The Definitive Guide to Business Finance: What smart managers do with the numbers, Second Edition

Controlling cash

Is it realistic to suppose that every business payment will go through the bank account? What if you need to run out and buy some coffee or duplicate a few pages at a copy bureau? Well, there is a rather neat trick which allows you to pass even these tiny transactions through the bank account. The trick is known as the imprest system of accounting for petty cash, named after the old French word for loan. It works as follows.

The first step it to decide how much petty cash you will use between replenishments. A couple of week’s worth of spending is usually about right. For the moment, forget about refreshing petty cash from cash sales and other sources. Such money should be paid into your bank account in its entirety to avoid ...