Managing Petty Cash Reimbursements: Manual vs. Automated Solutions

Companies view reimbursements as minor business expenses that can easily be handled by a custodian alone, but they overlook the implications a single mistake can have on the entire organization.  

As the company grows, branches expand, and expenses increase, these small claims become tricker to manage.

• Vague expenses - An employee requests reimbursement for a "business lunch" without any details about the attendees or purpose. Do you approve it and risk potential misuse, or ask for clarification and possibly frustrate the employee?
• Incomplete receipts - A claim for conference registration comes with only a partial receipt. Should you risk reimbursement based on limited information, or request complete documentation and delay the process?
• Duplicate claims - Two employees submit reimbursement requests for the same travel expense due to a lack of communication. Do you deny one claim, risking a strained relationship, or approve both and create a larger issue?
• Personal expenses disguised as business costs - An employee submits a hotel stay claim that appears business-related but may include personal days. Do you challenge the claim, risking tension, or approve it and set a precedent for misuse?

To address such issues, you require a clear workflow for reimbursements that includes setting policies and an expense filing process. 

In this blog post, we will guide you through a step-by-step approach to reimbursing expenses, offering options for both manual and automated petty cash management.

What is Petty Cash Reimbursement?

Petty cash reimbursement refers to the process of paying back employees for small, out-of-pocket business expenses, such as office supplies or travel costs. 

For example, an employee pays for office supplies and later submits a request for reimbursement. 

These expenses are then reviewed and reimbursed by an accountant or custodian, allowing for efficient management of minor financial transactions.

How Do You Reimburse Petty Cash?

Establishing a clear procedure for petty cash reimbursements ensures accountability and efficiency. 

Here’s a breakdown of the petty cash reimbursement procedure, across three different modes — completely manual, accounting software, and dedicated expense management software.

1. Manual 

In a completely manual process, employees submit reimbursement requests and receipts, and the approval and record-keeping tasks are performed without the aid of software.

• Policy enforcement: Policies regarding what expenses are eligible for reimbursement must be communicated to employees. Manual petty cash reconciliation increases the risk of non-compliance.
• Expense filing: Employees keep paper receipts and fill out reimbursement forms by hand.
• Approvals: Managers review and approve requests using email or in-person discussions.
• Record keeping: Physical records are maintained in folders or filing cabinets, increasing the risk of lost documents.

2. Accounting Software

Using accounting software, like Xero or QuickBooks, simplifies the reimbursement process by automating certain tasks to improve accuracy and ease record-keeping.

• Policy enforcement: Software incorporates rules to guide compliance with company policies, ensuring that only eligible expenses are processed.
• Expense filing: Employees submit digital receipts through the software, reducing the need for physical documentation.
• Approvals: Managers approve requests within the software, ensuring a clear audit trail.
• Record keeping: The software automatically records transactions, improving organization and accessibility.

3. Expense Management Software

While accounting software focuses on general financial management and include basic expense tracking, dedicated expense management tools, like Pluto, are specifically designed to handle the complexities of expense management, including petty cash reimbursements.

• Policy enforcement: Pluto automates policy compliance by allowing businesses to define rules for what constitutes reimbursable expenses. Employees submit their expenses through a WhatsApp bot, ensuring that submissions adhere to company guidelines from the start.
• Expense filing: Employees can instantly submit receipts by clicking a photo and sending it via WhatsApp. Pluto's optical character recognition (OCR) system automatically extracts, categorizes, and codes the expenses, reducing the need for manual expense filing.
• Approvals: Pluto enables customizable multi-layered approval workflows. When a reimbursement request is made, managers receive notifications and can approve or reject expenses instantly from the platform, ensuring seamless experience with all records and communication in one place.
• Record keeping: Pluto automatically stores receipts and expense data with a complete audit trail. It integrates with accounting software like Xero and QuickBooks, allowing two-way real time sync to your accounting records.

“We have been using Pluto for a few months now, and we literally have everything in one place. The beauty is you pay, upload your receipts right away, and approval can be done on the spot.”

~ Lee Kersen Mascarenhas, Head of Operations, BloomingBox

Pros & Cons of Each Mode of Petty Cash Reimbursement

Employee Reimbursement Audit Checklist

Use this checklist to systematically audit employee reimbursements and ensure compliance with company policies.

1. Receipt verification

• Are all receipts submitted valid, legible, and complete?

• Do receipts match the expenses claimed (amounts, dates, vendors)?

• Are there any missing or incomplete receipts?

• Have you checked for duplicate submissions or claims?

2. Policy compliance

• Do all submitted expenses adhere to the company's reimbursement policy?

• Are non-eligible expenses properly flagged and handled?

• Is there consistency in petty cash policy enforcement across departments?

3. Expense categorization

• Have expenses been correctly categorized (e.g., travel, meals, office supplies)?

• Are categories applied consistently across all claims?

4. Approval process

• Were expenses reviewed and approved by the appropriate managers?

• Are approvals properly documented and trackable?

5. Timeliness

• Were all reimbursements submitted within the required timeframe?

• Were reimbursements processed and paid on time?

6. Record keeping

• Are records of all expenses, receipts, and approvals properly maintained?

• Are any records missing or incomplete?

7. Tax and compliance

• Have applicable taxes been correctly accounted for?

• Does the reimbursement process comply with local tax regulations?

8. Employee acknowledgment

• Have employees confirmed receipt of reimbursement payments?

• Do employees acknowledge understanding of reimbursement policies?

9. Reconciliation with accounting records

• Do all reimbursement entries match with accounting system records?

• Are there any discrepancies between the approved reimbursements and accounting records?

Finding the Right Petty Cash Reimbursement Solution For You

Manual processes are simple and cost-effective, but they quickly become time-consuming and prone to errors as your business grows. Accounting software offers some efficiency but lacks the automation needed to keep up with rising expense volumes and approval complexities, especially with multiple branches. 

Pluto, on the other hand, provide an automated process—ensuring faster reimbursements, real-time tracking, and comprehensive reporting. Features like multi-layer approvals, automated receipt capture, bulk payments, and integration with accounting platforms save countless hours and reduce errors.

For businesses looking to scale or improve efficiency, check out our list of the top expense management software to find the right fit for your business.