What is a Petty Cash Book: Guide to Efficient Petty Cash Management

Managing petty cash—whether for an AED 10 stationery purchase or an AED 500 client lunch—requires proper record-keeping. 

And while the individual petty cash amounts seem insignificant, failing to track them results in unreconciled expenses and cash leakages over time. 

Hence, in this blog post, we will explore petty cash books for simplified petty cash management.  

What is a Petty Cash Book?

A petty cash book is a financial record used to track small, everyday expenses that do not require issuing a formal check or making a large accounting entry. 

It records minor cash transactions and ensures that all small expenditures are documented and reconciled properly.

For example, if an employee uses AED 50 from the petty cash fund to buy office supplies, this transaction is logged into the petty cash book with details such as the date, amount, and purpose of the expense. At the end of the period, the total spent is reconciled with the remaining cash to ensure accuracy and prevent discrepancies.

Petty Cash Book vs Cash Book

Both a petty cash book and a cash book track financial transactions, but they are used for different purposes.

A petty cash book is used to record small, routine expenditures that are paid in cash, such as office supplies or minor repairs. 

A cash book, on the other hand, is used to record all cash transactions, including both receipts and payments. 

So, while the petty cash book focuses on small, day-to-day expenses, the cash book covers all cash transactions. 

Types of Petty Cash Book

Petty cash books come in various formats, each serving a different purpose and unique features to manage and track petty cash transactions.

Simple Petty Cash Book

The simple petty cash book is the most basic form of recording petty cash transactions. It includes a straightforward ledger with columns for recording the date, description, amount spent, and the remaining balance. 

Columnar Petty Cash Book

The columnar petty cash book is designed with multiple columns, each representing a specific category of expenses, such as office supplies, travel, or entertainment. This format allows for straightforward recording and summarizing of expenses under predefined categories. 

Imprest Petty Cash Book

The imprest petty cash book is used with the imprest system, where a fixed amount is allocated to the petty cash fund. Expenses are recorded as they occur, and the fund is replenished to its original amount at regular intervals. This system helps in maintaining control over petty cash expenditures.

Electronic Petty Cash Book

An electronic petty cash book functions as a digital cash register for managing petty cash transactions. This system allows you to record, track, and reconcile petty cash expenditures electronically, streamlining the entire process. 

It also integrates seamlessly with accounting software, providing an efficient way to handle petty cash without the hassle of manual entries.

Why Keep an Electronic Petty Cash Book

While a traditional petty cash book is the easiest way to record small transactions, it leaves you prone to petty cash problems due to the tedious nature of record-keeping, frequent reconciliations, and tracking of numerous receipts.

Hence, maintaining a digital petty cash book offers numerous advantages over traditional physical petty cash books. 

Here’s how transitioning to a digital solution like Pluto helps:

1.Enhanced Accuracy and Reduced Errors

Pluto minimizes manual data entry, reducing the likelihood of errors associated with manual bookkeeping. 

With the OCR feature, you can automatically capture and record transaction details from receipts, ensuring accuracy and consistency in financial records.

2.Real-Time Tracking and Visibility

Pluto provides real-time tracking of cash flow. 

With an up-to-date view of available funds and recent transactions, custodians and managers can easily monitor the status of petty cash, identify discrepancies promptly, and make informed decisions based on accurate data.

3.Improved Security and Reduced Risk of Fraud

Pluto reduces the risk of theft or loss associated with handling physical cash. 

Access controls and audit trails in digital systems ensure that only authorized personnel can make changes, and all transactions are tracked, providing a clear record of who made each entry and when.

4.Simplified Filing and Reconciliation

Pluto simplifies expense filing with a user-friendly interface where employees can easily upload receipts and account for the cash withdrawn.

Reconciling petty cash also becomes more straightforward as custodians can easily compare recorded transactions against physical cash on hand, and discrepancies are identified and addressed quickly. 

The digital record-keeping also makes it easier to generate and review reconciliation reports.

5.Convenient Accessibility and Storage

Digital petty cash books are stored securely in the cloud, making them accessible from anywhere with an internet connection. 

This convenience eliminates the need for physical storage and allows for easy retrieval of records for audits, reviews, or any other needs.

6.Enhanced Compliance

Pluto provides a custom no-code approval workflow builder that enables you to enforce petty cash policies and automate and expedite the process of validating expenses. 

This ensures compliance with financial policies and regulations. 

7.Scalability 

As your organization grows, a digital petty cash book easily scales to accommodate increased transaction volumes and additional users. 

The flexibility of digital systems also allows for customization to fit your specific petty cash management needs.

How to Fill in a Petty Cash Book

Pluto offers a digital cash register to digitize and streamline the petty cash management process. 

Here’s how you can maintain a digital petty cash book for more efficient and simplified management with Pluto.

Set Up the Petty Cash Fund

Start by setting up your petty cash fund directly within Pluto’s platform. Input the initial amount of petty cash you have available, and Pluto will display this balance on your centralized dashboard.

Disburse Cash and Record Transactions

The custodian is responsible for handing over petty cash to employees. After dispensing the cash, the custodian records the disbursement on Pluto’s platform, updating the balance to reflect the new amount available.

So, if AED 200 is given to an employee for office supplies, the custodian enters this disbursement into Pluto, reducing the available balance by AED 200.

Employee Record Transactions

Employees use Pluto to log their expenses as they occur. They input the date, description, and amount of each transaction. 

Receipts can also be uploaded directly to Pluto via the app, WhatsApp bot, or web interface. Pluto’s optical character recognition (OCR) captures key details from each receipt and attaches them to the corresponding transaction.

So, if an employee buys AED 50 worth of office supplies and uploads the receipt via the Pluto app. Pluto automatically records the expense, updates the balance, and triggers the approval workflow.

Streamline Approval Process

Custom approval workflows can be set up in Pluto. You get a no-code custom approval workflow builder, where you can create workflows based on your policies and hierarchies. 

So, when an expense is recorded, and a receipt is uploaded, the system automatically routes it through the necessary approval channels, ensuring timely and efficient processing.

For instance, if a client lunch expense is submitted, Pluto automatically routes the request to the relevant manager for approval before finalizing the entry.

Centralize Reconciliation

Pluto simplifies reconciliation by providing a centralized platform where custodians can review all transactions, compare the digital records with actual cash on hand, and quickly identify discrepancies. 

Pluto’s OCR even flags duplicate receipts to prevent errors and fraud, simplifying reconciliation further. 

Request Replenishments as Needed

When the cash-in-hand runs low, Pluto automates the replenishment process. It alerts custodians when funds are low and even streamlines the request for additional cash, ensuring that operations continue smoothly without manual intervention.

Streamline Petty Cash Management With Pluto

A digital petty cash book is an excellent start for modernizing your expense management, offering enhanced accuracy and streamlined record-keeping. 

However, for those looking to further digitize their petty cash processes, Pluto enables you to eliminate cash entirely and replace it with corporate cards to automate expense management for more control and visibility over each diem. 

With Pluto, you can issue unlimited corporate cards to employees, simplifying transactions and integrating them seamlessly into your digital management system.

So, whether you want to eliminate or digitize your petty cash, Pluto offers the flexibility to adapt to your business needs. 

To learn more about how Pluto can enhance your petty cash management processes, book a demo and discover the benefits of a fully digital approach.