Is Petty Cash still Necessary in the Age of Cashless Payments

In today’s world of digital wallets, tap-to-pay systems, and mobile payment apps, the concept of carrying physical petty cash seems almost outdated. Businesses are adapting to this shift, embracing cashless payment methods that offer speed and convenience.

Yet, despite these advancements, maintaining a petty cash float is still essential for many small businesses.

Let’s dive into why petty cash is necessary, how it should be managed, and the pros and cons of keeping cash on hand.

The Shift Towards Cashless Payments

The rise of cashless payment methods has revolutionised transactions, offering benefits such as increased speed, better tracking, and reduced risks of theft associated with physical cash. Payment platforms like SnapScan and Zapper have gained popularity in South Africa, making it easier for businesses to go entirely digital.

Yoco and Ikohka are also great platforms to get paid instantly offering card machines and support whenever you need it. These are great ways to grow your business fast because everyone has their card on their phone these days and these are brands that customers can trust in South Africa.

Yet, some expenses, like minor office purchases, tips, or emergency supplies, are often best handled with petty cash. This makes it crucial to maintain a balance between embracing cashless systems and retaining a small reserve of physical cash for specific scenarios.

Petty Cash 101

Petty cash, derived from the French word “petite” (small), refers to a small reserve of cash that businesses use for minor purchases. Examples of such expenses include:

Refreshments for the office
Emergency printer ink or stationery
Staff tips or small tokens of appreciation
Cash on Delivery for your purchase orders.

Instead of waiting for approvals for minor expenses or relying on corporate credit cards, petty cash offers quick and easy access to discretionary spending.

Suppliers who are difficult to work with may also require you to have petty cash on hand as they won’t let you on account for convenient reasons etc.

Read our blog on QuickBooks Keyboard Shortcuts for how efficient tools can complement traditional petty cash transactions. Verbeek Consulting is able to assist you with this

How to Maintain a Petty Cash Float

Proper management of petty cash ensures accountability and security. Here’s how you can maintain and manage it effectively:

Set an Amount: Decide on the appropriate float based on your business size and spending habits. For small businesses, R5,000 to R10,000 is usually sufficient.
Lock it: Ensure that the box is locked in a security box or the money is put in a safe to keep safe. Make sure that only the designated employee knows where the key is.
Track Transactions: Record every expense in a petty cash log, noting the amount, date, and purpose. Use tools like Excel or bookkeeping software like QuickBooks for easy tracking.
Establish Replenishment Rules: Replenish the float when it reaches a set threshold, such as 20% of the total float value.
Assign a Custodian: Designate an employee to manage petty cash, ensuring transactions are recorded and receipts are filed for every purchase.

Make sure you buy a machine to check counterfeit notes. You can buy them easily on Takealot. This machine will save you from a lot of headaches and unnecessary worries.

If you’re a small business that deals in cash, it is recommended to have security cameras just to ensure the safety and security of you and your employees.

The Pros of Petty Cash

Despite the rise of digital systems, petty cash offers several advantages for small businesses:

Flexibility: It provides immediate access to cash for minor expenses, avoiding delays in approvals of your orders and products.
Reduced Dependency on Cards: It eliminates the need for employees to use personal funds or wait for the company credit card if they need to run a quick errand for your business.
Low Setup Cost: Managing petty cash doesn’t require additional software or complex systems. It is simple and must be systematic when filing receipts.

Cash is always king and is very convenient in a fast pased business environment that we live in.

The Cons of Petty Cash

While convenient, petty cash has some drawbacks:

Security Risks: Physical cash is susceptible to theft or loss. Cash is hard to track and may be difficult for account for.
Accountability Challenges: Without proper oversight, petty cash can lead to unauthorised spending or discrepancies and may be difficult to get evidence on.
Time-Consuming Management: Logging transactions, reconciling receipts, and monitoring the float require regular attention.

Petty cash is very convenient, however, it takes time and you need someone you can trust to manage the cash flow.

Managing Petty Cash the Smart Way

To reduce any risks and ensure accountability, businesses should follow these steps:

Reconcile Regularly: Compare receipts and the petty cash log with the remaining balance at least once a week.
Enforce Policies: Establish clear guidelines on what petty cash can be used for and require approval for specific expenses.
Leverage Bookkeeping Support: Outsource petty cash management to professionals like Verbeek Consulting to save time and reduce errors.

Managing petty cash should not have to be a hassle. We understand that business gets busy and that you do not have time for mundane tasks at hand. Verbeek Consulting is able to assist you with recording receipts and transactions. Every month we do a reconciliation to ensure that your money is recorded correctly.