How much is enough for the petty cash float?  There is no set rule for determining how much should be used for the petty cash float as each organisation will require different amounts based on their needs.

Firstly, let’s take a practical look at the process of replenishing the petty cash float.  How easy will it be to replenish? Depending on where your not for profit organisation is located it can be a major excursion to reach the bank.  Also, getting the signatures on the cheque may also be a difficult process if the signatory is only available after hours.

I recomment that when deciding how much is enough for your petty cash float,  work out how much you will need to last around a month. 

Try to also balance this up against the size of the float.  For small organisations with only a handful of employees or volunteers try to keep it small.  Petty cash amounts of around $20 or $50 that last around a month are not unusual and maybe $100 in some cases but amounts above that need to be reviewed.

If you find that the petty cash is being replenished several times during the month then review how it is being used.  Check that it is actually being used for petty cash purchases, the petty cash policy is being complied with and whether alternative methods can be used.  For example, if there are regular purchases from a particular organisation that relate to the day to day operations then it may be better to set up an account and receive an invoice to pay by credit card or via accounts payable on your accounting system.

Don’t just assume the petty cash float should simply be increased or before long it may be unnecessarily large.  For bigger not for profit organisations with a larger number of employees and which may have dedicated finance staff with strong reporting and controls in place, amounts up to $500 may be more appropriate.  Irrespective of the amount, it is really important that a review takes place on a regular basis to satisfy yourself that the petty cash is being used correctly.

Make sure the petty cash policy is aligned to other policies and procedures of the not for profit, and that there are no conflicts around the delegations, what it can be used for and who is authorised to manage and access the petty cash.

The key issue with petty cash is:

For smaller organisations the volunteer treasurer should review the petty cash system on a regular basis, to ensure compliance occurs, it is reconciled and the transactions are accurately recorded.

This is the last in our series on managing the petty cash for your not for profit organisation.  Remember at the beginning I told you that a simple little tin of money could cause many problems?  By now I am sure you understand how that could happen.  Luckily you now have the bows and arrows to keep that tin well and truly under control.