Petty cash at a project office
How a small project office can run petty cash on a fixed float with one custodian, and get the spending into the books by monthly journal.
By Achekam · · 5 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
A rural project office runs on small amounts of cash. Airtime for the community health workers, fuel for a borrowed motorbike, bread for a training day, a taxi to the district office. Nobody is going to raise a purchase order for a loaf of bread, and the nearest bank may be an hour away.
So the office keeps a cash box. And within a few months, without anyone intending it, the box has become a mystery: a handful of notes, a pile of slips of varying legibility, and a figure in the books that nobody can reconcile. When the funder's auditor samples the project's spending, petty cash is where the questions start.
Petty cash does not have to be a mystery. A fixed float, one custodian and a monthly routine make it one of the easiest things in the books to explain.
A fixed float and one named custodian
The classic method, often called an imprest system, works like this. The office holds a fixed amount of cash, the float. Every payment out of it is replaced by a slip or receipt for the same amount. At any moment, cash in the box plus slips for money spent should add up to the float. When cash runs low, the float is topped up by exactly the amount spent.
Two decisions set it up:
- The size of the float. Enough to cover a typical month of small costs without leaving large sums in a box. Agree it with your finance lead and the board, and write it down.
- The custodian. One named person holds the cash and signs for it. Not "the office", not whoever has the key. When the custodian is on leave, the cash is counted and handed over to a named stand-in, and both sign the count.
Set a limit on any single petty cash payment as well. Anything above it goes through the normal supplier bill process, so petty cash stays petty.
The cash withdrawal on the bank statement
The float starts, and is later topped up, with a cash withdrawal from the organisation's bank account. That withdrawal shows up as a line on the bank statement.
In Achekam, bank lines are matched by suggestion and a person accepts each match, and a line not yet in the books becomes a suggested journal that a person approves. For a petty cash withdrawal, make sure the journal you approve takes it to a petty cash account for that office, not to an expense. The money has not been spent yet; it has moved from the bank to the cash box.
Your ledger starts from a standard chart of accounts, and you can add, rename or switch off accounts. Give each project office its own petty cash account, named for the office, so that two offices' floats never share a balance.
Slips totalled into a monthly journal
Every payment out of the box needs a slip: a till receipt where there is one, or a simple voucher where there is not, showing the date, what was bought, the amount, who received the money and who approved it. For costs like a taxi fare with no receipt, the voucher signed by the person who took the taxi and the custodian is the evidence.
At month end:
- Sort the slips by the grant and expense they belong to: transport for the health programme, refreshments for the training grant, and so on.
- Total each group on a summary sheet.
- Post one manual journal for the month: debit each expense account with its group's total, credit the office's petty cash account with the overall total.
- Write the summary sheet's reference in the journal's description.
Achekam refuses a journal that does not balance, or one dated in a closed month, so post it before the month is closed. If a slip later turns out to belong to a different grant, a posted journal is corrected only by reversal: reverse the month's journal and post it again with the right split.
Topping up to the float
After the monthly journal, the petty cash account in the ledger shows the cash that should still be in the box. Count the box and confirm it agrees.
Then top the float back up by withdrawing exactly the amount spent. That withdrawal comes through the bank statement and is approved into the petty cash account, as before. The float is back to its fixed amount, ready for the next month.
AccountingTools sets out the petty cash procedure for running and replenishing a fund this way, replacing the cash paid out against vouchers.
Filing the slips where they can be found
Slips are fragile, and auditors want to see them. Scan or photograph each month's slips and summary sheet and upload them to Document Centre, a folder-based store where you can upload whole folders, tag and search files, and keep earlier versions when a new one is added. A folder per office, a sub-folder per month and a tag for each grant make any sample easy to find.
Keep the paper originals too, in a dated envelope, for as long as your accountant advises.
Surprise counts by someone else
The custodian counts the box every month. Someone else should count it without warning from time to time: the office manager, the finance officer on a field visit or a board member.
A surprise count is simple:
- count the cash in the box;
- total the slips not yet posted;
- add the two together and compare with the float;
- both people sign and date the result.
A shortage is not automatically theft. It is often an unrecorded payment or a slip that went missing. But it must be explained and written up, and a pattern of shortages is a reason to change the custodian or the process.
Surprise counts protect the custodian as much as the organisation. A custodian whose box always balances has a written record proving it.
Volunteer and staff claims are different
Petty cash suits small, frequent costs paid on the spot. When a volunteer or staff member pays for something with their own money and wants it back, a claim with receipts is usually better than taking cash from the box; see paying back volunteers' out-of-pocket costs. And the petty cash journal is one of the items to clear in what to check before closing a month.
This week, count your project office's box with its custodian, write down the float, and agree the date of the first monthly journal.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
