back an amount of money spent on an item. Documentary evidence will also be required as proof of purchase and if possible, to display the amount of VAT paid on the item. The voucher will detail the amount of cash spent on the goods and the amount of VAT paid, if any. The person who is making the claim will sign the voucher. Amounts of petty cash which can be authorised by the petty cash officer are generally limited to a reasonable amount, with expenses larger than that amount to be authorised by the accounting manager or the supervisor. Numbering the vouchers makes it easier to file and retain for future use, and easier to match transactions in the accounts.


If you are registered for VAT, it may be possible to reclaim VAT paid on purchases which is why it is important to record the amount carefully. If there is no VAT registration number on the receipt, it is possible that it wasn’t paid. If a VAT registration number is shown, but the amount hasn’t been shown separately, it can be worked out using the standard rate of 20 per cent.

Keeping an accurate petty cash book will tell you how much has been spent, by who and when, along with the amount of VAT which can be reclaimed. If you would like to discuss any aspect of your petty cash, or other financial matters, please give us a call and arrange an informal chat.