As Benjamin Franklin rightly put it “Beware of little expenses. A small leak will sink a great ship”. Every modern business owner knows petty cash is like that leaking hole in your water tank: It’s small and doesn’t justify the efforts to fix it. But as it keeps accruing, it becomes big enough to always keep nagging at the back of your mind, acquiring unnecessary mental bandwidth and not allowing you to close your accounts.
The word petty cash originated in the early 17th century and was used to describe the small amount of cash that was kept aside for trifling purchases, too small to require the effort of the making out and cashing of a cheque. While most of the major purchases were made by the owner, and only the minor day-to-day expenses like tea, snacks and stationery were left to the office boys, hence the name petty cash, that accounted to barely 3% of total business spends.
As businesses kept growing, the ad-hoc cash requirements kept increasing. Given the easy availability and low accountability, employees started using petty cash for making these one-off payments and it soon became a norm. When petty cash started amounting to double digit percentages, it could no longer be left un-accounted for, and soon found a place in the company’s balance sheets.
From then to now, Indian businesses have grown multi-fold. They have operations spread across the country, with multiple branches. Now each of these branches need petty cash to run their daily operations. The keys to the petty cash locker are now handed over to the individual store managers, affecting the cash flow.
The imprest system soon came into place that enabled businessmen to put down some rules and accounting systems for petty cash. Replenishing their imprest accounts, supporting each expense with receipts, and reconciling them at the end of every month improved the accountability by a great deal.
Business owners still have no centralized control over the spends and get delayed visibility into expenses.
Modern businesses need a digital and scalable way to manage cashflows, which gives them control, real time visibility, mobility and minimal dependence on manual data entry. With the world riding on a wave of innovation, the time spent on filing expense reports is coming down to a minimum, and more so for petty cash.