Petty cash management is a recordkeeping system to track the use of petty cash funds.
Petty cash funds are used by companies to handle small, one-off purchases that arise periodically in the course of business operations. They should be stored in a secure location with controlled access, such as a lock box.
What is Petty Cash Reconciliation?
Petty cash reconciliation is the process of verifying transactions that involve petty cash funds. It ensures that funds are being used appropriately, and it’s an important internal control for fraud prevention.
What is the Process for Petty Cash Reconciliation?
This process starts by counting up the amount of cash on hand at the end of the financial period and using it as the ending balance for the petty cash account. Next, receipts are reviewed and verified as appropriate and complete.
Each receipt is logged as a withdrawal from the petty cash fund. The ending balance should be equal to the beginning balance that was carried over from the previous period, plus any additional cash deposits — less the sum of all withdrawals.
When discrepancies occur, an investigation is required. This can involve examining who had access to funds, looking for missing receipts, and tracking down undocumented deposits. In cases where discrepancies are the result of fraud, additional internal controls are designed to prevent further occurrences.
How Does Petty Cash Management Software Work?
Petty cash management software provides an automated and controlled means for managing petty cash accounts and reduces the risk associated with these funds. It provides standardized templates to ensure that petty cash funds are managed consistently across the organization.
It also provides a centralized repository for storing all documentation associated with petty cash accounts and allows for an easy audit of these records by internal auditors.
When a case of fraudulent use of funds is identified, the software automates the workflow process to enact additional internal controls. Such controls are necessary to prevent any further fraud from occurring.
It also puts controls in place to ensure that petty cash reconciliations are being properly performed. These include:
- Automating the petty cash reconciliation workflow
- Ensuring that reconciliations are properly reviewed and approved
- Maintaining appropriate segregation of duties
What Solutions Does BlackLine Offer?
BlackLine Account Reconciliations manages and reconciles all petty cash accounts via a centralized system. Templates for recording account data with customizable checklists ensure standardized petty cash records across the organization.
Integrated storage allows all records to be easily linked directly to the transaction details. This also makes it easy for internal auditors to review petty cash records.
With this solution, petty cash reconciliations follow an automated workflow that ensures proper review and approval of account data, and maintains appropriate segregation of duties. When discrepancies are identified in petty cash funds, the product automates the workflow for their review by accountants.
When correcting journal entries are required to address discrepancies in petty cash funds, BlackLine Journal Entry integrates to automate this process. In addition to handling correcting journal entries, the solution controls and automates the workflow for posting all journal entries associated with petty cash accounts.
Controlling this process is necessary due to the high-risk associated with funds in these accounts. BlackLine Journal Entry ensures that journal entries are properly documented and follow required review and approval processes, eliminating their potential as a source of fraudulent activity.
When fraudulent activity is identified, BlackLine Task Management automates workflow tasks to ensure proper internal controls are enacted to prevent any future fraud from occurring.