Managing Petty Cash in Xero

For many businesses who manage petty cash floats, once the business has moved from paper records to accountancy software such as Xero recording cash income and expenditure within the software can often be forgotten.

Below, we have provided a step-by-step guide as to how to keep and manage a petty cash account in Xero.

Creating The Petty Cash Account

To create a petty cash account, the simplest method is to use the same feature to set up bank accounts.

    1. From the main screen go to Accounts, then Bank Accounts.
    2. Then click Add Bank Account.
    3. In the Find Your Bank screen, type in ‘Petty Cash’ and select Add It Anyway when 0 results appear.
    4. Then you need to enter the account details.
      1. Bank – enter ‘Petty Cash’
      2. Account Name – enter ‘Petty Cash’
      3. Account Type – select ‘Other’
      4. Account Number – enter all 0’s for the sort code and ‘Petty Cash’ for the account number.
    5. Click Save

Entering The Opening Balance

Now you will need to enter the balance of the petty cash you currently hold. You can do this one of two ways.

Entering an Opening Balance

  1. Go to Settings then General Settings
  2. Click Conversion Balances
  3. Click Show All Accounts
  4. Find Petty Cash and enter the balance into the Debit column.
  5. Click Save

Transfer Money into Petty Cash Account

  1. From the main screen go to Accounts and the Bank Accounts
  2. Click Transfer Money
  3. Choose the account you’re transferring the money From (e.g business current account)
  4. Choose the account you’re transferring the money To (in this case, the petty cash account)
  5. Select the Date
  6. Input the Amount
  7. Add a Reference if you wish
  8. Click Transfer

Recording Transactions

After you have the petty cash account set-up, you can then begin to record the income and expenses.

  1. Go to Account and then Bank Accounts
  2. Find and click Petty Cash
  3. Select Manage Account
  4. Select either:
    1. Spend Money (to record expenses)
    2. Receive Money (to record sales and other income) or
    3. Transfer (to record the movement of money to and from the petty cash account and the other business bank account)
  5. Enter the transaction information
  6. Click Save

Reconciling the Petty Cash Account

Once you have been recording transactions in the petty cash account, you will need to regularly reconcile the account also, as you would with the other bank accounts. However, as the petty cash doesn’t have bank statements to import, you will need to reconcile transactions manually.

  1. Enable the Mark as Reconciled feature by clicking the ? symbol in the top right of the screen when in the Petty Cash account.
  2. Click Enable Mark as Reconciled (you will only need to do this the once)
  3. Click on the Account Transactions tab
  4. Once you have reviewed the transactions, click More and then Mark as Reconciled

If you have any further questions about maintaining a petty cash account in Xero (or any other accounting queries), please do contact us here at Bright Horizon. We’d love to hear from you!

Jody Miles
Qualified Chartered Management Accountant with more than 10 years practice experience. Very different from the stereotypical accountant but professional and diligent none the less. In my spare time I enjoy spending time with my young family and volunteering on the Calshot RNLI Lifeboat.

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