Insurance Petty Cash Management
A controlled procedure for maintaining, disbursing, reconciling, and replenishing a petty cash float for small day-to-day business expenses.
Purpose
To provide a secure and accountable system for handling small cash payments that are impractical to process through the standard purchase application or accounts payable process, while maintaining adequate controls over cash.
Scope
Covers the establishment, disbursement, reconciliation, and replenishment of petty cash floats. Applies to all petty cash transactions up to the approved single-claim limit.
Prerequisites
- Approved petty cash policy defining the float amount and claim limits
- Lockable cash box or safe for securing the float
- Petty cash vouchers and a petty cash register or logbook
Aligns with ASIC regulatory requirements, General Insurance Code of Practice, and AFSL obligations. Includes audit trail provisions.
Step-by-Step Procedure
Establish or Verify the Petty Cash Float
Confirm the approved float amount, count the existing cash, and ensure the float is at the correct starting balance.
- 1.1Check the approved float amount as stated in the petty cash policy
- 1.2Count the cash on hand and reconcile to the float balance
- 1.3Report any discrepancies to the Finance Manager immediately
- 1.4Ensure the cash box is stored securely in a locked location
Receive and Assess the Petty Cash Request
Receive a request for petty cash, verify it is for a legitimate business expense within the approved limits, and confirm that petty cash is the appropriate payment method.
- 2.1Confirm the requested amount does not exceed the single-claim limit
- 2.2Verify the expense is for a legitimate business purpose
- 2.3Check that the expense cannot be more appropriately handled via a purchase application or credit card
- 2.4Obtain the requestor completed petty cash voucher with details of the expense
Disburse Cash and Record the Claim
Count out the requested amount, obtain the claimant signature on the petty cash voucher, and record the disbursement in the petty cash register.
- 3.1Count the cash in front of the claimant
- 3.2Have the claimant sign the petty cash voucher to acknowledge receipt
- 3.3Record the date, amount, description, and general ledger code in the register
- 3.4Attach the receipt or tax invoice to the voucher when the claimant returns it
- Never disburse cash without a signed voucher and a clear business purpose
Collect Receipts and Change
When the claimant returns, collect the original receipt or tax invoice and any change, then update the petty cash voucher.
- 4.1Verify the receipt matches the original request and voucher amount
- 4.2Collect any change and reconcile to the original disbursement
- 4.3Attach the receipt to the voucher and file in date application
- 4.4Update the register with the actual amount spent if different from the original disbursement
Reconcile the Petty Cash Float
Count the remaining cash, add the total of vouchers and receipts, and verify the sum equals the approved float amount.
- 5.1Count all cash remaining in the cash box
- 5.2Total all vouchers and receipts for disbursements since the last replenishment
- 5.3Verify that cash on hand plus voucher total equals the approved float amount
- 5.4Investigate and document any discrepancies
- Perform a reconciliation at least weekly, or whenever the float drops below 30% of the approved amount
Request Replenishment
Submit a replenishment request to restore the float to the approved amount, attaching all vouchers and receipts for the disbursements being claimed.
- 6.1Prepare the replenishment request form with the total amount to be replenished
- 6.2Attach all signed vouchers and receipts in application
- 6.3Code each voucher to the correct general ledger account and cost centre
- 6.4Submit the request to the Finance Manager for approval
Approve and Process Replenishment
The Finance Manager reviews the reconciliation and vouchers, approves the replenishment, and arranges for a cheque or cash withdrawal to top up the float.
- 7.1Review the reconciliation and verify vouchers are properly supported
- 7.2Approve the replenishment amount
- 7.3Process the payment to restore the float via cheque or bank withdrawal
- 7.4Post the petty cash expenses to the general ledger
Quality Checkpoints
Common Mistakes to Avoid
Expected Outcomes
The petty cash float reconciles to within $1 of the approved amount at every count.
100% of petty cash disbursements have a signed voucher with a supporting receipt.
Frequently Asked Questions
How often should the petty cash float be reconciled?
The float should be reconciled at least weekly, and always before requesting a replenishment. A surprise count may also be performed periodically by the Finance Manager.
Can I use petty cash for personal expenses and reimburse later?
No. Petty cash is strictly for business expenses. Personal use of petty cash, even temporarily, is a breach of policy and may result in disciplinary action.
What is the maximum amount that can be paid from petty cash?
The maximum single-claim amount is defined in the petty cash policy, typically between $50 and $100. Any amount above this limit should be processed through the standard procurement or accounts payable process.
What should I do if there is a shortage in the float?
Document the shortage immediately, report it to the Finance Manager, and investigate possible causes. Repeated or significant shortages may trigger a change of custodian or a review of controls.
Who can access the petty cash float?
Only the designated Petty Cash Custodian and an authorised backup should have access to the cash box. The float should be kept in a locked location with limited access.
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