BUSINESS START UP - WORKSHOP - PETTY CASH

Good morning bloggers - herewith my offerings for the day

. PETTY CASH

The object of this exercise is to ensure that the petty cash disbursements and receipts are properly carried out and supervised. To be quite honest with you, it is known in the retail industry that the first place money will go “missing” is out of the petty cash till. The controls and procedures that relate to this have to combat this and make it all that more difficult for fraud to be perpetuated.

1. If someone other than you is handling the petty cash, make sure that it is not the same person who receipts cash payments or who has anything else to do with bookkeeping functions. The reason for this is that it is very easy to move cash around the place, so if you walk in to check the petty cash and they have been using some of the funds for their own purposes, it is very easy to “borrow” some cash, from a cash payment to supplement the petty cash and make it balance and then as you walk away, put it back into the cash payments! Also remember, this is the “New South Africa”, you have to prove intent! One of my clients discovered money missing out of the till float and the guilty party, admitted that he had “borrowed” the money out of the till for taxi fare. He was then charged with theft and found guilty of same at a disciplinary hearing and summarily dismissed. He appealed his dismissal on the grounds that the Company had not shown his “intent” to steal the money and they had to reverse the dismissal and pay the costs of his CCMA appeal and also pay him back pay from the date of his dismissal, which in this case happened to be about 11 months after he had been dismissed – they were then forced to re-hire him! Costly exercise don’t you think for R50.00 that went missing out of the till! They have since issued a memo, that now forms part of the “Letter of Appointment” stating that any monies taken out of the till for any reason other than Company Business, will be considered as theft, irrespective of what the intention was. It might be a good idea for you to add something similar if you intend to have staff working for you, that work with your money or your stock!

2. The person who is in charge of the petty cash must have exclusive control over the petty cash and therefore the responsibility thereof. It is no good having a dedicated petty cash cashier and you have access to the cash whenever you want it! That defeats the object of the purpose and again will put you at risk as the responsibility is therefore diminished! When cash is given to the cashier, he/she should count and verify it in front of you, and sign for it, thereby indicating that they have received the said amount and they agree that the amount is correct! In this way you can hold them responsible it the money goes missing.

3. All purchases must be supported by properly authorized petty cash slips and vouchers (where applicable). It is a good idea to purchase a book of petty cash vouchers, and then attach the receipts to them. The voucher should describe the nature of the purchase/service and the receipt should evidence the purchase and/or service that was rendered. The receipts should balance back to the voucher. If your petty cash transactions are far and few between, one voucher will do for the month but if there is plenty of activity on the petty cash funds, it is advisable to have one petty cash voucher per day, this will then give you the total amount paid out on any given day – per day and the attached receipts should again balance back to the voucher. Many companies will set limits on what can be purchased out of the petty cash without authorization. This usually refers to purchases such as tea, coffee, cleaning materials, certain stationary and so on. Anything purchased that does not appear on the list would then require authorization prior to the transaction taking place. One of my clients had a staff member (actually the store manager of one of the remote stores) who purchased all her plants out of the store’s petty cash (there had been something like 27 plants purchased) – when the excessive petty cash was queried, she tried to explain that she had purchased the plants to make the store look “pretty”, but there was not a plant in sight and the reply to that was that they had all died! Another example of abuse of petty cash was the store manager who bought cold drinks every day for herself and all of the staff, because it was too hot to drink coffee or tea! Make sure that your petty cash is secure

4. Once the petty cash has been replenished and paid out, all vouchers and receipts should be marked “Cancelled” or “paid” to prevent them from being re-used again. Be aware of the pitfalls out there and the fact that some people are not honest! If you are aware of what can happen, chances are that you will be able to prevent them.

5. Your petty cash float should be set at a reasonable level. This level should be fixed and all replenishments should therefore credit the float back to its fixed level. When fixing your float, you need to take into consideration, what your monthly expenditure is. It is no good fixing the float at say R500.00 a month, but your normal monthly expenditure is around R750.00 as this will necessitate the float being replenished too often. It should only need to be replenished once a month at the end of the month (there will be exceptions to this as emergencies will arise from time to time). Having said that, it is also not wise to have the petty cash too large, for example, having a petty cash of say R2000.00 and your monthly expenses are around R200.00, also does not make any sense. I would suggest a petty cash of your average monthly expenses plus say 20%. This should be a comfortable working arrangement.

6. The petty cash should be counted on a regular “irregular” basis to ensure that the petty cash balances and that the purchases are legitimate and authorized where necessary, by someone other than the petty cash officer. This should be evidenced in the petty cash book so as to indicate that the count has taken place and the regularity thereof.

7. When the float is re-imbursed (both as at month end and also, should this function be required during the course of the month), the petty cash book and vouchers must be presented, together to the cheque signatory. The vouchers must be checked back to the book in order to ensure that the calculations are correct prior to the cheque being signed. If you would like a copy of a Petty Cash Reconciliation Form, these are available at a cost.