What is Petty Cash and How to Set It Up for Your Business?

Petty cash is a small amount of cash that is set aside by businesses to pay for minor expenses that are not easily covered by checks or credit cards. These expenses can include things like office supplies, postage, and minor repairs. Petty cash is an important part of any business’s financial management, as it helps to ensure that minor expenses are properly accounted for and that the company’s cash flow is maintained.

Setting up a petty cash system for your business is a straightforward process that can be accomplished in just a few steps. Here’s how to do it:

Step 1: Determine the amount of petty cash you need

The first step in setting up a petty cash system is to determine how much cash you need to have on hand. This amount will vary depending on the size and needs of your business, but it’s generally a good idea to have enough cash on hand to cover at least a month’s worth of minor expenses.

Step 2: Designate a custodian

Once you have determined the amount of cash you need, the next step is to designate a custodian for the petty cash fund. This person will be responsible for managing the fund, keeping track of expenses, and replenishing the cash as needed. It’s important to choose someone who is trustworthy and responsible, as they will be handling cash and financial records.

Step 3: Establish procedures for requesting and approving petty cash

In order to maintain control over the petty cash fund, it’s important to establish procedures for requesting and approving petty cash expenses. These procedures should include guidelines for who is authorized to make requests, what types of expenses are eligible for reimbursement, and how receipts should be submitted and recorded.

Step 4: Set up a petty cash box or drawer

The next step is to set up a petty cash box or drawer. This should be a secure location that is easily accessible to the custodian but not easily accessible to others. The petty cash box should be locked when not in use, and the key should be kept by the custodian.

Step 5: Record petty cash transactions

It’s important to keep accurate records of all petty cash transactions. This includes recording the date, amount, and purpose of each expense, as well as the name of the person who made the request and the person who approved it. Receipts should be attached to each transaction record for documentation purposes.

Step 6: Replenish the petty cash fund

As petty cash expenses are incurred, the custodian should keep track of the remaining cash in the fund. When the cash runs low, the custodian should request reimbursement from the company’s main bank account. The reimbursement should be for the amount of cash that was spent, plus any additional cash needed to bring the petty cash fund back up to its designated amount.


In conclusion, setting up a petty cash system for your business is an important part of financial management. By following these simple steps, you can ensure that minor expenses are properly accounted for and that your company’s cash flow remains healthy. Remember to keep accurate records and to designate a trustworthy custodian to manage the petty cash fund.


SND Team

We are a team of writers passionate about entrepreneurship and innovation. We cover anything else that our readers may find interesting. This includes trending news, lifestyle and finance topics, consumer guides, and much more.


Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.