Who Should Be in Charge of the Petty Cash Fund?

Petty cash is a small amount of money kept on hand by a business to cover minor, day-to-day expenses that do not warrant issuing a check or using an electronic payment. This fund serves as a resource for immediate needs such as purchasing office supplies, postage, or reimbursing employees for incidental out-of-pocket costs. It streamlines operations by avoiding more formal payment processes for low-value transactions.

The Role of the Petty Cash Custodian

The petty cash custodian manages and oversees the petty cash fund. This role involves duties to ensure the fund’s integrity and proper use. The custodian disburses cash for approved expenses, ensuring each payment is supported by documentation.

Duties include meticulous record-keeping, accurately logging all inflows and outflows of cash. This involves using pre-numbered petty cash vouchers or a detailed log to track each transaction, noting the date, amount, purpose, and recipient. The custodian collects receipts for all expenditures, matching them to vouchers. Periodically, the custodian reconciles the fund, ensuring cash on hand plus receipts equals the original established amount.

Essential Qualities for a Petty Cash Custodian

Selecting a petty cash custodian requires considering specific personal and professional attributes. Trustworthiness and honesty are paramount, as the individual has direct access to company funds. This foundation of integrity helps mitigate the risk of misuse or theft.

Strong organizational skills are essential for managing documentation, maintaining accurate records, and keeping the fund orderly. Attention to detail ensures transactions are correctly recorded and receipts matched, which is important for accurate financial reporting. Basic mathematical aptitude enables the custodian to accurately count cash, make change, and perform reconciliations without error. A sense of responsibility ensures the custodian adheres to established policies and safeguards the fund.

Key Controls and Oversight

Internal controls protect the petty cash fund from misuse or fraud, irrespective of the custodian. One control is establishing the fund on an imprest basis, meaning it has a fixed, predetermined amount that is periodically replenished. Limits should be set on individual disbursement amounts, preventing the use of petty cash for larger expenses that warrant more formal payment methods.

Proper authorization for all expenses is a significant control, requiring a supervisor or another designated individual to approve disbursements before cash is released. Regular and surprise reconciliations, conducted by someone other than the custodian, help verify the fund’s accuracy and deter irregularities. Segregation of duties is a principle; the person who disburses cash should not be the sole individual responsible for approving expenses or performing reconciliations. This separation creates a system of checks and balances, enhancing accountability and reducing the risk of error or misappropriation.

Typical Placement of the Petty Cash Custodian

The petty cash custodian role is often assigned to individuals in administrative or financial support positions. Common placements include administrative assistants or office managers, particularly in smaller businesses. These individuals are typically on-site, interact regularly with employees who might need petty cash, and often handle other general office management duties.

A designated member of the accounting or finance department may serve as the custodian, especially in larger organizations or those with multiple petty cash funds. This placement leverages their familiarity with financial procedures and record-keeping requirements. Regardless of title, the chosen individual is typically regularly present, accessible, and integrated into the daily operational flow of the business, facilitating efficient handling of minor expenses.