What Can Petty Cash Be Used for in a Medical Office?

Petty cash provides medical offices with ready funds for minor, day-to-day expenses that do not warrant issuing checks or using credit cards. Establishing and managing petty cash properly is important for maintaining financial integrity and accurate record-keeping within the office.

Appropriate Uses of Petty Cash

Petty cash is intended for small, incidental expenditures that are impractical to process through regular accounting methods. Common uses in a medical office include purchasing minor office supplies such as pens, paper clips, or sticky notes. It can also cover postage for small mailings or urgent letters, and costs for minor repairs like replacing lightbulbs. Patient comfort items, such as tissues, water for the waiting room, or small snacks, are also appropriate uses.

The fund can also be used for refreshments like coffee or tea for staff and visitors. Local travel expenses, such as parking fees or small amounts for errands, are suitable, as are tips for delivery services. In emergency situations, petty cash might be used for critical medical supplies if regular stock unexpectedly runs out. Petty cash reimbursements are for amounts under $200.

Petty cash should not be used for large purchases. It is inappropriate for payroll, employee advances, or personal expenses of staff or owners. Travel or entertainment reimbursements, or payments for major medical supplies and equipment, fall outside the scope of petty cash. Any expense requiring a formal invoice or contract should also not be paid from this fund.

Setting Up a Petty Cash System

Establishing a petty cash system begins with determining an appropriate fund amount, often ranging from $50 to $500. This amount should be sufficient to cover anticipated small expenses for a reasonable period, such as a month. Once the amount is decided, a trusted individual, such as an office manager or administrative assistant, is designated as the petty cash custodian.

The petty cash fund must be stored in a secure location, such as a locked drawer or a small safe, to prevent theft or misuse. The initial funding involves withdrawing cash from the main bank account, often by writing a check payable to “Petty Cash” or to the custodian for petty cash. This initial transaction is recorded in the accounting system by debiting the Petty Cash account and crediting the main Cash account.

A written petty cash policy is important. This policy should outline authorized uses for the funds, specifying maximum per-transaction limits. It must also detail the procedures for reimbursement and the required documentation for each expenditure.

Managing and Reconciling Petty Cash

Ongoing management of petty cash involves tracking every disbursement. For each expenditure, a petty cash voucher should be completed, detailing the date, amount, purpose, and the signature of the recipient and approver. Collecting and attaching original receipts for every purchase is mandatory. These receipts, along with the voucher, serve as proof of the transaction.

All transactions must be recorded in a petty cash log or journal. This log should include the date, a description of the expense, the amount disbursed, and the running balance of the fund.

Periodic reconciliation is important. The physical cash remaining in the fund, plus the total value of all vouchers and receipts for spent amounts, should always equal the initial fund balance. This reconciliation process should occur regularly, such as weekly, monthly, or when the fund runs low.

When the cash balance drops to a predetermined low level, the fund needs replenishment. The custodian sums up all the spent vouchers and receipts and requests a check from the main account for that exact amount. This check is then cashed, restoring the petty cash fund to its original balance. The accounting entry for replenishment involves debiting the appropriate expense accounts for the amounts spent and crediting the main Cash account.