How to Manage Petty Cash in QuickBooks Online

QuickBooks Online includes several features that ensure the productive development of businesses. The software helps companies in managing unexpected expenses with the help of petty cash. Petty cash funds enable businesses to manage their expenses. However, it is essential to learn how to set this feature for your business growth and performance. The article here provides a detailed insight into the meaning, uses, and steps to set up petty cash in QuickBooks Online. You will also learn how to manage such accounts as well.

So, let us delve into it!

What is Petty Cash and Uses in QBO

Also referred to as petty cash funds, petty cash is a small amount of money organizations keep aside to handle small expenses. These small expenses are usually incidental or minor. As expenses usually require payment instruments like a credit card or a cheque, using these for small expenses can be a hassle. In this regard, petty cash is used to avoid using those instruments for small payments.

Usually, petty cash amount is minimal but the amount kept by a company depends vastly on the requirements of the organization. Petty cash amount generally ranges from $50 to $500; however, it can vary based on region and country.

What are the uses of petty cash

Some of the typical uses of petty cash are listed below:

• Employee reimbursements
• Small office supplies
• Going away parties
• Catered lunch for small groups of employees or clients
• Cards or flowers for clients or employees
• Tea or coffee and snacks for employees

Now that you know about the basics of petty cash and its use, let us learn the way to set it up in QuickBooks.

How to Set up a Petty Cash in QuickBooks Online

Before setting up, you must move money from your bank account into petty cash. At that time, you need to follow the below-given steps for the final setting.

• Visit the Settings tab and click on Chart of Accounts.
• Press New. You will either find a panel named New Account or New Category based on your account view.

For creating a petty cash account in the New Account panel

• Press the dropdown with Save account under the option and click on Bank Accounts.
• You will find the Cash on Hand option in the Tax form section dropdown.
• Input Petty Cash in the Account name field.
• You need to transfer funds or write a check to move money from the checking account to create an opening balance in the petty cash account. Once you are done, input your decided amount in the Starting date and opening balance field and select the as of duration.
• Click Save.

For creating a petty cash account in the New Category panel

• Input Petty Cash in the Category name field.
• Press the Select Category option and choose Bank & Credit Cards then click Select.
• Choose the Cash on Hand option from the Account type dropdown.
• Same as before, move your preferred amount from your checking account to create an opening balance. Include the decided amount in the Starting date and opening balance and set the as-of-date.
• Press Save.

When you consider creating a cash fund, some essential procedures must be followed. These procedures ensure that your funds are safe and effectively trackable.

How to Manage Petty Cash in QuickBooks Online

To manage petty cash, you must know how to put in and take out cash in the account.

Putting cash in

For this, you need to withdraw some money from your checking account and move it in a locked cash box. Now, record the transaction in QBO.

• If you wrote a check for the money,
  • Click +New, and then select Check.
  • Choose Petty Cash as the payee.
  • If the Petty Cash option is unavailable, press +Add new.
• If you recover the cash without writing a check, then
  • Click on +New.
  • Choose Transfer.

You might not know how to create or record checks. You can follow:

Steps for creating and recording checks

• Navigate to +New and click Check.
• In the Payee dropdown, select whom you want to address the check.
• In the Bank Account dropdown, select the account you want the money to move.
• Fill up the remaining fields accordingly.
• Press the Save and Close button.

You can transfer funds between accounts without writing a check.

Steps for transferring funds between accounts

For that, you need to

Record a new transfer

• Press + New and choose Transfer.
• In the Transfer Funds From dropdown, choose the bank account from which the money will be transferred.
• In the Transfer Funds To dropdown, choose the bank account where the money will go.
• Now, go to the Transfer Amount field and enter the amount needed to be transferred.
• Edit the Date field. In the Memo field, you can also enter a description of the transfer.
• Choose the Save and Close button.

Record a transfer by check

In the case of using a physical cheque to transfer funds,

• Choose +New and press Check.
• Enter the check as you would; and in the Bank Account field, choose the account from where the money will come.
• In the Category column, choose the account where the money will go.
• Click on Save and New or Save and Close if you want to record the check.

• Match the transfer in the imported bank transactions

After downloading transactions from both accounts, you can classify and match the transfer. You need to record the transaction from one account as a transfer by following these steps.

• From the Bookmarks dropdown, choose Bank Transactions.
• Select the actual bank account from where the funds are coming.
• Find and choose the transaction to unlock it.
• Go to the Record as transfer option, and select the account to transfer the money in the Transferred to dropdown.
• Click on Record transfer.

Now, match this transaction from another account.

• Select the bank account where the money will go.
• Go to the For review dropdown, and choose the Recognized filter.
• Search the transaction, and choose Match from the Action column to match the transaction in both bank accounts.

Taking cash out

While giving cash to an employee, you must keep track of the petty cash. You should keep tabs on who, when, and what the cash was used for. This will act as a receipt to trace the cash you take out. In QuickBooks Online, you can record this as an expense with petty cash as the payment account. Make sure that the receipts of the expenses and the cash you are left with add up to the money you deposited in the account. Reconciling the petty cash account will be beneficial for your overall accounts

How to Activate Petty Cash

• Login to your QuickBooks accounts and locate the Gear icon.
• Choose the Chart of Accounts tab.
• Click on the New tab, now you can find that in the top right corner of the screen.
• This will open up a different window,
• Choose your type of account. It can be either bank or cash.
• Now you would need to select Cash on Hand as your Detail Type.
• Now name your account Petty Cash.
• Enter the amount and the date you want to register in your records. You can even leave your account as NIL, it is a new account and you don’t have any cash in hand.
• Click on the Finish tab.

What are Petty Cash Procedures?

The basic procedures of petty cash are as follows:

Appointing a petty cash custodian

Small businesses can manage petty cash on their own; however, things can get out of hand for medium or large organizations. Thus, large companies are often seen to employ middle-level management workers as custodians for handling their petty cash accounts. A custodian focuses on:

• Supervising petty cash funds
• Operating petty cash rules and regulations
• Requesting replenishments
• Administering the needed funds
• Recording every petty cash transaction

Like any other transactions, you must form journal entries that record and track all the petty cash transactions. Your financial statement should include these transactions in such a manner that pinpoints all replenishments of your funds. Even though actual funding must be recorded, documenting individual purchases is not necessary.

You can collect petty cash receipts to record all these expenses to ease the record-keeping process. However, you need to make sure that these receipts match the replenishment funds within the recorded durations. Otherwise, these funds will be unexplained which can cause problems in managing the overall business expenses.

Reconciling petty cash funds

You must regularly reconcile your petty funds to ensure that the amount spent is always repaid. Make sure that you investigate and review discrepancies immediately once they are discovered.

You learned above that you need to put some cash in to create an opening balance for your petty cash account. Let us find out how you can manage petty cash in QuickBooks Online.

QuickBooks Online provides various features that enable users to manage their business transactions effectively. Keeping track of small expenses for medium or large organizations can be a hassle, as they are hard to trace. However, by using a petty cash account in QuickBooks Online, companies can excel in their bookkeeping and manage financial transactions.

The article here provides a detailed overview of the matters associated with this feature, that is petty cash accounts in QuickBooks Online. However, if you have any doubts regarding the topic, feel free to contact our certified QuickBooks Proadvisors professionals who will help you find solutions.

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