A Simple Petty Cash System for Associations That Survives an Audit

A bulb for the stairwell, a padlock for the roof door, tea for a committee meeting, a rickshaw to the bank. Each one is small, but together they fill pages of the main cash book and are the first thing an auditor questions. A proper petty cash system keeps these small expenses in one controlled place, with a clear limit and a clear trail.

What is a petty cash system?

Petty cash is a small, fixed amount of money kept by one named person for minor day-to-day expenses. The most common and reliable method is the imprest system:

• The committee approves a fixed float, say ৳5,000.
• The petty cash holder spends from it and keeps a slip for every expense.
• At the end of each month (or when the float runs low), the slips are totalled and the treasurer tops the float back up to exactly ৳5,000.

At any moment, cash in the box + slips for money spent = the fixed float. That one rule is what makes petty cash easy to check.

Setting up petty cash step by step

1. Agree the float. Pick an amount that covers roughly a month of small expenses. For a 120-flat building this might be a few thousand taka; a larger welfare association covering several roads may need more. Keep it as low as practical.
2. Name one holder. Usually the office manager or caretaker supervisor. One person, one box, one responsibility.
3. Set a per-item limit. For example, anything above ৳1,000 goes through the normal payment process, not petty cash.
4. List what petty cash can be used for. Small repairs and supplies, refreshments for official meetings, local transport for association work, photocopies and printing.
5. Record the opening transfer. Move the float from the main cash or bank to a "Petty cash" account with a contra voucher. This is a transfer, not an expense.

Tip: Write the agreed float, holder and per-item limit in the committee minutes. If the holder changes, count the box together and minute the handover.

Recording each expense

Every time money leaves the box, the holder fills in a petty cash slip or a line in a petty cash register:

Attach the shop's cash memo where one exists. Where there is no memo, such as a rickshaw fare, the slip itself with the holder's signature is the record. The expense head column matters: it is what lets petty cash spending flow into the right lines in your accounts.

The monthly top-up

At month end, or whenever the box runs low:

1. The holder totals all slips by expense head.
2. The treasurer counts the cash in the box.
3. Check: cash counted + total of slips = float. If you started with ৳5,000 and slips total ৳3,270, the box should hold ৳1,730.
4. Record a payment voucher from petty cash for each expense head, using the slip totals.
5. Transfer ৳3,270 from main cash or bank back to petty cash with a contra voucher, restoring the float to ৳5,000.
6. Both people sign the count sheet, and the slips are filed with the voucher.

Handling shortages and common problems

• Box is short. If cash plus slips is less than the float, ask about missing slips first. If the gap cannot be explained, record it openly as a cash shortage and report it to the committee; do not quietly cover it.
• IOUs in the box. A note saying "Taken ৳500, will return" is not an expense. Ban personal loans from petty cash entirely.
• Large items split into small slips. Three slips of ৳900 for the same purchase on the same day is a way around the per-item limit. Check for it during the monthly count.
• Petty cash mixed with collections. Service charge payments must never go into the petty cash box. Keep collections and petty cash physically separate.
• Float creeping upward. If the holder keeps asking for a bigger float, look at which expenses are growing and whether they belong in petty cash at all.

Surprise counts

Once or twice a year, a committee member other than the treasurer should count petty cash without notice. It takes five minutes, and it protects the holder as much as the association, because a clean surprise count is the best evidence that the system works.

For cooperatives that manage deposits, DPS and loans, see Somity Keeper; for a small somiti or savings circle, the simpler Somity Keeper Lite app keeps the books on your phone.

Running petty cash in Society Keeper

In Society Keeper you can add a "Petty cash" account in the editable chart of accounts, fund it with a contra voucher from cash or bank, and record the monthly spending as payment vouchers against the right expense heads, each approved by a second person under maker-checker. The cash and bank book then shows petty cash separately, and the monthly expense analysis includes these small costs under their proper heads. Try it with your own figures in a free demo.