Petty Cash Management for a Small Office: The Imprest System
How to run petty cash in a small office: the imprest system, a voucher for every rupee, a worked month-end count, GST bills and rules that stop leakage.
Short answer: keep a fixed float, for example ₹10,000, with one custodian. Every payment out of it needs a voucher and, where possible, a bill. At the end of the period, count the cash, total the vouchers, check that the two add up to the float, record the expenses, and top the float back up by exactly what was spent. This is the imprest system, and it makes any shortfall visible within a month.
KEY TAKEAWAYS
- One custodian, one fixed float, one box.
- Cash in hand plus vouchers must always equal the float.
- Top up by exactly what was spent, against the vouchers.
- Keep GST bills in the company's name if you want to claim input tax credit.
Set it up
- Float: enough for about a month of small spends. ₹5,000 to ₹15,000 suits most small offices.
- Custodian: one named person, with a deputy for leave. Nobody else takes money out.
- Limit per payment: for example ₹2,000. Anything larger goes through normal payments.
- What it is for: courier, stationery, tea and snacks, local travel, small repairs. Not salaries, advances or supplier bills.
A voucher for every payment
Each payment gets a voucher with the date, amount, purpose, who received the money, who approved it, and the bill attached. If there is no bill (an auto fare, a tip to a delivery person), the person who spent it signs the voucher. Number the vouchers in sequence so a missing one is obvious.
A worked month-end count
The float is ₹10,000. On 31 October the box holds ₹1,650 in cash and vouchers totalling ₹8,350.
| Category | Vouchers (₹) |
|---|---|
| Courier and postage | 1,900 |
| Stationery and printing | 2,450 |
| Tea, snacks and pantry | 2,600 |
| Local travel | 1,400 |
| Total vouchers | 8,350 |
| Cash counted | 1,650 |
| Cash + vouchers | 10,000 — matches the float |
Record the four categories as expenses, and give the custodian ₹8,350 to bring the box back to ₹10,000. If cash plus vouchers came to ₹9,700, the ₹300 gap gets investigated now, while people remember, not at year end.
Rules that stop leakage
- Count by surprise once in a while, not only at month end.
- Never mix petty cash with personal money or with cash collected from customers.
- No IOUs. An advance to staff is a salary advance, recorded as one.
- Review the categories. If "local travel" doubles in a month, ask why.
- Prefer UPI or a company card for anything that allows it; fewer notes means fewer gaps.
GST and tax points
You can claim GST input tax credit on a petty-cash purchase only with a proper tax invoice showing your GSTIN, and only if the item is eligible; most small cash bills carry no GSTIN, so expect little credit from petty cash. Income-tax law also limits business expenses paid in cash to one person in a day, above which the expense can be disallowed, so larger payments should not go through petty cash at all. Ask your CA for the current limit under the Income-tax Act, 2025.
How Grovia handles it
In Grovia, record each top-up's spends as expenses with a category, the payment mode set to cash, and a photo of the bill attached, so the vouchers and the books are the same record. For wider expense control, see expense tracking and reimbursement.
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Checked on 3 November 2026. Tax rules change; confirm anything that affects a return with your CA.
Frequently Asked Questions
What is the imprest system of petty cash?
A fixed float is given to one custodian. Spends are supported by vouchers, and at the end of each period the float is topped up by exactly the amount spent, so cash plus vouchers always equals the float.
How much petty cash should a small office keep?
Enough for about a month of small expenses; ₹5,000 to ₹15,000 suits most small offices. If you top up more than twice a month, raise the float.
What should a petty cash voucher contain?
The date, amount, purpose, who received the money, who approved it, a voucher number, and the bill attached or the recipient's signature.
Can GST input tax credit be claimed on petty cash expenses?
Only with a proper tax invoice that shows your GSTIN, for an eligible item. Most small cash bills do not qualify.
What if petty cash does not match at month end?
Investigate the difference immediately: check for missing vouchers, arithmetic errors and unrecorded advances, and record any genuine shortfall with a note of what was found.
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