Petty Cash: Keep a Small Business Cash Fund Accountable

A few small cash purchases can leave an owner with a box of loose receipts and no clear explanation of the remaining money. If your business uses petty cash, give that fund a defined purpose, a named custodian and a repeatable count.

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Decide whether a cash fund is useful

Petty cash is a small fund for incidental purchases. A change fund serves a different purpose: making change for customers. Duke University's guidance distinguishes the two. A business that can pay for routine purchases through a controlled card or invoice process may have no need for petty cash at all.

Ask which purchases actually require cash, how often they occur and who would keep it secure. Set an amount based on that need rather than keeping extra money available without a purpose. The appropriate amount and purchase limits are business decisions, not universal accounting rules.

Keep custody and documentation clear

Duke's process uses a custodian, secure storage, purchase evidence and documented counts. Those are useful control concepts; Duke's dollar caps, receipt restrictions, deadlines and approval roles are its own institutional policies.

For your business, write a short policy covering permitted purchases, a maximum purchase amount, who approves exceptions, who holds the cash and who reviews the record. Where staffing permits, separate custody from accounting and review. In a very small business, an owner count provides a practical checkpoint.

For each payout, retain the purchase date, amount, vendor, business purpose, recipient and receipt. Assign a reference that connects the payout to the supporting document. Keep personal loans, owner withdrawals and customer collections outside this fund's routine expense process.

Count cash and receipts together

Under a fixed-fund, or imprest, approach, cash remaining plus documented payouts should explain the authorized amount. Duke's procedure calls for that balance check and investigation of differences. Count before replenishing, when custody changes and on a schedule suited to usage.

A practical count sheet records the approved fund amount, physical cash, documented purchases awaiting replenishment, any replenishment in transit and the unexplained difference. Avoid counting a replenishment request as both cash received and an outstanding request. Keep the count date, preparer and reviewer with the record.

Example: find the gap before adding cash

This is an invented example, not a client result. A business authorizes a $200 fund. There is $82 in the cash box and $118 in supported purchase receipts. Together they explain the $200 fund. Replenishing the documented $118 returns physical cash to $200.

If the box instead contains $72, the same receipts leave a $10 shortage. Recount, check arithmetic and look for a missing payout record. The difference does not prove theft or establish which purchase is missing. Document the resolution and obtain approval for any supported accounting adjustment.

Replenish without recording expenses twice

Duke's account guidance describes replenishment using the appropriate expense accounts. In your records, connect the cash replenishment to the supported purchases. If those purchases were already posted, do not add the same expenses again when moving money from the bank. The correct entries depend on how your system records the fund and each payout.

Keep bank cash, petty cash and any change fund separately identifiable. Moving money between cash accounts is distinct from spending it. When the fund closes, count it, resolve open items and document the return of the remaining cash.

Make the process fit the business

A simple cash log can be enough for a low-volume fund. More activity may call for tighter review or a different purchasing method. Software can organize receipts and flag missing details, while a person still confirms the physical count and business purpose.

Sources and factual boundaries

Duke University's Petty Cash and Change Funds supports the distinctions and control concepts described above. Its Petty Cash: Imprest Funds describes authorized fund levels and replenishment. These are university procedures, not laws for small businesses. Reviewed October 7, 2026. The business recommendations and example are original Summer Peaks guidance.