In an age of digitisation and rapidly evolving business practices, some conventional methods of managing finances remain consistent, one such method being the use of petty cash.
However, the question arises: is maintaining a petty cash fund still viable for businesses, especially in the contemporary Australian market?
An over-reliance on petty cash can increase the risk of fraud in your business. It can be challenging to manage, particularly in a post-covid economy.
Read our comprehensive analysis of using petty cash so you can make the best choice for your business.
Petty cash has worked for years… hasn’t it??
Traditionally, petty cash is an amount of cash kept in the office that can be used when needed. A note or receipt should be left with the petty cash to explain what the money has been spent on and who by. This may be contained in a petty cash book.
However, the nature of petty cash is changing in tune with the evolving payments landscape in Australia. Payments are increasingly being made electronically, with the use of cash payments facing a steep decline.
This is a trend that is already dominating the finances of businesses and the consumer. Businesses globally are choosing to plastic and digital payments continues to soars, turning businesses cashless.
Particularly in light of a post-Covid society, businesses are choosing to use petty cash cards instead of coins and notes to reduce staff administration and improve transparency.
The pros & cons of petty cash
Petty cash is quick and convenient yet also vulnerable and prone to misuse. But, what are the pros and cons of using petty cash in your business?
Petty cash is convenient and saves time and effort. You can access the cash at any time in the office and you can avoid expense-related reimbursement procedures.
As a result, time is saved and the number of administrative tasks is reduced. Employees possess increased autonomy and do not need to wait for expense approvals.
However, petty cash does offer a business some disadvantages. Anyone can spend cash and so a lack of accountability can result in misuse, fraud or theft. It may be difficult to track all uses of petty cash and document effectively.
Furthermore, a large petty cash fund can negatively impact cash flow. This can lead to losses or overspending.
Across Australian and New Zealand retail economies, employee theft can make up 24 per cent of losses. This costs a business an average value of $1,200 per incident.
We have broken down the pros and cons into a list to make it easy for you to make your own decision.
Immediate availability: It ensures liquidity, meaning businesses can quickly cater to small, immediate expenses without the hassle of formal processes.
Simplicity: There’s no denying the ease of use. Handing over cash is straightforward and requires little documentation.
Lack of oversight: Cash transactions often lack a detailed audit trail, leading to potential misuse or pilferage.
Administrative burden: Though intended for simplicity, petty cash can become cumbersome, requiring regular reconciliations and safekeeping.
Limited to small transactions: The fund can only cater to minor expenses, which might not be suitable for all requirements.
Safety concerns: Holding cash can pose security risks, from potential theft to loss.
First,What does petty cash look like in the future?
Given the increasing emphasis on digital transactions and cashless operations, the future of petty cash seems uncertain.
Many businesses are seeking alternatives that offer greater oversight and reduced administrative burdens. Furthermore, with the advent of instantaneous digital payments, the ‘immediacy’ advantage of cash is being challenged.
The use of cash is in decline. Cash could be almost gone in Australia in a decade, following the rapid disappearance of cheque payments.
Recent figures state that the total value of cash payments made in Australia represented just 6 per cent of all point-of-sale transactions in 2022. This is estimated to fall to just 4 per cent of total retail purchases across the country by 2025.
What’s the best way to handle Petty Cash?
The best way to handle petty cash for businesses is to keep cash secure, set spending limits, and implement regular record-keeping. Record how do employees use petty cash daily.
This may take time to incorporate and administer in your business but will lead to safer finances and fewer opportunities for employee theft.
Alternatives to petty cash
Whilst tight controls on physical petty cash can help, it is not a flawless procedure when considering how to manage petty cash. However, alternatives may benefit the business and the employee!
Trust U Petty Cash Card is a reloadable prepaid Mastercard or Visa card and a fantastic alternative to physical petty cash. Employers can load their petty cash budget via a self-serve portal, ready for employees to use whenever they are required to make a small purchase on behalf of the business.
Accepted online and instore, the Trust U Petty Cash Card gives employees the flexibility to use for a range of business expenses and complete transactions instantly. All transaction history is available via the cardholder website or app and exportable to a CSV file to ease the record-keeping process. You can also ‘lock’ a card you believe may have been misplaced or stolen.
Why choose an alternative to Petty Cash
While petty cash has its historical significance and advantages, the modern Australian business landscape is evolving. With concerns over security, oversight, and efficiency, many firms are exploring alternatives.
Solutions like the Trust U Petty Cash Card, available as a plastic or digital card, not only offers convenience of immediate payments but also bring along the benefits of traceability, confidence, and control.
Join the cashless revolution and make the switch to the Trust U Petty Cash Card today.
Buying prepaid cards from Corporate Prepaid Cards is quick and easy, simply fill out the form online.