Key takeaways
What this article covers, in order:
- Why petty cash goes wrong
- The imprest system, explained
- Setting it up
- The petty cash log
- The month-end count and top-up
- What if it doesn't balance?
Petty cash works best as a fixed float: you set an amount, spend from it with a slip for every purchase, and top it back up to the same figure from the bank. Every top-up becomes one tidy entry in your petty cash bookkeeping, split across the right categories. Run it that way and the tin always balances, the receipts are in one place, and the shoebox can go back to holding shoes.
Why petty cash goes wrong
Ade manages a small café in Leicester. The till drawer has a separate tin for "bits and bobs": milk when the delivery's short, a pack of bin bags, a parcel to the post office, cake for a staff birthday. Everyone dips in. Some people leave a receipt; some leave a note saying "milk"; some leave nothing.
At the end of the month, the tin had £22.15 in it. It started at £150. Nobody could say where £127.85 had gone, and three different people were sure it wasn't them.
None of this is dishonesty, usually. It's just that cash is easy to spend and hard to remember. The fix is a system that's so simple people actually follow it.
The imprest system, explained
"Imprest" is the old-fashioned name for a fixed float. It's still the best way to run petty cash.
- You decide on a float, say £150.
- Every time cash goes out, a slip or receipt goes in. Cash plus slips should always equal £150.
- At the end of the period, you add up the slips, record them in the books by category, and draw exactly that amount from the bank to bring the tin back to £150.
The beauty is the built-in check. At any moment, count the cash, add the slips, and you should have £150. If not, something's missing, and you know straight away instead of a month later.
Setting it up
Pick the right float
Big enough to last a month without running dry, small enough that losing it wouldn't hurt much. For most small offices, shops and cafés that's somewhere between £50 and £250. Look at what you actually spent in cash over the last three months and add a bit.
Choose one person to hold it
One custodian, one tin, one key. Others can ask for cash, but the custodian hands it over and makes sure a slip comes back. This one rule fixes most petty cash problems.
Record the opening float
When you first take £150 out of the bank for the tin, it's not an expense. You've just moved money from one place you own to another. The entry is:
| Account | Debit | Credit |
|---|---|---|
| Petty cash | £150.00 | |
| Business current account | £150.00 | |
| Total | £150.00 | £150.00 |
In your bank feed, that withdrawal should be categorised as a transfer to petty cash, not as "Sundries".
The petty cash log
Alongside the tin, keep a simple log. Paper in the tin, a shared spreadsheet, or a page in a notebook: it doesn't matter, as long as everyone uses it.
Here's Ade's café for Sep 2026, after he brought the system in:
| Date | Slip | Description | Category | Amount |
|---|---|---|---|---|
| 2 Sep 2026 | 01 | Milk, short delivery | Food and drink purchases* | £9.60 |
| 5 Sep 2026 | 02 | Parcel to supplier | Postage | £18.40 |
| 9 Sep 2026 | 03 | Bin bags and bleach | Cleaning supplies | £14.85 |
| 12 Sep 2026 | 04 | Taxi, bank run | Travel | £20.25 |
| 16 Sep 2026 | 05 | Cake for staff birthday | Staff welfare | £21.60 |
| 19 Sep 2026 | 06 | Mop heads and cloths | Cleaning supplies | £27.90 |
| Total | £112.60 |
*In a café, short-delivery milk is a cost of sales item, so it goes with food and drink purchases rather than overheads. Your categories may differ.
Every line has a slip number that matches a receipt in the tin. If a receipt is genuinely lost, the person who spent the money writes a slip saying what, where, when and how much, and signs it. Better than nothing; not as good as a receipt.
The month-end count and top-up
On the last working day of the month, count the tin.
- Float: £150.00
- Slips total: £112.60
- Cash that should be in the tin: £150.00 minus £112.60 = £37.40
Ade counts £37.40. It balances. Lovely.
Now record the spending, grouped by category. You don't need six separate entries; one journal does it:
| Account | Debit | Credit |
|---|---|---|
| Food and drink purchases | £9.60 | |
| Postage | £18.40 | |
| Cleaning supplies (£14.85 + £27.90) | £42.75 | |
| Travel | £20.25 | |
| Staff welfare | £21.60 | |
| Petty cash | £112.60 | |
| Total | £112.60 | £112.60 |
Then top up. Draw £112.60 from the bank and put it in the tin, bringing it back to £150:
| Account | Debit | Credit |
|---|---|---|
| Petty cash | £112.60 | |
| Business current account | £112.60 | |
| Total | £112.60 | £112.60 |
After both entries, the petty cash account in the books shows £150, and the tin holds £150. The expenses are in the right categories. Done.
In practice, you'll often see the top-up arrive as a cash withdrawal on your bank feed. Categorise that line as a transfer to petty cash. The spending journal is the part that puts the costs where they belong.
What if it doesn't balance?
Sometimes it won't. A few pounds out is usually a lost receipt or a mistake in change. Recount, check the slips, ask around.
If you still can't find it, record the shortfall honestly as a cash difference expense with a note. Don't top up by a round number to "make it work". That hides the problem, and the next month starts from a float that isn't really £150.
A pattern of shortfalls is a different matter. If the tin is £20 short every month, someone isn't leaving slips, or something more serious is going on. Tighten who can access the tin.
Ground rules worth writing down
Stick a short list inside the lid. Something like:
- Only the custodian hands out cash.
- No slip, no cash.
- Petty cash is for small, occasional business costs. Anything over £50 goes through the business card or a supplier bill instead.
- Never use petty cash for wages, personal loans or IOUs.
- Takings never go into the petty cash tin. Takings are banked separately.
That last point matters in cafés, shops and anywhere that handles cash sales. Mixing takings and petty cash makes both impossible to reconcile.
Do you even need petty cash?
Honestly, maybe not. Many small businesses have quietly replaced it with a business debit card held by the manager, which leaves a bank record for every purchase and comes through your bank feed with no counting. If cash purchases are rare, that's often simpler.
Where it still makes sense: cafés and shops buying odds and ends from the corner shop, sites where workers need cash for small purchases, and anywhere card payments aren't accepted.
How HelloBooks helps
You can keep a petty cash account in your books alongside your bank accounts. When the cash withdrawal for a top-up comes through your bank feed (connect your bank through Open Banking, or import a CSV statement), you categorise it in the review list as a transfer to petty cash. Cost categories then show up on the P&L, so you can see what petty cash actually goes on over a year. Your bookkeeper can be invited into the same books to check the monthly count.
Running a café or restaurant? See how HelloBooks fits on the restaurants page. There's a full list on bookkeeping features, and plan details on the UK pricing page.
FAQs
How much should a petty cash float be?
Enough for a typical month of small cash purchases. For most small businesses that's between £50 and £250. Check your last three months of cash spending and round up.
Is the petty cash top-up an expense?
No. The top-up is a transfer from bank to petty cash. The expenses are the individual purchases on the slips, recorded by category.
What if someone loses a receipt?
Have them write and sign a slip with the date, shop, item and amount. Keep lost receipts rare; if they're common, the system isn't being followed.
Should petty cash be reconciled?
Yes, at least monthly. Cash plus slips should equal the float. Count it, record the spending and top up to the same figure.
Can I use petty cash for staff wages or tips?
Keep them out of petty cash. Wages go through payroll, and tips have their own rules. Mixing them in makes the float impossible to balance.
Set the float, appoint a custodian, and put the shoebox back in the wardrobe.
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