The hidden costs of petty cash: why your business might be losing more than you think

The hidden risks of cash handling

In South Africa, crime is a pervasive concern for many businesses. Petty theft remains a prevalent issue, especially in urban centres like Johannesburg, where opportunistic crimes are common. According to Dragonfly Intelligence, “Petty theft is still the main day-to-day security risk in Johannesburg; our general crime rating for the city is severe”. This environment heightens the risk associated with maintaining physical cash on premises, and as many businesses still rely on physical cash as a convenient alternative to corporate bank cards for petty cash expenses, these funds are ultimately more vulnerable to theft.

Manual reporting: a breeding ground for errors

Traditional petty cash management often relies on manual processes, including handwritten logs and paper receipts. This approach is not only time-consuming but also prone to human error. Missing receipts, inaccurate record-keeping, and delayed reconciliations can lead to financial discrepancies that are difficult to trace. As noted by Insightsoftware, “Manually reconciling petty cash can be a time-consuming task, especially for larger organisations with frequent transactions”. Such inefficiencies can disrupt financial reporting and obscure the true financial position of the company.

Fraud: the overlooked threat

Employee theft is a significant concern that often goes unnoticed until substantial losses have occurred. As eNCA CEO of forensic investigative services company CS Forensics, Christo Snyman, reveals in an article by Business Tech: “-any given business is losing around $117,000 per case (roughly R2 million), equating, on average, to about 5% of company revenue.” A significant number of these theft incidents stem from employees engaging in fraudulent activities, such as processing fake disbursements, adding unauthorised beneficiaries to company accounts, and misappropriating loose cash. Consequently, relying on physical cash for petty expenses and failing to enforce strict financial controls creates a vulnerable environment that facilitates fraud.

As PayCentral’s founder, Veenash Parbhoo, insightfully points out, “When it comes to petty cash, it’s the one pain point that everyone overlooks, and they just keep funding. And if there’s any fraudulent activities occurring, it’s too small to even bother. But then when you look at the bigger picture, you lose a lot of money.”

A modern approach to petty cash management

To mitigate these challenges, financial departments are increasingly turning to digital solutions. One effective strategy is the adoption of preloaded corporate cards. These cards can be used anywhere, offer real-time tracking of expenses, and allow for instant fund disbursements. This approach not only reduces the risks associated with physical cash but also enhances transparency and control over minor expenditures.

“From a fraud perspective, we solve the problem because there’s better control, there’s transparency, there’s real-time transparency.” – Veenash Parbhoo, PayCentral Founder and Director

Implementing these solutions can transform petty cash management from a cumbersome, error-prone process into a streamlined, secure, and efficient one. By embracing modern financial tools, South African businesses can protect their assets, improve operational efficiency, and foster a culture of accountability.

In conclusion, while petty cash may represent a small fraction of a company’s finances, the implications of its mismanagement are far-reaching. Addressing the inherent risks through innovative solutions is not just a matter of convenience but a strategic imperative for financial integrity.

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