Most businesses have credit or debit cards to manage their non-check or automatic transactions. But I still run into some businesses that are relying on old school cash for various transactions. Don’t get me wrong, there’s nothing wrong with properly documented use of cash, but it’s rarely tracked well.
PLEASE, I beg you, do not randomly go to the ATM machine and take cash out for business use. If you are traveling, you’ll need some cash. If at all possible, pay for it personally, collect the receipts and/or keep a journal of how the cash was spent. Then get reimbursed from the business. This keeps your books clean, doesn’t raise eyebrows in the event of an audit, and gives you a great incentive to make sure you’re collecting those receipts.
Of course, the best action is to use a credit card as much as possible. With the credit card, there’s a record of the transaction. That means your bookkeeper knows to ask you for the receipts. Debit cards can work for this too, but I really prefer businesses to limit their use of debit cards. Unless you are keenly aware of the amount of money and the bank and on top of cash flow tracking, using the debit card can be a dangerous and expensive habit (overdrafts, inability to pay important bills, etc).
If the above methods don’t work, then take the following steps:
- For small items, you can set up a petty cash fund. You and your employees will sign for receipt of the cash and must return receipts and change equal to the amount that was given to them.
- Similarly, you can “advance” travel cash which would go on the books as money owed to the business by the individual. Once again, the recipient must turn in receipts equal to the cash given or will have to repay the advance.
Try to avoid using cash and, if you do, make sure every expense is documented and left over cash is returned to the bank. A handwritten note stating “tips and stuff for California trip” is not adequate.