Handling cash for our office is an unavoidable part of my job. While we prefer using bank transfers or PayPal wherever possible, there are vendors who simply only accept cash.
So we have created a simple way to manage our petty cash, and I thought of sharing it for startups and SMEs in Singapore.
A small safe (cost S$100-$200) that is drilled down to one of our wooden shelves. Only two people in our office know the codes to the safe.
A Xero Account called Petty Cash:
Step 1: Create a bank account called Petty Cash. You can find this button under Chart of Accounts under the Settings tab of Xero.
Step 2: Enter the bank account details similar to the sample below.
Xero has a handy help section article on this.
An initial deposit:
This is the first deposit into your Petty Cash, which may be a withdrawal from your company bank account. This can be recorded in Xero using the “Transfer Money” option.
A petty cash policy:
We have set up some simple policies around our petty cash involving
- who handles access to the physical cash
- the maximum amount of petty cash to be held (between $1-2K is usual for Singapore SMEs)
- How money spent is recorded (more on that below)
- Once a month reconciliation of the petty cash by our accountant
How money spent is recorded
As the designated administrator for the company handling petty cash, I have access to our company’s Xero account to be able to upload receipts and supplier invoices.
All I have to do when I spend money is hit the big plus symbol, select Spend Money and choose my Petty Cash account.
And the last step is that I upload the physical invoice into Xero, after which I discard the physical copy since a digital copy of the invoice is sufficient for the Inland Revenue Authority Of Singapore.
Monthly reconciliation of petty cash account:
This is the step that lets me not worry about getting anything wrong. Once a month our accountant, goes through the petty cash transactions that I have put in and
- Corrects any wrong categorisations especially of the Account to which expenses are posted. (He is also kind enough to let me know, so I can get this right the next month)
- Checks with me on the physical balance of cash, and matches that to Xero
- Tops up petty cash to our designated amount of $2000
- Once a year my accountant does a physical count of cash as well before closing the financial year end.
So that’s our petty cash process, it is elegant and keeps things tidy. Hope my sharing was helpful.
Drop us a note if you want to know more about Xero.
Posted: January 18, 2017