Cash Reconciliation: How to Reconcile Petty Cash


What is Petty Cash Reconciliation?

Petty cash reconciliation is the process of verifying transactions involving petty cash funds. Its purpose is to ensure that funds are being used appropriately. It is an important internal control for fraud prevention.

How Do You Reconcile Petty Cash?

Here are five steps to reconciling petty cash:

  1. The petty cash reconciliation process starts by counting up the amount of cash on hand at the end of the financial period and using this as the ending balance for the petty cash account.

  2. Next, receipts are reviewed and verified as appropriate and complete.

  3. 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.

  4. When discrepancies occur, investigation is required. This can involve examining who had access to funds, looking for missing receipts, and tracking down undocumented deposits.

  5. In cases where discrepancies are the result of fraud, additional internal controls are designed to prevent further occurrences.

What is Petty Cash Management?

Petty cash funds are used by companies to handle small one-off purchases that can come up periodically in the course of business operations. They should be stored in a secure location with controlled access, such as in a lockbox. Petty cash management is the system of recordkeeping to track the usage of petty cash funds.

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 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 ensure that additional internal controls are enacted. 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 including:

  • automating the petty cash reconciliation workflow

  • ensuring that reconciliations are properly reviewed and approved

  • maintaining appropriate segregation of duties

What Solutions Does BlackLine Offer for Petty Cash Management & Reconciliation?

BlackLine offers an Account Reconciliations product that allows all petty cash accounts to be managed and reconciled 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 allows for easy review of petty cash records by internal auditors.

With the BlackLine Account Reconciliation product, 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 accounting staff.

When correcting journal entries are required to address discrepancies in petty cash funds, the BlackLine Journal Entry product integrates to automate this process. In addition to handling correcting journal entries, the Journal Entry product 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. The BlackLine Journal Entry product 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, the BlackLine Task Management product automates workflow tasks to ensure that proper internal controls are enacted to prevent any future fraud from occurring.