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A petty cash log sheet can help you lower your taxes, prevent fraud, and save money. Don’t try to wing it – small expenses can add up fast.
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A petty cash log book lets you keep track of all the small expenses made at your office. Most businesses that aren’t large enough to issue company credit cards use cash to pay for all the little things they need at the workplace. Things like:
A petty cash log lets you keep personal and business expenses entirely separate. You might think it’s too much trouble to list every dollar that goes out of your office. Maybe it seems easy to just dig into your personal wallet for tiny business expenses, but think about it. Let’s say you spend $5 a day on miscellaneous stuff. At around 260 working days a year, that adds up to $1300! And those expenses are tax-deductible!
With a petty cash log sheet, you’ll have an itemized list that you can put on your tax return. Even better, you’ll be able to keep track of those little things that can add up so fast. Are you spending too much money on office cappuccinos? Without a petty cash log, there’s no real way to tell. At least, not without issuing office credit cards. But if you have a smaller business, you might not need those yet.
1. Petty cash logs help stop fraud
2. How to keep a petty cash log
3. Switch to digital petty cash logs
The Association of Certified Fraud Examiners reports that organizations lose an average of about 5% of their revenue every year to employee fraud. And most of it is small-time stuff – padding expense reports, stealing inventory and office supplies, or misappropriating cash. A petty cash log book can help keep temptation away from your employees. The honor system can be great under the right circumstances, but it’s much safer if all your cash is locked away in one place and accounted for.
If you’re worried about employees pilfering the petty cash, research has shown that encouraging them to keep photos of loved ones around might help stop this problem. According to the Harvard Business Review, study subjects were significantly more honest on self-reported tests when they could see a picture of loved ones. The theory is that seeing those photos encourages people to behave more ethically.
Keeping a petty cash log doesn’t have to be complicated. Just follow these best practices and you’ll have it down in no time.
How much cash should you keep on hand? Many businesses consider $100 to $200 to be a good amount, but it depends on you. Do you often take small deliveries that you need to pay for? Treat your employees to pizza on Fridays? What about office supplies, printer ink, and so forth? Do you order it all in bulk, or just buy what you need when you run out?
Try keeping track of all your small expenses for a week. That should give you an idea of how much petty cash you need. While you’re doing this, it’s a good idea to decide what expenses qualify for petty cash disbursement. Maybe you treat your employees to pizza Fridays, but you probably don’t want to pay for their daily lunches.
There are other
It’s a good idea to severely limit the number of people who have access to your petty cash. Choosing one or two people is ideal. Allowing everyone accesses to the petty cash will just lead to chaos. Depending on your situation, you might need a cash register or lockbox. An envelope in your office administrator’s desk drawer might work, too. But it would help if you had a designated spot to keep your cash and petty cash log – preferably one that can be locked.
Depending on how much control you need, you can get petty cash vouchers and appoint two petty cash custodians. One to hold the cash and one to approve requests and sign vouchers. The vouchers should list the following:
This voucher should then be kept with the petty cash log sheet, along with the receipts for those purchases. This way, you’ll have everything sorted out at the end of the month or quarter when it’s time to do your taxes.
Go to the ATM or write a check to petty cash. Record this expense in your accounting log so you can keep track of it.
If you’ve decided to get petty cash vouchers, you can show everyone where those are kept and how to fill them out. Tell them who they need to go to in order to get their requests approved and disbursed. Acquaint your employees with the guidelines you’ve set up. Explain what expenses are suitable for petty cash and how much the limits are.
Keeping a petty cash log sheet is easy. The petty cash custodian just needs to remember to log every expense as soon as possible. If they wait too long, they’ll probably forget, which defeats the whole purpose. A voucher system makes everything much easier here since there is already a record of each expense.
A petty cash log can be as simple as six columns:
If your petty cash system is electronic, your petty cash log sheet practically keeps itself. Your cash custodian won’t have to do any math. All they need to do is enter in the information, and the app will do everything else for you.
Using a petty cash book is critical to ensuring that petty cash is sufficient and properly spent. Although paper-based petty cash books may be sufficient for certain transactions, digital petty cash books, offer many advantages. For example, the conversion increases security, minimizes the risk of loss and damage, and prevents unauthorized spending.
Lumiform is a digital checklist and forms tool. It allows digitizing the entire petty cash process. Automatically create monthly reports and analyze the evolution of your expenses. Take advantage of Lumiform for your petty cash log by using the following:
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