ARTI SUBSTITUTE PETTY CASH FOR CHECKS

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Cutting and issuing an always check is an extended, multistep process. One must match a supplier invoice to a purchase order and receiving document, enter the invoice into the computer, watch for the due date, and then print the check, own it signed, and mail it to the supplier. For small payments where in fact the supplier shows up at the company offices, there is a less complicated way. It is much simpler to cover a supplier from the petty-cash box. This approach eliminates the entire process needed to cut a check. However, there are some severe limitations on the use of petty cash that limit its effectiveness to a few situations. First, considering that the intention is always to bypass the usual checks and balances of the accounts payable process, it must only connect with those payments which can be so small that no body cares if the device is bypassed. In many companies, the total amount that can be paid with minimal controls is normally below $100. For amounts larger than this, the most common check-paying process is probably better, since it requires tighter control over payment approvals. Another problem is so it makes little sense to stuff money into a bag and mail it to the supplier, since the money may be intercepted and removed at many points on the way, leading to no payment. Consequently, it is much better to hand the amount of money right to a supplier representative, who must be on the organization premises to sign for the money. By limiting the use of petty cash to small amounts and on-site payments, one can effectively reduce this option to a tiny percentage of the full total amount that most companies pay out. Nonetheless, it is really a simple and effective approach that will result in some reduction in the amount of transactions flowing through the normal accounts payable system.

Some control is necessary if petty cash can be used as a typical form of payment. One key item would be to demand a signed receipt for all moneys passed out, preferably having an accompanying invoice from the supplier. This provides sufficient evidence of why an expense was incurred and covers the company if the supplier claims so it was never paid. Also, there ought to be a monthly reconciliation of the petty-cash box to ensure that all expenditures and replenishments are accounted for. It is specially important if you find a top volume of payments going from the petty-cash box, since there is a prospect of tens and thousands of dollars to disappear over time when there is not a continuing reconciliation. Finally, given the high volume of usage, it is important to provide control of the petty-cash box to just one person who need responsibility for the money. When combined with storage in a locked container, these measures present an effective pair of controls over continual petty-cash disbursements.

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