Key takeaways
What this article covers, in order:
- Why does petty cash go wrong so often?
- How does the fixed float (imprest) system work?
- Setting it up: a checklist
- Recording the float
- Recording a top-up
- What if the tin doesn't balance?
The simplest petty cash system that actually balances is a fixed float. You keep a set amount in the tin, every withdrawal gets a receipt or voucher, and when you top up you put back exactly what was spent and record those costs. Cash plus receipts should always equal the float. Here's how to set one up, keep the petty cash bookkeeping straight, and what to do when the tin comes up short.
Why does petty cash go wrong so often?
Lena runs a hair salon in Townsville. There's a tin under the front desk with "about two hundred bucks" in it. Staff grab $20 for milk, someone pays a courier from it, a client's change comes out of it when the till's short. Receipts go in the tin, or a drawer, or nowhere.
Every few months Lena tips the tin out, finds $64.15 and a pile of crumpled receipts, can't work out what's missing, and codes the difference to "Sundry". Her books never quite reflect what was spent, and she's got no idea whether the tin is $10 short or $100 short.
Nothing's being stolen, probably. The trouble is the system has no fixed point to check against. Give it one and petty cash becomes a two-minute job.
How does the fixed float (imprest) system work?
You decide on a float, say $300, and that number never changes in the books. The rule is simple:
Cash in the tin + receipts for what's been spent = $300, always.
When cash runs low, you add up the receipts, withdraw exactly that amount from the business bank account, and put it in the tin. You're back to $300 in cash. The receipts get recorded as expenses and filed.
That's it. The beauty is that at any moment, anyone can check the tin: count the cash, add the receipts, and it should be $300.
Setting it up: a checklist
- [ ] Pick a float that covers two to four weeks of small spending. For most small businesses that's $100 to $500.
- [ ] Withdraw it from the business account in one go and label it clearly in the books.
- [ ] Choose one person to hold the tin. Others ask them, not the tin.
- [ ] Set a spending limit per item (say $50). Anything bigger goes on the business card or through normal bills.
- [ ] Keep a pad of petty cash vouchers in the tin for spending without a receipt (a parking meter, a tip for a delivery).
- [ ] Never use petty cash for change in the till or for personal loans to staff.
- [ ] Count and top up on a schedule: fortnightly, or whenever the cash drops below about a third of the float.
Recording the float
When Lena withdraws $300 to start the float, it's not an expense. It's money moving from one asset (the bank) to another (the tin):
| Account | Debit | Credit |
|---|---|---|
| Petty cash | $300.00 | |
| Business bank account | $300.00 | |
| Total | $300.00 | $300.00 |
The petty cash account now shows $300, and it should keep showing $300 for as long as the float stays the same size.
Recording a top-up
After three weeks, Lena counts the tin. Here's what's in it:
| Receipt / voucher | Amount | Category |
|---|---|---|
| Milk and tea for the staff room | $18.40 | Staff amenities |
| Stamps for posting gift vouchers | $36.00 | Postage |
| Cleaning cloths and spray | $42.75 | Cleaning |
| Parking for supplier pickup | $24.00 | Travel and parking |
| Taxi to drop off a broken dryer for repair | $61.30 | Travel and parking |
| Total receipts | $182.45 | |
| Cash counted in tin | $117.55 | |
| Cash + receipts | $300.00 |
It balances. She withdraws $182.45 from the business account, tops the tin back up to $300, and records:
| Account | Debit | Credit |
|---|---|---|
| Staff amenities | $18.40 | |
| Postage | $36.00 | |
| Cleaning | $42.75 | |
| Travel and parking | $85.30 | |
| Business bank account | $182.45 | |
| Total | $182.45 | $182.45 |
Notice the petty cash account isn't touched. The tin went from $117.55 back to $300 in real life, and the books always said $300, so they're now right again. The expenses land in the month they're topped up, which for small amounts is perfectly reasonable.
What if the tin doesn't balance?
Say the count had shown $115.55 instead of $117.55. Receipts $182.45 plus cash $115.55 is $298.00. The tin is $2.00 short.
For small amounts, don't spend an afternoon hunting. Top up by $184.45 (receipts plus the shortfall) and record the extra $2.00 to a "Cash over and short" expense account:
| Account | Debit | Credit |
|---|---|---|
| Staff amenities | $18.40 | |
| Postage | $36.00 | |
| Cleaning | $42.75 | |
| Travel and parking | $85.30 | |
| Cash over and short | $2.00 | |
| Business bank account | $184.45 | |
| Total | $184.45 | $184.45 |
If the tin keeps coming up short, or the gap is more than a few dollars, that's different. Tighten who has access, insist on vouchers, and count more often. A pattern is a process problem, not a rounding error.
Changing the size of the float
If $300 keeps running out in a week, increase it. Withdraw the extra (say $200), put it in the tin, and record it the same way as the original setup: debit petty cash $200, credit bank $200. The petty cash account now shows $500, and that's the new number the tin must always add up to.
Going the other way, put the excess back into the bank and reverse it.
Do you even need petty cash?
Honestly, fewer businesses do than used to. If everyone who spends small amounts can use a business debit or credit card, every purchase comes through your bank feed with a date and payee, and there's no tin to count. Staff reimbursements for occasional out-of-pocket spending, paid by bank transfer against a receipt, are another clean option.
Petty cash still makes sense when:
- Suppliers or situations are genuinely cash-only (some markets, tips, coin parking)
- Several staff need to make tiny purchases and you don't want to hand out cards
- You want a hard cap on what can be spent without asking
Whatever you choose, keep the receipts and keep GST coded correctly on what you record; your BAS agent or accountant handles lodgement.
Petty cash habits that keep the tin honest
- One tin, one custodian.
- A receipt or voucher for every withdrawal, every time.
- Count before every top-up, and write the count on the top-up voucher.
- Top up from the business bank account, never from the till.
- Reconcile the business bank account as usual; the top-up withdrawals will appear there like any other transaction.
How HelloBooks helps
HelloBooks doesn't run your tin for you, but it does keep the bank side clean. The float withdrawal and every top-up come through when you connect your bank account (or import a CSV statement), and land in a review list where you confirm or change the category. On the reconcile screen, each statement line gets an AI match suggestion with a confidence score and the reason for the match, so the petty cash withdrawals are easy to spot and tick off. Your P&L then shows those small costs in the right categories, and the mobile app means whoever looks after the tin can check in from the front desk. See bank reconciliation and our full bookkeeping features.
FAQs
How much should a petty cash float be?
Enough for two to four weeks of small spending. Track what you actually spend for a month and set the float a bit above that. For most small businesses it lands somewhere between $100 and $500.
Is the petty cash top-up an expense?
The top-up itself isn't. What you spent from the tin is. You record the receipts as expenses when you top up, and the bank withdrawal pays for them.
What if someone loses a receipt?
Fill in a petty cash voucher straight away: date, amount, what it was for, signed by the person who spent it. Keep it with the other receipts.
Can I pay a contractor from petty cash?
Better not. Contractors should be paid against an invoice through your normal bills process so there's a clear record. Keep petty cash for genuinely small, everyday items.
How often should I count petty cash?
At every top-up, at minimum. If several people use the tin, a quick weekly count catches problems while they're still easy to explain.
Set the float once, count it on a schedule, and the shoebox can go back to holding shoes.
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