The Imprest System of Keeping Petty Cash

The reason why I’m writing this article is that I have seen many financial executives that do not truly appreciate using the imprest system to keep the company’s petty cash.

Before I continue,let’s look at what really is the Imprest system:
This method of keeping petty cash or even cash is that a fixed sum or what we call an initial “float” is given to the cashier or the custodian and at each balancing period,a cheque is issue to reimburse the exact amount of disbursements that have been utilized.
If you were to check at any one point of time,you will find that the petty cash custodian must be able to furnish to you the actual disbursements in the form of the paid petty cash voucher + physical cash unutilized which should strictly tally to the petty cash float.

Illustration:
Let’s say we have established a petty cash float of $1,000.00,On 1/1/06,we gave this $1,000 to A who is the petty cash custodian. A will issue petty cash for paying staff claims and subsequently on 19/1/06,he has only $450.00 left,so he will issue seek reimbursement in the form of $450.00 so that the whole petty cash is reverted to the original float of $1,000.00

So what is so useful about this Imprest System?
· This is a very good internal control check particularly when you have branches whether local or overseas. By enforcing this imprest system,we can very quickly do surprise physical petty cash count and able to reconcile if any money is missing,
· The amount of periodical disbursement is kept prominently before the notice of the person controlling the bank account and enables a closer check to be imposed on petty cash expenditure.

The following salient points need to be noted for any Imprest petty cash system:

• The petty cash float should be reviewed to ensure there should not be too frequent disbursement of petty cash which means that the initial establishment of the float is too low. It’s good to review the past three to six months petty cash disbursement before establishing the petty cash float

• Sometimes,it is not the fault of the float but the definition of the term petty cash which should strictly be used for petty item that perhaps should be less than $100.00

• Internal Controls For Bank And Cash
• Month End Close:Proper Classifications And Others
• Cash Pooling Or Concentration Of Balances