Petty cash funds have been around for a long time as a quick method of providing funds to employees that need to make a purchase for a company. However, purchases made using cash are hard to track, easily forgotten, and ultimately make accounting a challenge. Is the petty cash box a help or a hindrance? Is there a better way to solve the small expenditure dilemma?
Here are some advantages and disadvantages to using petty cash as an expense management solution:
Advantages to Using Petty Cash
Petty cash is an understandable and familiar method of paying for company expenses. When petty cash is accessible to employees, it is a convenient way to pay for small purchases. When a business doesn't give access to a company credit card to all employees, or employees don't wish to make purchases and wait to be reimbursed, using petty cash on hand in the office is a simple alternative.
Disadvantages to a Petty Cash System
Petty cash is largely an outdated and inefficient system, and one that businesses should reconsider using. While convenient for small purchases, petty cash is not a feasilbe solution to large expenses. The bigger the company, the harder it is to track outgoing petty cash, change, and receipts. This makes the entire petty cash system susceptible to abuse or outright fraud. For most businesses, the disadvantages of using petty cash far outweigh the advantages.
A New Alternative to Petty Cash
Fortunately, there is an alternative. Prepaid cards, such as the PEX Visa® Prepaid Cardoffer a more precise way of managing small expenses, because everything from lunch to a subway ride can be charged on the card. There is no cash lying around the office or change to turn in. Plus, there is a digital record of every transaction.
With a system like PEX, a finance team can see where company funds are going in real-time and allocate funds to employees as needed. Who needs a petty cash drawer when most merchants accept Visa debit cards? Learn more about how PEX works, and get started with simple expense management.
Toffer Grant is PEX's Founder and CEO. He founded PEX in 2006 as a prepaid card solution for small businesses. His background in the prepaid industry began at Clarity Payment Solutions, where he initiated 65 prepaid card programs in consumer, corporate, and emerging verticals of the prepaid card industry.
This blog post originally appeared October 13, 2008 and has since been updated.