Petty cash is a little sum of money that is always on hand to cover small expenses that don’t warrant writing a check or using a credit card.
Each department may have its own petty cash pool in larger corporations. A petty cash fund can be used to pay for office supplies, greeting cards for clients, flowers, catered lunches for staff members, and employee expense reimbursement.
The key benefits of using petty cash are its speed, convenience, and simplicity. Petty cash funds include drawbacks like their susceptibility to theft and abuse and the requirement to regularly check and balance them.
Petty cash funds can be used to get around some internal controls. Petty cash is available, but that doesn’t imply everybody can use it for everything they want. Strict internal controls are used by many businesses to administer the fund. Frequently, only a small number of people have the authority to approve disbursements, and they can only do so for costs associated with legal business operations or activities.