Store Manager Petty Cash: Setting the Float

Store Manager Petty Cash: Setting the Float

To establish and manage a petty cash fund, small retail businesses should follow these rules: petty cash must be kept separately from the business's general cash. The amount of the petty cash fund should be at least $10 per employee per year, and should not exceed $50 per employee per year. The petty cash account should be approved by the store manager and should be audited annually. The store manager is responsible for maintaining accurate records and for ensuring that the petty cash fund is used only for legitimate expenses. For the bigger picture, see our guide to retail expense management for under $10/user (2026).

Common Pitfalls and Frequently Asked Questions

Counting the physical cash on hand and adding it to the total of receipts/vouchers is a critical step in managing a petty cash fund. However, this process can be prone to errors, especially in small businesses with large cash handling needs.

One common pitfall is not accurately counting the cash, leading to a discrepancy between the physical count and the total in the petty cash register. This can result in under- or over-receipts, which can have significant consequences if not caught.

Another pitfall is not regularly reconciling the petty cash register with the cash count, which can lead to discrepancies and errors. This is especially true in high-volume businesses where cash handling is a critical aspect of operations.

Some frequently asked questions about managing a petty cash fund include:

• What is the typical rate of error in counting physical cash?
• How often should the petty cash register be reconciled with the cash count?
• What happens if two different employees count the cash at different times?
• How can I ensure that my petty cash fund is accurately matched with my receipts and vouchers?
• What are the consequences of not properly managing a petty cash fund?

Setting Up and Managing the Petty Cash Fund

A petty cash fund is a small, limited amount of money set aside for minor expenses that do not require frequent replenishment. For most small businesses, a petty cash fund of $100 to $500 is considered sufficient to cover minor expenses without frequent replenishment.

To set up the petty cash fund, you will need to:

• Determine the starting balance, which should equal the sum of the fund's starting balance. This is usually $100 to $500, depending on the business.
• Set a fixed fund amount, which is the amount you will replenish after expenses are incurred.
• Designate an individual, such as the store manager, as the custodian of the petty cash fund.

Every disbursement from the petty cash fund must be documented with a petty cash voucher or slip, which includes:

• The date of the transaction
• The description of the expense
• The amount of the expense

The petty cash fund should be replenished to its starting balance after expenses are incurred, and the funds should be reconciled regularly to ensure their accuracy.

Setting the Float

To establish a petty cash fund, start by setting a maximum per-transaction limit. This limit should be high enough to prevent misuse but low enough to handle larger expenses. For example, setting a maximum per-transaction limit of $25 to $50 helps prevent misuse and ensures larger expenses are handled through other payment methods. This limit should be communicated to all employees and set as a policy. It's essential to review and update the limit regularly to ensure it remains effective.

When a transaction exceeds the limit, a petty cash slip should be completed. The petty cash slip should include the date, description of the transaction, amount, and reason for the transaction. The slip should also include a note indicating that a payment was made from the petty cash fund. If a receipt is unavailable, a detailed petty cash slip is the fallback, but this should be an exception, not the routine.

Best Practices for Petty Cash Management

The imprest system is commonly used for petty cash management. Designate one trustworthy employee as the petty cash custodian. Receipts are required for all petty cash expenses to prove that the cash was used for legitimate business purposes.

Rules:

• The petty cash custodian is responsible for reconciling the petty cash account on a regular basis.
• The custodian must keep receipts for all petty cash expenses and submit them to management for approval before posting to the petty cash account.
• The petty cash custodian must be a trustworthy employee who has been authorized to handle the petty cash account.

By following these best practices, small retail businesses can ensure accurate and compliant petty cash management, and maintain a transparent and trustworthy accounting system.

State-Specific Requirements

In the United States, the Fair Labor Standards Act (FLSA) dictates that petty cash funds are considered a current asset on the balance sheet, not an expense. This means that businesses must report the petty cash fund's value on the balance sheet, rather than charging it as an expense on the income statement.

Some states have specific requirements for petty cash management.

Additionally, some states have specific rules for the use of petty cash funds. For example, Illinois requires that petty cash funds be used for purchases that are "necessary for business purposes." Other states, such as Florida and Texas, require that petty cash funds be used only for small purchases, such as postage or small supplies.

It is essential to check with local authorities to determine the specific requirements for petty cash management in your state.

Tax rules, limits and rates change. Confirm current figures with the IRS or your accountant before you file.