Technology insight
Managing petty cash
Adam Reynolds, chief executive officer of webexpenses, , explains a smart way is available
T he dictionary definition of the word ‘petty’ is something that’s deemed, “not important and not worth giving attention to”. And it’s this perception that makes managing petty cash such a potential hazard for payroll professionals. It’s that one area of company costs that’s liable to attract the least amount of monitoring or scrutiny; it’s what makes petty cash such an attractive target for fraudsters. And there’s certainly nothing petty about the scale of losses that can be inflicted on organisations when inadequate petty cash systems are ruthlessly exploited. In 2013, tens of thousands of pounds were taken from the petty cash fund of a Birmingham housing charity as part of a £1.8 million fraud. And in a 2016 case, a Cardiff council worker was found guilty of stealing £35,000 from petty cash. It has been estimated that the total losses to UK businesses through petty cash fraud and inefficiency could be as high as £1.8 billion each year. A combination of factors has helped to create this situation but a prime reason is the attitude that petty cash management is not something worth devoting organisational resources to. Businesses have traditionally relied on the imprest system with a cash fund or ‘float’ created to cover those everyday office costs, such as bottled water or items of stationery. An employee is designated as ‘custodian’ of the float and tasked with recording any money paid out to colleagues; requesting a cash ‘top up’ from the employer when the float falls below a certain level. In theory, it’s a perfectly sensible system; one which provides the speed and flexibility to cover any day-to-day business costs that employees may occur. But in the real-world, it has a tendency to deteriorate over time as
petty cash rules are stretched and blurred. This is liable to happen whenever the amount of money paid out falls out of kilter with the amount left in the float. To try and offset this discrepancy, the temptation is for the curator to resort to ‘creative’ accounting to rebalance the books. ...area of company costs that’s liable to attract the least amount of monitoring or scrutiny So the effectiveness of the system relies a great deal on the ability of the individuals tasked with managing the petty cash fund. This can be especially difficult to maintain when staff members change and employees are absent for holidays or sick leave. But perhaps the problem which is most inherent with the way the imprest system has been traditionally implemented by businesses, is the way it operates in isolation of the main expenses regime. With petty cash being ‘outsourced’ to individual offices, it falls outside of the usual organisational checks and balances. Finance teams are liable to carry out summary checks only whenever a request is made for the float to be ‘topped up’. But with cloud-based technology and digital expenses management, we now have the tools to take back control of petty cash, to integrate it with the rest of the expenses ecosystem. It gives finance teams the power to properly monitor costs and robustly
maintain spending policies. It does this by allowing the float to be managed digitally, with digital receipts to support costs incurred and a warning whenever the float doesn’t tally with outgoings. The move to digital data brings with it the benefits of consolidated reporting and automated alerts whenever spend falls outside of set parameters and policies. By integrating it into the rest of the system, finance and payroll teams can keep track of the current status of each and every float that may be operating within an organisation. They are able to keep track of exactly how much cash is being held in each office. It effectively shines a light on those kind of day-to-day business costs that have previously remained in the shadows. In doing so, it greatly reduces the risk of fraud and boosts general efficiency. The benefits are not just for those managing costs, the systems also allow employees to use a smartphone app to instantly convert any paper receipts into a digital form. It removes the need for bundles of receipts or handwritten notes to support petty cash costs. Alongside this user friendliness is another important factor; it’s the way that moving to a digital system can change the general perceptions within an organisation towards petty cash. It moves petty cash away from its homespun origins; away from the office biscuit tins full of change and handwritten notes. Instead, it allows petty cash to be fully integrated into an efficient digital environment. It allows everyday business costs to benefit from the level of smart management and monitoring that we now expect in a modern growing business. n
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Issue 25 | November 2016
| Professional in Payroll, Pensions and Reward |
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