Petty Cash Basics

Almost every business has it somewhere: a drawer or tin with some cash in it, a pile of crumpled receipts, and nobody quite sure how much should be there. Then at BAS or tax time, a lump of unexplained spending gets coded to something vague, and the deductions that were genuinely there go unclaimed.

A petty cash system fixes this with very little effort. Here is how the classic approach works.

Set a fixed float

Choose a set amount of cash to keep on hand — enough to cover small incidental purchases for a few weeks, and no more. This is called an imprest float, and the key idea is that the amount never changes. At any moment, the cash in the tin plus the vouchers for what has been spent should always add up to the full float. If you find yourself topping up constantly, the float is too small; if it sits untouched for months, you probably do not need it at all.

Use a voucher for every withdrawal

Whenever money leaves the tin, a voucher goes in. A voucher can be a printed slip or a simple form, but it should record:

• The date and the amount taken
• What the money was spent on
• Who took it and who approved it
• The receipt or tax invoice, stapled to the voucher

No voucher, no cash. That rule alone does most of the work, because it removes the guessing later.

Reconcile and top up

On a regular cycle, count the cash and add up the vouchers. If cash plus vouchers equals the float, everything is accounted for. Then withdraw enough from the bank to bring the tin back up to the full float, and enter the vouchers into your accounting software, coded to the right expense accounts. Because the top-up always equals the vouchers, the bank transaction is easy to reconcile.

Record any shortfall honestly as a cash discrepancy rather than forcing the numbers to balance. Small occasional differences happen; repeated ones tell you the system needs tightening.

GST on petty cash purchases

You can generally claim GST credits on petty cash purchases if the business is registered for GST and you hold the receipts. For very small purchases, a full tax invoice is not always required below a low-value threshold — check the current ATO figure — but keeping every receipt is still the safest habit.

Common traps

• IOUs in the tin — personal borrowing from petty cash should simply not happen
• Using petty cash for larger purchases that belong on the business card, where they leave a clean record
• Topping up from the till instead of the bank, which muddies your sales records
• Nobody owning it — give a named person responsibility for the float and its reconciliation

How much should the petty cash float be?

Enough to cover a few weeks of small incidental purchases and no more. The right amount varies by business, and it is easy to adjust the float once you see how quickly it turns over.

Can I claim GST credits without a full tax invoice?

For small purchases below the ATO's low-value threshold, a receipt showing the essentials may be enough — check the current ATO figure for that threshold. Above it, you need a valid tax invoice to claim the credit.

Do card payments make petty cash unnecessary?

Often, yes. If nearly everything can go on a business debit or credit card, the card gives you a cleaner record automatically, and many businesses now run without a float at all.