There are still organizations out there that struggle to keep on top of their petty cash transactions. This is unfortunate because detailed management of day-to-day business expenses is quite important for every business.
Small amounts can add up to large sums of money. And if proper registration processes and structures are not in place, errors are bound to occur.
Don’t have a grip on it?
This could result in unexpected financial setbacks, a distorted view of the companies’ financial health or could even create compliance issues.
This is why you should invest in a robust cash management system.
What is cash management?
Cash management relates to the financial logistics and structures within a business. Its goal? To keep a grip on petty cash transactions by streamlining, monitoring and managing business expense cash flows.
Organizations that have a solid cash management system in place, have continuous insight into the status of their cash flow and working capital. In addition, a well-structured system offers businesses the opportunity to optimize their liquidity, to minimize the costs of cash flows and maximize the income from interest.
Is this the end of petty cash?
Many organizations in the Netherlands still use a petty cash box for small, day-to-day business expenses.
To buy flowers for a colleague, to fill up the company car with petrol or to buy a potential client lunch. With a petty cash box such business expenses are quickly and easily paid for.
If your company has multiple offices, you can allocate a certain budget to each location and put someone in charge of cash management. This colleague will be responsible for keeping track of which amount is spent by whom and on what. He or she will collect all transaction receipts and, if necessary, request more budget.
By skipping the often time-consuming process of requesting advances and by not having to involve the finance department for every small purchase, decisions can be made efficiently at departmental or office level.
Sounds good, right? On paper, it certainly does, but it’s perhaps also a bit old-fashioned. Handling cash carries certain risks and also creates a lot of fuss and hassle. This is why more and more organizations are becoming cashless.
Having a properly organized cash management system
In theory, petty cash is an easy solution for small, day-to-day business expenses. In practice, however, many finance teams struggle with it.
A common issue is that the management of petty cash funds becomes less and less effective over time. There are good reasons for this:
- Often, the manager in charge does not have a financial background.
- Or, managing petty cash flows isn’t part of their core tasks.
- The administrative burden of keeping cash books for petty cash is high.
- Many organizations still work with paper receipts and confusing incomplete spreadsheets.
Last but not least: because effective checks & balances for small cash funds are often lacking, the risk of errors (or even fraud) is high.
Irregularities are able to remain unnoticed for long periods of time, only to be discovered through external audits.
Fortunately, there are many ways to get your cash management on track and
manage business expenses more effectively.
Stay in the know
Our latest blog articles, business developments and financial news. Straight to your inbox.
This is how you organize your petty cash flows
Would you like your cash management to be improved long-term? Then don’t wear yourself out by constantly putting out cash-related fires in your organization.
This might provide some relief in the short term, but the underlying issues will likely remain unchanged.
It’s better to start with the basics:
- Determine how much time your cash management processes currently take and how much money this costs.
- Work out how many man-hours are spent on transporting cash to the various locations.
- For each petty cash fund, create an overview of the number of users and the number of payments per accounting period.
- Consider the (dis)advantages of having one centralized cash fund over having several local cash boxes. And ask yourself if, for instance, payments or certain administrative processes could be digitalized and/or automated?
Whatever you do, stay focused!
By setting clear priorities, working on one task at a time and involving the right people at the right time, you will work your way towards a solution in a more efficient and focused way.
Start, for example, with a new structure for expense justifications. Think about what it would take to record and process these expenses faster.
Digitalization is an obvious step, as this, generally speaking, creates big improvements in inefficiency.
Do you already use cash management software?
It is as clear as daylight that for financially healthy organizations, it is very important to keep track of small expenses and to accurately record all transactions.
A digital cash management system can help you with that.
Such an (online) platform automates time-consuming tasks and reduces errors by adding the correct checks and balances.
This is how you get a better grip on employee business expenses:
Set up a company expense policy
With a clear business expense policy for your organization, expenses are dealt with quickly and neatly. It should, for example, state for which purposes petty cash can be used, what the maximum limits are and within what time frame expense claims will be processed and paid.
Digitalize expense records
By digitalizing small cash funds, employees will be able to use them more quickly and easily: many online tools provide the option of uploading photos of paper receipts straight into your financial administration system.
Reconcile your accounts daily
Keep a grip on your financial transactions by daily reconciling your accounts. Consider using an app to keep track of all daily expenses. That way you can be sure that you always have accurate and up-to-date data.
Track expenses in real time
By tracking expenditures in real time, you significantly reduce the likelihood of company budgets being exceeded.
With the right digital solution, employees can submit business expense receipts and record expenses online, immediately after purchase.
This gives you real-time insight into when budget limits are about to be exceeded.
Innovative online support for cash management
No matter how cash management is organized in your company, chances are you can take it to the next level with SimpledCard.
Thanks to SimpledCard’s user-friendly, online platform, you no longer need cash books because the registration, justification and control over business expenses are all digitalized.
Designated employees receive a prepaid debit card with a personal expense budget, which can be adjusted by finance colleagues at the push of a button.
Expenditures can be viewed in real time, at any time and from anywhere. And receipts for expenses are easily stored through the secure online system.
This saves your employees a lot of time and ensures that your finance department always has real-time insight, allowing you to make financial decisions quickly and accurately.
Contact us about cash management
Are you wondering how you can easily implement SimpledCard in your organization, providing your employees with a safe alternative to cash and allowing you to quickly get a grip on your business expenses?
Our financial experts are happy to discuss with you which solutions best fit your organization, wishes and ambitions.