Peeriosity Insights: Recent Research Findings Summarized insights. To view detailed research results, contact us to inquire about membership.

Making Smart Decisions about Petty Cash

The word “petty” is defined as something that is relatively worthless or unimportant, with a secondary definition of a person who gets caught up in the small details.  The word “cash” however, takes on a whole other meaning, with an emphasis at most companies on proper business use, tracking, and detailed record keeping.  While some companies continue to have petty cash funds, complete with an imprest system for replenishing with detailed receipt and approval requirements, in today’s world with many competing approaches for small dollar purchases, the better description for “petty cash” embraced by most companies is “obsolete” and “unnecessary”. 

A Peeriosity member at a large healthcare company wanted to quickly understand the range of approaches other companies take to administering petty cash funds.  As stated by the member, a Senior Director of Purchase-to-Pay Operations, “We have a number of different small offices that require an efficient payment method for small dollar purchases. We are curious if other companies currently maintain a Petty Cash process or utilize an alternate tool as part of best practice identification.”   

Within a few minutes, the member was able to use Peeriosity’s iPollingTM to create a question, with the real-time posting of poll results and the ability for the member to see immediately who responded, what company and region they represent, with the opportunity to contact individual respondents directly using Peeriosity’s built-in communication tool, Peer MailTM.   

The Peeriosity member’s iPollingTM question asked how important having a petty cash process was to addressing small dollar purchases, with a follow-up question to secure details about the primary solution being used to address the need for small dollar purchases. As expected, for many companies petty cash does not play a significant role in small-dollar purchases, with 32% of member companies indicating that petty cash has been completely eliminated.  Here are the details:

For 65% of member companies, the preferred alternative to petty cash is the use of a purchasing card, and for an additional 26%, the use of a travel card or reimbursement through the T&E process is the preferred method.

While it may seem like maintaining petty cash funds in multiple locations isn’t a big deal, since there is little impact on either Shared Services or the local Finance team, the truth is that for most the alternatives for making purchases using a purchasing or a travel card, or for reimbursement through the T&E process, is easy and readily available.   Once you get through the initial and temporary frustration of employees who are resistant to the change, it is likely that petty cash can be eliminated completely.

Here are a few of the comments added by iPollingTM participants:

  • Petty cash is only used in very few locations worldwide where employees do not have access to corporate cards or P-Cards. At most locations globally, instead of having a petty cash fund, we use both P-Cards and traditional expense reimbursement processes depending on the size and complexity of the operation.
  • We have very few locations that have petty cash funds. Unfortunately, we are not able to remove petty cash from some of our smaller locations, as it is considered to be essential to their daily needs. The purchase card is our preferred method for purchasing small-dollar items.
  • Multiple answers could have been provided as solutions or alternate tools for managing petty cash. Our best practice is to clearly identify the items flowing through petty cash at each business unit. One BU may have many employee reimbursement payments flowing through and we would request these items be processed through a standard T&E report; other locations, for example, may have many taxi reimbursements for visitor travel expenses and a direct invoice billing from a preferred taxi company may be used to reduce petty cash needs; others business units may find that they have a larger number of maintenance items flowing through petty cash, where they can work with the vendors to invoice the company directly through AP or use a purchasing card.  By reviewing petty cash transactions you can get to the root cause of why petty cash is being used so that you can identify solutions.

How many petty cash funds does your company have in place?  With excellent alternatives available, is it time to eliminate petty cash?

Who are your peers and how are you collaborating with them?

____________________________________________________________________________

 “iPollingTM” is available exclusively to Peeriosity member company employees, with consultants or vendors prohibited from participating or accessing content. Members have full visibility of all respondents and their comments. Using Peeriosity’s integrated e-mail system, Peer MailTM, members can easily communicate at any time with others who participate in iPolling.

Peeriosity members are invited to log into www.peeriosity.com to join the discussion and connect with Peers.   Membership is for practitioners only, with no consultants or vendors permitted.  To learn more about Peeriosity, click here.

Are You Eligible for Membership?
Click Here to Find Out