How to Track Restaurant Petty Cash Expenses

By John Nessel
Restaurant Resource Group

Most restaurants use their POS cash drawer as a source of petty cash for daily incidental expenses. The bartender needs some cash for soda or limes, the shift manager needs cash for cleaning supplies or light bulbs, or the owner might need some cash to pay for a small printing job at the corner copy center. That is way too many hands in the cash till to suit my tastes, and is very dangerous from the point of view of inviting theft. Moreover, my experience indicates that even with the best of intentions many of these cash disbursements are not properly accounted for with receipts that indicate how the funds were used. This creates another set of problems at the end of the day when the cash drawer is short, and unaccounted petty cash is now added to the list of possible explanations!

The Petty Cash Box
Here is a simple solution. Use a separate petty cash box to disburse and account for all your daily petty cash expenses. Go to an office supply store and get yourself a simple metal cash box for $20.

The petty cash box should be stored in your safe, and accessed only by the owner/manager when required. In the event that petty cash is needed on a regular basis, and the safe is not in a convenient location, then you might make the bartender or shift manager responsible for it. In this case the contents need to be counted at the beginning and end of the shift so that the designated person can be held responsible for any unaccounted for cash and receipts.

First off you need to "fund" the account by writing a check, say $200.00, from your operating account. Code this check to a new general ledger account named "Petty Cash". The account Type should be "Other Current Asset".

The Petty Cash Log
Cash the check and then break it down into useful denominations and change. Make sure to use a petty cash log to track each disbursement that is made. You can do this by creating a simple spreadsheet (so that you can easily make replacement copies) with twenty or so horizontal lines. Begin at the top by recording how much cash is in the box when the new log begins. Each line should have the following information:

  • Date
  • Name (the employee who is spending/disbursing the cash)
  • Purpose (how the cash is being used)
  • Vendor (name of the person or vendor who is receiving the cash)
  • Total (amount used)
  • Balance (the new balance that is remaining in the box)

Note: Keep a calculator in the box so that the running balance can be accurately maintained!

Disburse the Cash
Now letís get down to the actual disbursement and tracking of the funds. Typically petty cash is disbursed in two ways:

1) Directly from the cash box to the recipient or vendor (e.g. a $25 bill is paid COD, and the vendor gives you a receipt at the same time the bill is paid, or

2) From the cash box to the person who will make a purchase outside the restaurant. In this case the final amount spent and/or the vendor may not yet be known, and a receipt will not be available when the cash is initially disbursed.

In the first case, recording the petty cash disbursement is easy. Simply record all the information on the log at the time of the payment and use the calculator to subtract the total disbursement from the previous balance as indicated on the line above. Make sure to place the receipt in the box to verify the expense.

In the second case where the funds have yet to be spent, the person responsible for the petty cash should use the log to note the name and total amount that is advanced (not necessarily the amount that will be spent) to the person who will be using the funds. When the person returns with the receipt, and with unused cash from the advance (e.g. you advance $20 and the expense is $15 so there is $5 returned to the petty cash box), then you can make the final entry on the cash log.

Note: Problems often occur when cash is removed from the box and not initially recorded because the person thinks that he/she will wait until the total is known and the receipt is in hand. Often these advances are never recorded and the cash box is therefore short the amount that was removed!

Replenish the Petty Cash Box
Eventually the balance in the box will be reduced to the point that is needs to be replenished. When you write a check to bring the total back to the original amount (or some other new total), you simultaneously record how the petty cash that you are replacing was utilized (e.g. you code it to the proper expenses accounts). First off, remove the petty cash log from the box and replace it with a new log. Make sure to indicate the new cash balance that will be in the box after you replenish the funds.

Take the old cash log and break it down, by your chart of accounts expense category (e.g. total all food purchases, operating supplies, postage, etc)

From the Write Checks screen (if you are using QuickBooks) create a new check for a Vendor named "Petty Cash". Make the check total for the exact amount of cash that is required to bring the petty cash box total back to its original balance. For example, if you started with $200.00 and the cash balance is now $17.75 then write a new check for $182.25. This represents the total cash that was used for petty cash expenses.

Code the Petty Cash Expenses
Here is the key! Rather than coding the new check to the Petty Cash general ledger account (as you did when you recorded the original check to fund the cash box), this time you will "split code" the total to the various expense accounts that accounted for the cash disbursements, and that you combined from your petty cash log. Repeat this process every time you need to replenish your petty cash box and make sure to keep a file of every recorded petty cash log with all the receipts from the log attached.

When you are replenishing the petty cash box, letís say that you decide to increase the cash total from $200 to $300. Using the example above you would write the replacement check for $282.25 rather than $182.25. Simply code the additional $100 to the Petty Cash account and when you check out your Balance Sheet the new total will read $300.

Finally, in the event that there is a discrepancy between the balances as indicated on your petty cash log and the actual cash that you counted, you need to account for that difference when you code the replacement check. As an example, letís say that your cash log balance indicates $20 but when you actually count the cash you only have $12. First off, you need to make sure that you write the new check for $188 rather than $180. Second, you need to account for the missing $8 when you code the replacement check (otherwise you will not be in balance and you will not be able to save the entry). Use your cash over/cash short expense account to record this shortfall.

John Nessel is the President of Restaurant Resource Group a Boston based consulting firm that provides simple yet powerful financial tools and support services to restaurant owners and managers. He is also the author of The Restaurant Operators Complete Guide to QuickBooks. John can be contacted at john@rrgconsulting.com

 

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