| Why petty cash is so important |
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How much money do you pay out of your own pocket each day? How much do
you spend on small items such as parking fees, toll fees, even having
coffee with clients? How often do you visit the local Postnet or print
shop for a photocopy, or buy a newspaper or magazine at the
airport? How
often do you give money to a staff member to buy stamps or milk or
sugar? How many times do you pay for expenses using your personal
credit card? Many small business owners spend way too much money on petty cash and then do not claim it back. We have seen businessmen/businesses spend up to R200 a day on 'petty items". One client had R14000 worth of slips from various shops - all genuine expenses that had never been claimed. This is a total waste of money, and it affects you the business owner as well as your business. If you do not claim your expenses, you will be out of pocket. Your salary/drawings is still taxed by the taxman, and in addition you are paying out money to your business. From the business's viewpoint, it is showing higher profits (because it is recording lower expenses). This is BAD. The excess profits are being taxed at 29% or previously 30%, when the expenses should have been incurred in the business. At the same time, some of the petty cash items are VATable, bear input vat and could have been claimed in your VAT return. Again money is being lost for no good reason. Is petty cash so difficult to manage? YEs, if you do it once a year. NO, if you do it once a day, just as you should be doing your accounts every day for 5 minutes. EconoAccounting makes it so easy to capture your petty cash. Unfortunately you cannot import your petty cash expenses, like you do your bank statements! The procedure is as follows: Create a petty cash account in the chart of accounts. Make this account a Bank Account. (It is a bank account - you, the owner are bank rolling your own business.) Choose Petty cash account as the type of bank account. Yyou are ready to begin recording your petty cash and save thousands per month. Incidentally we sometimes like naming this account "Loan from owner" rather than "Petty cash" as this is really what it is - you are financing your business, and eventually you want to get that money back! At the worst you want to record that the business does owe you the money. You obviously need to keep all your receipts and invoices proving the expense. Every day when you do your accounts, you should go to the Cashbook, choose the petty cash account - or loan from owner account - and add the few transactions in that you have made the previous or even the current day. To add say three transactions and allocate them to the rightful expense and include VAT where relevant each day will take you no more than 90 seconds! Is it worthwhile spending 90 seconds ensuring the accuracy of your petty cash, ensuring that your own claims are accurate and the business has correct accounts? Even if you are only claiming a R10 parking voucher, it IS worthwhile doing it. |
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