MAINTAINING PETTY CASH RECORDS

CHAPTER 8

3 AUTHORISATION

Authorisation of petty cash claims is an important issue. Each business should have a policy regarding who is permitted to authorise petty cash claims. The following alternative approaches may be considered:

• The person responsible for the petty cash, the petty cashier, may be given responsibility for authorisation of all petty cash claims.
• A senior employee, other than the petty cashier, such as the chief accountant, may be required to authorise all petty cash claims.
• The petty cashier may authorise all claims up to a specified amount, whilst another appropriate person authorises claims above this amount.

3.1 AUTHORISATION PROCEDURE

The person authorising the petty cash claim must make two checks.

• The claim should be supported by adequate documentation proving the expense is for valid business purposes, such as a receipt.
• The claim should not exceed the petty cash limits of the business. Claims above a certain amount should be made as an expenses claim for payment by cheque or BACS, and not as a petty cash claim for payment in cash.

3.2 SUPPORTING DOCUMENTATION

To ensure that a petty cash claim is a valid business expense, each claim must be supported by documentation demonstrating that the expense is genuine. Before the petty cash claim is authorised, this supporting documentation must be checked.

Most types of petty cash claim are for straightforward office expenses such as the purchase of refreshments, cleaning materials or small travel expenses for staff to attend meetings etc. In these situations, a simple receipt or till roll receipt is sufficient evidence of the payment for the expense. For bus, train or taxi fares, the ticket itself is probably sufficient evidence.

In each case the supporting documentation should be attached to the petty cash claim

Sales tax as part of the expense

Provided there is a valid tax receipt (ie a written receipt containing the supplier's sales tax registration number), the sales tax included in a cash payment can be claimed back from the tax authorities. To record the sales tax properly, the amount of the tax should be shown in the petty cash voucher. The voucher will therefore show the expense exclusive of tax, the sales tax and the total expense inclusive of tax. The sales tax should be itemised on the tax receipt

3.3 NO SUPPORTING DOCUMENTATION

Some expense claims may not have a supporting receipt. For example, the employee may have lost the receipt, or an employee may have paid for a train fare to a meeting, and the ticket was collected upon leaving the train.

In such circumstances, most businesses have a policy that the claim can still be authorised if it is deemed to be reasonable. This may involve authorisation by the manager responsible for the claimant's work, as this manager is most likely to be able to judge whether, say, a journey, did take place and was for a valid business reason.

3.4 PAYMENTS IN ADVANCE

In some instances, an employee may not have enough cash to purchase the item from their own money and then reclaim it from petty cash later. The employee will therefore ask the petty cashier for cash in advance to pay for the item or the expense. Any such advance payment must be authorised by an appropriate person

When the expenditure has been incurred, the employee will normally be required to provide appropriate documentation of the actual expense (typically, a receipt) and return any surplus cash to the petty cashier.

In such cases, a petty cash voucher is initially completed for the amount of cash taken, and when the surplus cash is returned, the voucher is then amended to show the actual correct amount of the expense.