Top four alternatives to petty cash
May 12, 2023
By Adriana Amato
We need milk. Can you go grab us some coffees? Shall we send her flowers? I need a new mouse. Businesses and employees constantly incur incidental expenses. Traditionally, we relied on the petty cash system. However, businesses aren't so traditional anymore. Part-time employees, staff working from home, cashless businesses are a few reasons why “grab $20 from Debbies biscuit box and don't forget to ask for a receipt” is no longer a viable solution.
In this article, we'll explore the modern alternatives to petty cash management that can work better for business owners and finance teams who want more control over their finances.
What is a petty cash fund?
Petty cash, also known as a float is used by businesses to manage small and frequent expenses such as stationery, postage, lunch, and other incidental expenses. It's typically kept in a petty cash drawer or box and managed by a designated custodian. The amount of the fund is usually determined by the company’s budget, with some organisations maintaining anywhere from $50 to $500 in their petty cash fund.
Problems with petty cash
While a petty cash fund can be helpful for covering immediate costs without having to write checks or share credit cards, it does come with some drawbacks for your accounting processes. Tracking these transactions can become difficult when they're done in real-time and it's hard to ensure that only correct expenses are being charged to the fund. Additionally, petty cash often lacks internal controls which makes it possible for funds to be misused or embezzled without anyone noticing.
Four alternative petty cash solutions
The good news is that there are alternatives to using petty cash that can help businesses streamline their operations and better control their spending.
Company credit cards
Company credit cards are a great way to pay for expenses and reduce the need for petty cash. With company credit cards, businesses can easily monitor employee purchases in real-time. This allows companies to quickly identify incorrect expenses or fraud. Having a business card may also provide discounts or rewards when making purchases which can be beneficial for both the employee and the business. Making purchases on credit may also help with company cash flow.
But the risks of allowing unfettered access to a credit card, are not insignificant. Credit cards and pins are shared, which leaves you open to internal and external fraud. Company cards may give employees too much freedom when it comes to spending as they may not understand their limits or the difference between necessary and unnecessary expenses.
Prepaid debit cards
Alternatively, companies may opt to issue prepaid debit cards to employees instead of using a traditional company credit card.
Prepaid debit cards are a great alternative to using petty cash for minor purchases and employee reimbursements. With this method, businesses can easily control their spending without having to go through lengthy credit checks or wait for reimbursements from the company. Prepaid debit cards also give employees more freedom to spend as they wish without worrying about overspending or incurring debt. Furthermore, businesses can assign specific spending limits to each employee's card so they have greater control over their expenses. This ensures that all funds are being used appropriately and in the right place. Finally, some prepaid debit cards offer businesses real-time tracking of their spending as well as detailed reports so they can better understand where their money is going.
Employee reimbursements are useful for small spenders that make infrequent, small purchases. Employees use their own funds to make the purchase and then submit an expense report with invoices or reciepts to get the money sent back to their bank account.
This system is simple and effective, but it may not be time-conscious or practical in certain situations, particularly when the purchase is expensive. The reimbursement process can create administrative burdens for both the employee and the employer which lead to employees putting off making purchases. Our Working from Home has Killed the Office Credit Card report uncovered that 66% of employees purchased work items out of their own pocket and 37% put off necessary business purchases because they felt anxious about spending their own money.
The perfect petty cash alternative: Weel virtual corporate cards and expense management software
We are a little biased - we admit. But we also have thousands of businesses across Australia that have found that Weel is the perfect petty cash alternative. Weel’s virtual corporate cards provide a secure, real-time solution to managing employee expenses without having to deal with complex cash registers and petty cash boxes. With Weel, you can issue digital business cards to each employee that can be used for approved purchases - from office supplies to incidental expenses. For the small spenders, Weel’s reimbursement tool makes it easy to pay back employees as soon as they make a purchase. Weel's internal controls and expense management platform make it easier than ever to track and review every transaction in real-time. So if you're looking for an efficient way to manage your company's spending, consider trying out the convenience of Weel virtual corporate cards today. Start your free 14-day trial or book in a demo.