Every organisation uses petty cash but it is not unusual that the petty cash system is never reviewed to see how it is being managed and used.  It is a petty cash system so what could go wrong?  There is the first mistake.

People assume that because petty cash relates to minor amounts then any issues are likely to be immaterial and not important often occurs.  

Actually, especially with small organisations, you can find that the petty cash system plays a major role with the day to day operations.

Often spare cash, membership fees or other not for profit income are simply placed into the petty cash tin when they should be properly accounted for, receipted and banked.  With organisations that have poor systems and which don’t accurately record transactions through an accounting system, the petty cash tin may become the major source of funds.  With all the Merry Men dipping their hands into the tin and forgetting to record the transaction it can, in extreme circumstances, threaten the viability of the organisation.

You wouldn’t think a simple little tin of money could cause so many problems, would you?

As the volunteer treasurer for your not for profit organisation, you should undertake a review of how the petty cash system is being managed and operated.  Any organisation with poorly managed petty cash is exposing itself to fraudulent activities.  Furthermore, from a treasurers perspective, if your petty cash is poorly managed then this can also be a sign that other internal controls such as compliance to policies and procedures are not being managing or adhered to properly.

Smaller organisations with bad practices and no accounting systems can rely on petty cash as the main method for running the organisation for the day to day purchases that are required.  If you are the treasurer for such an organisation you will be finding it very difficult to track purchases, ensure transactions are in accordance with policies and procedures, have accurate financial and accounting records as well as you have adequate cashflow.

Petty cash, as the name implies, should only be used for one off minor purchases.  Petty cash should never be used as a substitute for a poor purchasing policy or even as a way to get around spending delegations.

Admin Bandit software won’t make the Merry Men stop using the petty cash tin to pay for their arrows and ale. Only you can do that.  It will, however, make it a lot easier for you to record and track what is really going on with your money.