Petty Cash Gets Serious

This is an article that Robert Stack, President and CEO was interviewed for with American Express - Inside Edge related to Petty Cash. It was written by Karen Bannan.

Community Options has 2,500 employees who work with thousands of developmentally disabled people. In many cases, employees live alongside their charges in group homes managed by the Mount Olive, N.J.-based nonprofit. As part of that care, it’s not unusual for an employee to run to the supermarket for milk or pay a pizza delivery person, both of which require cash.

That’s why every one of Community Options’ more than 150 group homes has a petty cash account, a locked box with anywhere from $200 to $1,000 inside. It’s important for the three or four employees who co-manage each facility to have access to cash, explains Robert Stack, the organization’s president and CEO. “A local ice cream store is going to want paper money.”

While petty cash might be a forgotten concept at larger companies, for mid-size enterprises such as Community Options, it’s still a key part of running the business. To protect what could be large sums of money from being lost or stolen, companies need to have strict policies in place.

Added together, Community Options’ petty cash accounts total more than six figures, which is why the company uses multiple policies and practices to protect it, including requiring receipts for purchases, adhering to a strict accounting process and performing several types of audits.

Such restrictions make for extra work, but it’s worth it. Business owners may be reticent to police employees, but failing to do so can have serious consequences, says Alan Carsrud, a professor who holds the Loretta Rogers Chair of Entrepreneurship at Ryerson University in Toronto. “Any entrepreneur always has to be thinking, ‘What happens if we don’t take care of business and we end up on the front page of our local paper? What will the headline read?’ ”

Petty cash problems typically start out as simple mistakes but can quickly spiral into something much more dangerous, says James Ratley, president of the Association of Certified Fraud Examiners, an Austin, Texas, group that specializes in anti-fraud training and education.

“Companies can definitely fall prey to internal fraud, and it happens more often than you would think,” Ratley says. “They believe the word ‘petty’ in the phrase ‘petty cash.’ They have no idea how much money is at stake or how long this kind of theft can continue if left unchecked.”

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