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Petty cash floats to the cloud

14th Nov 2016
CEO webexpenses
Columnist
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petty cash
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Adam Reynolds, CEO of webexpenses, examines the impacts of poor petty cash management and explores new cloud solutions that can help to manage this process more effectively.

When people think of petty cash, the traditional petty cash ‘tin’ springs to mind: a money box containing the business float for those smaller purchases such as stationery or refreshments.

Often accompanying the tin is a petty cash book that acts as a ledger for all money taken out and going into the tin. Although this method has been widely accepted for many years, it is hard to control and can often even leave businesses out of pocket.

Risks of poor management

Poor petty cash management can have a significant impact on the bottom line for business. One retailer has estimated that businesses are losing £1.8bn each year through petty cash fraud and inefficiency. Keeping track of this outdated paper-based form of management is the source of many headaches for FDs and CFOs.

Incomings and outgoings aren’t tracked automatically, meaning much of its use relies heavily upon honesty and conscientious of employees. Lines can be blurred and boundaries are easily stretched, meaning there’s a great deal of trust placed in the workforce – something that FDs and CFOs can’t directly control.

There have been numerous high profile case studies of employees committing fraudulent acts through expenses and petty cash, costing their business. For example, in a 2016 case, a Cardiff council worker was found guilty of stealing £35,000 from petty cash. The fact that it was possible for one worker to extract such a large amount from the system underlines the extent of its vulnerabilities, but this is often underestimated.

As illustrated by the name, for many petty cash is considered a ‘small’ aspect of a business’s accounts management, which results in a lack of scrutiny and monitoring, and occasionally costs to the business through fraud and theft. It is therefore important that FDs and CFOs are aware of the new solutions available that can help to manage this process more effectively.

The new solutions

One major technological development which lends itself perfectly to solving the issues around petty cash is cloud-based software. Online solutions enable the float to be managed through one central system, which houses a digital record of receipts, and therefore all ingoing and outgoing expenditure.

This digital system also provides an automatic warning whenever the float doesn’t tally with the outgoing, affording the finance teams plenty of time to rectify the costs and keep the books in balance.

These cloud-based technologies have transformed the accounting industry over the past ten years. For CFOs and FDs, cloud-based software has simplified many of the basic bookkeeping tasks and freed up their time for ‘higher level’ thinking, thus making it easier to see where improvements can be made. The cloud allows businesses to have remote access to their system and be accessed across several devices. The result is immediate and effective as employees can manage expenditure on the go.

The benefits

One of the key benefits for FDs and CFOs is the centralisation of the business’ expense management systems, including the petty cash element. The technology effectively shines a light on the day-to-day business costs that had previously remained in the shadows, reducing the risk of fraud. It provides finance teams with the tools to track and report any cash or expenses being taken in and out of the business.

The ability to keep a digital record of receipts provides an audit trail to tally up the company expenditure on expenses and petty cash, so finance teams no longer have to worry about finding a taxi receipt from the previous year to prove to HMRC where the cash has been spent.

These new solutions not only benefit the finance teams managing the costs, but also the employees. Cloud software allows employees to use their smart phone and apps to instantly convert paper receipts into a digital form, reducing the risk of losing bundles of paper receipts which can be frustrating and time consuming for employees and finance teams alike.

The cloud also empowers employees to keep track of their purchases as well as providing the finance teams with the ability to provide reports and monitor the businesses’ petty cash purchases. This even contributes towards the sustainability goals of a business – scaling back on the need for paper based recording methods.

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Hallerud at Easter
By DJKL
16th Nov 2016 14:45

Not sure I really see the pluses, yes transparent but still requires oversight and still only as good as the completeness of the recording. There is a false safety bias inherent, "on the computer so it must be right" attitude can prevail.

IMHO the way to control is:

1. Make a particular individual responsible for the tin, they pay out on submission of properly incurred receipts, they hold the keys, and the physical cash is checked on a periodic basis by A N Other.

2. Such checks are recorded and can be reviewed as having happened by others.

I actually prefer running imprest systems, that makes the holder paranoid about losing receipts as in effect a lost receipt is their own money- does not help with items being correctly claimed/for the business, but that check really only comes with reviewing for large/unusual amounts.

Having said that we are lucky if, within the two floats we run, we expend more than £3,000 p.a. in total.

Thanks (1)