What Is Petty Cash and Why Is It Bad for Your Business?


Petty cash is an analog holdover in a digital age. It’s an outdated process that works okay in a small business with few employees. But the bigger the company, the more unwieldy that process gets. Nobody likes it.

So, What is Petty Cash?

Petty cash is a store of money kept in an office to be used on various office expenditures. It is typically spent on small items. The problems with petty cash are largely embodied in its name. 

Keeping “cash” around in a business is always fraught with risk. Petty cash logs need to maintained by someone, and the cash itself tends to stick to the fingers of anyone who comes in contact with it. 

That cash is supposed to be “petty” — dealt with in small amounts. Unfortunately, the more petty cash transactions you have outside the office, the less petty — and less manageable — it gets.

Accounting With Petty Cash

Your employees need petty cash to make necessary outside purchases, but they have to jump through hoops to deal with it. 

It’s a manual process. Employees have to request the cash, usually by filling out a form. They have to keep it separate from their own cash, and make sure their business and personal expenses don’t intermingle. After making the purchase, they need to get change and a receipt, and hold on to both until they can fill out an expense report. This process has plenty of room for error, and often employees don’t like being held accountable for money kept on their person. 

It’s tempting for companies to use petty cash. Handing employees money rather a credit card with access to a credit line might seem like a better option – but both solutions are fraught with difficulty. 

Lower the Risk of Fraud

There’s plenty more to dislike. Managers have trouble controlling how petty cash is spent. Bookkeepers devote far too much time to processing it. Finance sees it as a cash drain, since they have to budget for more than they’ve projected in order to cover expenses in the field. And for larger expenses — travel, in particular — it’s hopelessly inefficient.

Furthermore, the whole system lends itself to fraud: usually unintentional, like mistakes or overspending, though sometimes outright. At best, it places your employees in an adversarial position —they act in your interest, yet their actions are inherently suspect. At worst, employees trusted with company money intentionally abuse their power and spend on personal items. Larger issues, such as embezzlement, are rare. However, leaving the door open to temptation is ill-advised. 

As your business scales up, these problems only grow more pronounced. It’s a system long overdue for replacement.

A Better Solution for Petty Cash

What if you could throw out your entire petty cash system? What if you could give each employee spending freedom, yet control every cent that gets spent? What if you could specify maximum expense amounts, types of acceptable expenses, and acceptable places to spend it?

Fortunately, all these things are no longer “what-ifs.” They are not only possible, but also easily affordable for even the smallest businesses. The time and money you save in bookkeeping alone justifies the entire system.

With a prepaid business card, you can fund expenses by individual employee function, by customer, by location, or by time of day. You can automatically track expense information for each employee and allocate new funds 24/7, wherever they are in the field.

With one bold stroke, you can get unprecedented control over your expenses, eliminating the inefficiencies, and sharply reducing mistakes and fraudulent spending. Your employees are relieved of annoying paperwork, burdensome reimbursement procedures, and the feeling that their actions are somehow under suspicion.

It’s the kind of program your whole company can embrace. A win for everyone.

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