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Is there still a need for petty cash?
Fiona McKinlay • Aug 21, 2018
Petty cash may be outdated, inefficient and subject to abuse, but small businesses have used discretionary funds since the 17th century.
Petty cash may be outdated, inefficient and subject to abuse, but small businesses have used discretionary funds since the 17th century.
Basically, it should be for minor incidental expenses like taxis, postage and office supplies, and sometimes lunch, most importantly for giving change, and kept in a small locked box or drawer — or even an old-fashioned cash register.
It is the most common imprest accounting system: a fixed amount, of between $50 and $500, depending on the business, that is always available, and restored whenever necessary. Petty cash is an asset, not an income and all transactions should be recorded and listed separately at the beginning of the current assets section of the balance sheet in the accounts ledger.
Although more people use credit and debit cards nowadays, and cash is discouraged more and more often, petty cash is still necessary — and tax deductible.
The initial sum of money comes from the business bank account. You don’t want more than necessary and don’t leave it unsupervised for fear of tempting thieves or even staff, but it’s easy to work out the average you need to hand.
Then it should be regularly counted, especially if it is used for change, and petty cash slips filled out for every sum taken. This documentation is the most important part of the system and the total cash on hand plus reimbursed vouchers should equal the original fund at all times.
A petty cash reconciliation reveals undocumented disbursements as, inevitably, there is always a risk of fraud. Try not to give all employees access to petty cash and never leave it off your books.
If keeping your own accounts, from essential petty cash to balance sheets, inventory and projections, is taking up too much of your valuable time and causing unnecessary anxiety and dismay, perhaps now may be the time to consider handing the whole lot over to a bookkeeping professional so that you can concentrate on the things that really matter to you and actually bring in business.
And then there are employee payment summaries and the summary of income and expenses in a profit and loss statement, the record of debtors and creditors, asset purchases and expenditure on improvements, depreciation expense claims and capital gains tax, income tax returns and yearly reports, returns for PAYG withholding, fringe benefits tax (FBT), Goods and Services Tax (GST), and the taxable payments reporting system, meeting superannuation requirements… the list goes on and on.
With so many great software options including XERO, MYOB and Reckon. It’s vital for Balanced Bookkeeping and Business Solutions to be on top of them all. Our expert team can help tailor fit any software your business needs. We proudly keep the Sunshine Coast on top of their accounts. Ask us how we can help you today.
Balanced Bookkeeping and Business Solutions is a local Sunshine Coast company that provides a complete bookkeeping service and solutions for small to medium businesses and can cope easily with both the ATO and ACNC, so that you can pursue the far more rewarding and philanthropic business of fund-raising and distributing to the deserving foundation or trust of your choice.
Balanced Bookkeeping and Business Solutions is a local, Sunshine Coast business that provides a complete bookkeeping service and solutions for small to medium businesses. The principal of Balanced Bookkeeping and Business Solutions has worked in the accounting industry for over 20 years and is a qualified accountant and registered BAS agent, which means that you can discuss the pros and cons of casual and full time and part time employment, knowing that you will receive practical, constructive, valuable advice.
So, what is Fringe Benefits Tax? Simply put, it’s an extra tax that you cover for your employee that is for the benefit of the employee in lieu of paying them more money. The tax is calculated on the value of what is being used for FBT.
This is only a new initiative as we mention that came into effect as of the 1st of July 2018, so there are still a lot of questions to be answered. This is why a number of clients we serve on the Sunshine Coast have been coming to us at Balanced Bookkeeping and Business Solutions to see their options.
