DESCRIPTION SUBSTITUTE PETTY CASH FOR CHECKS

Cutting and issuing a check is an extended, multistep process. One must match a supplier invoice to a purchase order and receiving document, enter the invoice to the computer, await the deadline, and then print the check, own it signed, and mail it to the supplier. For small payments where in fact the supplier appears at the organization offices, there’s a simpler way. It’s much easier to cover a supplier from the petty-cash box. This process eliminates the whole process had a need to cut a check. However, there are a few severe limitations on the usage of petty cash that limit its effectiveness to a few situations. First, since the intention would be to bypass the most common checks and balances of the accounts payable process, it must only apply to those payments which can be so small that no one cares if the machine is bypassed. In most companies, the quantity that may be paid with minimal controls is normally below $100. For amounts bigger 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 can be intercepted and removed at many points as you go along, resulting in no payment. Consequently, it is much better to hand the cash right to a supplier representative, who ought to be on the company premises to sign for the money. By limiting the use of petty cash to small amounts and on-site payments, you can effectively reduce this option to a small percentage of the sum total amount that many companies pay out. Nonetheless, it is a simple and effective approach that will result in some decrease in the quantity of transactions flowing through the typical accounts payable system.

Some control is needed if petty cash is employed as a regular form of payment. One key item would be to need a signed receipt for many moneys handed out, preferably by having an accompanying invoice from the supplier. This allows sufficient evidence of why an expense was incurred and covers the company if the supplier claims so it was never paid. Also, there must be a monthly reconciliation of the petty-cash box to ensure all expenditures and replenishments are accounted for. It is particularly important if you have a top volume of payments going out from the petty-cash box, while there is a prospect of thousands of dollars to disappear as time passes if you have not a continuing reconciliation. Finally, given the high level of usage, it is important to provide control of the petty-cash box to just one person who will accept responsibility for the money. When followed by storage in a locked container, these measures present a fruitful group of controls over continual petty-cash disbursements.