The One Business Habit That Could Save You Thousands (Yet Most Owners Ignore It)

Every business owner knows that staying on top of finances is critical. But there is one deceptively simple tool that often gets overlooked, mismanaged, or ignored altogether: the petty cash account.

Petty cash may sound old-school in a world of digital payments and accounting software, yet it remains one of the most practical and efficient ways for businesses to handle small, everyday expenses. The key is knowing how to use it correctly.

When petty cash is well–managed, it saves time, reduces risk, and gives teams the flexibility they need to operate smoothly. When it is not… it becomes one of the fastest ways for money to disappear unnoticed.

This guide breaks down how petty cash really works, when you should use it, and how to establish foolproof internal controls that protect your business.

What Is a Petty Cash Account and Why Does It Matter?

A petty cash account is simply a small amount of money kept on your business premises to cover minor expenses. Think of it as the “quick-access fund” your team uses for small, immediate purchases like:

• A vendor who only accepts cash

• A toll booth on a delivery route

• Emergency supplies

• A window washer who gives a cash-only discount

  
  

While most business expenses should flow through standard accounts or credit cards, petty cash fills the gaps where cash is the only realistic option.

Why Petty Cash Still Makes Sense Today

1. Lower Risk Compared to Other Options

Issuing company credit cards to multiple employees or making them authorized signers on a business account exposes you to unnecessary risk.

Petty cash caps that exposure. The maximum loss is equal to the amount of cash in the box, which is why balances should be kept intentionally low.

2. It Is Fast and Convenient

A new employee can make a purchase on their first day without waiting for a card, login, or authorization profile. The custodian (usually a manager) simply hands them the cash and records the withdrawal. Done.

3. Some Expenses Are Cash-Only

No matter how modern your business is, there will always be someone who prefers cash. Petty cash solves that problem instantly.

4. It Can Simplify Your Workflow

Instead of juggling multiple cards and tracking who used what, petty cash centralizes small purchases. One custodian. One ledger. One place to monitor activity.

How to Run Petty Cash the Right Way

A petty cash account is only helpful when it is tracked with the same discipline as a bank account. Here is how to keep it clean, compliant, and under control.

1. Record Every Transaction

Your petty cash ledger can be a notebook, spreadsheet, or a designated account in your accounting software. It must include:

• Date

• Amount

• Purpose

• Employee who made the purchase

• Running balance

  
  

Treat it exactly like a checking account.

2. Always Keep Receipts

Without receipts:

• Your bookkeeper cannot prove the expense to the IRS

• The purchase cannot be deducted

• It must be coded as an owner draw

  
  

Receipts protect your business financially and legally.

3. Assign a Custodian

One person per shift should control petty cash. This avoids confusion, reduces risk, and creates accountability. The custodian must:

• Maintain the ledger

• Hand out cash

• Confirm the balance at the beginning and end of the shift

  
  

4. Establish Internal Controls

Even custodians need oversight. Regular audits by the owner or regional manager ensure funds are used appropriately and the balance matches the ledger.

5. Create a Clear Petty Cash Policy

Your policy should outline:

• Allowed expenses

• Required documentation

• Maximum balance

• Required approval

• Deposit procedures

  
  

6. Keep the Balance Low

Risk equals the amount of cash available. Replenish consistently but avoid letting too much accumulate.

7. Source Funds Only From the Business Bank Account

Never refill petty cash with money from the register. Deposits should always come directly from the business account, ideally by the owner.

This ensures complete transparency and immediate visibility into spending patterns.

8. Use Secure Storage

Cash should be locked at all times—drawer, lockbox, or safe. Unsecured petty cash is an open invitation for theft.

Why ProfitWise Is the Partner Businesses Trust With Their Money

Managing petty cash correctly is just one part of understanding where your money is going and how to keep more of it. Many bookkeeping services simply track transactions—but ProfitWise goes deeper.

Our team combines real-world business experience with rigorous financial systems, giving business owners clarity they often do not get anywhere else. We do not just record numbers; we help you understand them. That means spotting patterns, identifying inefficiencies, and improving your ability to make decisions grounded in data, not guesswork.

While other services may offer basic bookkeeping, ProfitWise stands out for helping business owners gain true financial control. Our approach empowers you to protect your cash, stay compliant, reduce waste, and operate with the confidence that every dollar is accounted for.

Because when you understand your money, you keep more of it.

Contact ProfitWise Today