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What is Petty Cash Management?

Petty cash can be a little amount of cash but it can be tedious for your expense management team to manage it. In this article, we will discuss all “Petty cash” and Petty Cash Management. Therefore, if you want to know further about it then read this article from start to end.

What is Petty Cash?

Petty cash is a little amount that the company kept on-premises to pay for small expense needs. In simple words, petty cash is the amount of money that organizations kept in hand or nearly accessible. The term petty cash originated from the word “Petite” which means little or small. Organizations use this money to pay for their small needs and they tried to maintain them. Organizations use the money for the instant expense.

Commonly, such expenses for which petty cash is used are too small, occasional, small, and cannot be able to write on a check or swiped on a credit card. Almost all organizations have such petty cash in their hands.


  • Petty cash is used to buy office equipment
  • To pay for a small cost those workers of the unit can experience for business cards and flowers for clients
  • Companies may use petty cash to provide meals for workers at events
  • A worker can use it to travel for delivering the products

What does petty cash management mean?

Petty cash is a little amount of money that organizations have to pay for small or instant expenses. Petty cash is the amount of money that head offices of organizations send to the branches, which reserve that money for the incident and small expenses. Petty cash management relies on an imprest system.

You credit a small amount of cash fund with some amount. The branches can use the funds for the incident and small expenses. You can refill the fund when it reaches to set limit. Petty cash management enables organizations to maintain their funds. Companies can record the petty cash in their record books for expense tracking.

What are the reasons why businesses need petty cash?

Business needs petty cash but why is mentioned below:

  • To pay for small expenses

Organizations may face some small expenses so; they use petty cash to pay for them. Like, if you need to replace the equipment and stationary of your office. The cost to replace is too small for you to withdraw from a bank account or use cheques. In such situations, organizations considered paying with cash. Therefore, they prefer to use petty cash to pay for small expenses.

  • Pay for instant expenses

If an organization may face any instant expense like buying flowers for some customers, organizations use petty cash to pay for rapid expenses. Some expenses are too instant and rapid so, there is no time to withdraw money from the bank and issue cheques that is why organizations use petty cash to pay for them.

  • Enhance the organization’s efficiency

Petty cash enables organizations to pay for small expenses efficiently. If you send money for every small expense from the main office to branches, it may be hard for branches to work rapidly and freely. Additionally, it also results in many problems for the main offices. Petty cash makes the organization efficient in paying for small expenses independently.

How can you set up the petty cash management system?

Setting the system for managing petty cash is not very hard. The following process can help you to manage it easily:

  • Make and maintain the procedure and policy for petty cash management

First, you should make a process to use petty cash and the policies to manage them efficiently. It ensures clarity when you handle the petty cash at the branches. You can make policies by starting from basic things that which type of dealings will allow for withdrawal of the petty cash, accounting, tracking the expenses, and much more.

  • Hire a petty cash defender

A petty cash defender is accountable for the branch’s small and instant cash transactions. Additionally, they are accountable for transactional records keeping and maintaining the bookkeeping. Reduce the errors and chances of fraud. You can get better control of petty cash by hiring a custodian.

  • Set the petty cash funds

Commonly, you will credit the set amount into petty cash accounts and when the pre-credited amount will finish, you will refill them. The amount that is set for credit relies on the size of the organization.

  • Take security measures

You should place the petty cash in the safest place. In addition, you should reduce fraud chances and errors. Small organizations use a lockbox to keep the petty cash secure while some organizations use separate cash boxes or rooms. 

  • Accounting

Accounting refers to holding the records of transactions and expenses for which petty cash is used. It helps you to track the expenses.