The Imprest System of Managing Petty Cash

Definition

Petty cash is a small amount of money a company uses for small, urgent expenses without writing a cheque or following procurement. The float varies by organisation. One person — usually a junior accountant — is designated petty cash custodian, disbursing small amounts subject to approval and documenting each payment with a voucher and receipt.

The imprest process

• Staff needing cash fill in a petty cash voucher, approved by their line manager or a senior accountant.
• The cashier disburses the cash against the approved voucher and files it.
• Staff spend the cash, obtain a valid receipt, then return any balance plus the receipt to the cashier.
• The cashier updates the voucher with correct figures and files vouchers and receipts.
• When the float reaches the reimbursement point (usually a percentage of the total float), the cashier prepares a reimbursement request — a summary of all spending with all vouchers and receipts attached.
• A senior accountant approves it and a cheque is drawn; the cycle repeats.

Posting and control

The reimbursement cheque is drawn on the bank account, so the Cash account (not Petty Cash) is credited and expense accounts debited — the Petty Cash ledger account is not involved in replenishment. At all times the custodian should hold currency, coins, and receipts totalling the imprest balance. Control happens at replenishment: the approver reviews the receipts attached to the cheque request, and an independent person can confirm cash plus receipts equals the imprest amount.

Policy points

• Never use petty cash for personal expenses or items that must follow procurement;
• Keep the float standard and review it regularly;
• A company may hold an M-Pesa float on a mobile line;
• Any transaction without a receipt needs a signed undertaking;
• Set clear per-transaction limits;
• Always secure petty cash in a safe and insure it.