What Is the Usual Amount of Petty Cash?

A petty cash fund provides a small, readily available amount of cash for minor business expenses. It is used for incidental purchases or reimbursements when traditional payment methods are impractical. This fund streamlines operations by allowing immediate payment for small-scale needs like office supplies or employee reimbursements.

Key Considerations for Petty Cash Amounts

There is no universal “usual” amount for a petty cash fund; the appropriate sum depends on a business’s operational requirements and expense patterns. Businesses must evaluate several factors to determine a suitable petty cash balance, ensuring it is sufficient for daily needs without holding excessive cash.

The frequency of small expenses plays a significant role in setting the fund amount. Businesses with frequent minor cash purchases, such as daily office supplies or small reimbursements, will require a larger fund. The average cost of individual small expenses also influences the total; if typical purchases are around $50, the fund needs to accommodate multiple such transactions.

The overall size and operational scale of a business are important considerations. Larger companies with multiple departments or higher transaction volumes may need several or larger individual funds. Smaller businesses typically manage with more modest amounts. For many small to medium businesses, petty cash funds commonly range from $50 to a few hundred dollars.

Accessibility of other payment methods is another factor. If credit cards or digital payment options are not always feasible for minor expenses, a larger petty cash fund can serve as a practical alternative. The replenishment cycle, or how often the fund is refilled, also impacts the initial amount; longer periods between replenishments may require a larger starting balance.

Internal control policies define the maximum allowable amount for individual petty cash transactions and the overall fund size. Some policies might set a per-transaction limit, such as $50 or $100, which guides the fund size needed to cover typical expenditures. Regularly reviewing past spending helps establish an appropriate float amount that balances convenience with financial control.

Managing Your Petty Cash Fund

Establishing a petty cash fund begins with setting aside a specific amount of cash and appointing a trusted individual as the petty cash custodian. The custodian is responsible for overseeing the fund, disbursing cash, and maintaining accurate records. The initial cash amount is typically withdrawn from the company’s main checking account, with a corresponding accounting entry debiting the petty cash account and crediting the bank account.

When an expense needs to be paid from the fund, the custodian disburses the cash for approved purposes. For every transaction, collect a receipt and maintain a petty cash log or voucher system. This documentation should include the date, amount, purpose of the expense, and the recipient’s name or signature, ensuring accountability for all cash outflows.

Replenishing the petty cash fund occurs when its balance runs low, reaches a predetermined minimum, or at regular intervals (e.g., monthly). The custodian gathers all accumulated receipts and submits them for reimbursement to restore the fund to its original balance. This process ensures that the total of cash on hand plus the value of receipts always equals the initial fund amount.

Security measures protect the petty cash fund. The cash should be stored in a secure location, such as a locked box or drawer, with access limited to the designated custodian. This helps prevent unauthorized access, theft, or misuse of funds.

Periodic reconciliation of the petty cash fund is necessary to ensure accuracy and detect any discrepancies. This involves counting the remaining cash and comparing it to the documented expenses and the original fund amount. If the cash on hand plus the receipts do not match the initial fund, any shortage or overage must be investigated and recorded.