It’s remarkable how the way that most businesses manage their petty cash costs has changed so little since the C17th. This was when the imprest system of accounting was first devised as a flexible and convenient way to reimburse small-scale everyday costs.
It’s a simple system - a float of money is set-up with an employee acting as ‘curator’ to keep track of any costs claimed by colleagues. Even in the most tech-savvy businesses, you’re still likely to find a petty cash box being managed via the traditional imprest system. And while the basic system remains as effective as ever, it’s a lack of effective management controls which make it such a risk.
Flaws in petty cash control
There’s a dangerous tendency for petty cash management to become increasingly ineffective over time as curators fail to keep on top of claims. Written records become incomplete and inaccurate with ‘creative’ accounting often used to ensure that float amounts match expenditures.
The problem is compounded by the fact that petty cash systems usually operate outside of an organisation’s main expense set-up. It means that reimbursements claimed via petty cash don’t receive the same level of scrutiny as expenses submitted via the main system. This creates an area of company finances which is notoriously susceptible to losses through error and fraud.
Petty cash target for fraud
A 2017 survey, commissioned by Webexpenses, found that 42% of Australian employees admit to having falsified or exaggerated expense claims. The research highlighted the ‘little and often’ strategy adopted by employees to drain money from a business without alerting suspicion. It’s a management weak spot which can now be removed by cloud-based software which finally drags petty cash into the digital age.
Webexpenses allows any number of office floats operating within a business to be fully integrated into the company’s main expense system. It does this by creating a virtual equivalent of the petty cash box which keeps track of each and every claim that’s submitted.
Advantages of digital receipts
Employees use a smartphone app to convert paper receipts into a digital form. This move to digital receipts allows the whole process to become paperless. It allows a central finance team to monitor office costs in real-time, they can access any office-based claims as and when they’re submitted. It also means that alerts can be triggered whenever costs fall outside any limits that have been set. It allows suspicious claims to be immediately spotted and investigated.
For employees, it provides a faster, simpler and more convenient way to manage petty cash claims. The ability to submit digital receipts removes the need for manual paperwork.
For a business, it provides a simple, scalable and secure way to regain control of an area of finances which has, for too long, been off the management ‘radar’.
Webexpenses provides a smarter way to manage employee expenses. Find out how it can help your business control petty cash by requesting a free demo.