How do I record a cash advance?
You may wish to give a 'cash advance' to a member of your team, so they can make cash purchases with your organisation's money for an upcoming project, event, or trip.
This help guide article explains how you can record a cash advance in ExpensePlus, using a new Petty Cash account.
In accounting terms, the money in the cash advance will still belong to your organisation, just like when a team member spends your organisation's money on their business card. Be careful to record the expenditure only once.
In this article:
Step 1: Set up a new Petty Cash account for your cash advance
Step 2: Transfer money into your new Petty Cash account
Step 3: Record purchases made from the cash advance
Step 4: Transfer any residual balance from the cash advance after the project has ended
Step 5: Close the Petty Cash account (next financial year)
How is a cash advance different from recording Petty Cash expenditure?
Step 1: Set up a new Petty Cash account for your cash advance
To add a new Petty Cash account, you will need to be a Finance Team user.
To set up a new petty cash account, head to your Settings screen and choose Bank & Cash Accounts, then under Petty Cash Accounts, choose 'Add Petty Cash Account'.
In the pop-up that appears, give your new Petty Cash account a clear and unique name, and add access for any ExpensePlus users who will need it.
Click 'Submit' to create your new Petty Cash account. You'll now see it listed in the Petty Cash module in ExpensePlus.
Step 2: Transfer money into your new Petty Cash account
Before you can record any expenditure, you will need to transfer some cash into your new Petty Cash account and give the cash advance to the person who will spend the money.
There are three options for how to give the money:
- Option 1: deposit money into the team member's bank account via bank transfer
- Option 2: withdraw money from your bank account and give the person cash
- Option 3: take money from an existing Petty Cash account and give the person cash.
Even though you may be handing or transferring cash to a team member, you are not recording expenditure at this point, as this is an internal transfer of your organisation's cash - the recording of expenditure will come when the actual purchases are made.
Option 1: bank transfer to team member or Option 2: cash withdrawal from bank account
If you have sent a bank transfer to your team member or withdrawn cash from your bank account to give to the team member, in the Bank Matching screen you should record this as a 'Withdrawal of Petty Cash'.
Under the 'Transaction Details' section, select your new Petty Cash account (created in Step 1).
Option 3: take money from another Petty Cash account
If you have taken cash from another Petty Cash account, you need to code a 'Transfer between Petty Cash accounts'. This is done in the Petty Cash module.
Whichever option you have chosen, your new Petty Cash account (in this example, named "Cash advance - Bake Sale ingredients") will now have an opening balance against which expenditure can be recorded.
Step 3: Record purchases made from the cash advance
Now you need to code any expenditure made from this cash advance. You should do this inside the Petty Cash module in ExpensePlus.
See the helpguide article: How do I submit a payment request to Petty Cash?
You can set your team member up as an ExpensePlus user, so they can enter their own purchases (just like business card holders) - just ensure they have access to the Petty Cash account in their user role.
Petty Cash expenditure purchases are subject to the usual receipt checks and approvals (if applicable and turned on). Learn more about how to customise approvals within ExpensePlus.
At any time, you can see the purchases made and the remaining balance in the Petty Cash screen for that account.
If you need to top up the cash advance, you can simply repeat Step 2 as needed.
Step 4: Transfer any residual balance from the cash advance after the project has ended
Once the project is completed, there will likely be a residual balance in the cash advance that needs to be deposited back into your main bank account, or wherever the initial cash advance came from. You should choose one of the three options below.
This residual balance already belongs to your organisation, so you are not recording income at this stage - it is simply a transfer of money between your accounts. If you choose option 1 or 2 below, you may wish to double-check the transfer has not been recorded as a named donation.
If the expenditure exceeds the original cash advance, and there is now a negative balance in the Petty Cash account, meaning you owe the team member a further payment, follow Step 1 again (i.e. the same steps as the initial payment you made to them).
Option 1: bank transfer from team member
If your team member returns the residual balance by bank transfer, you should record this as a 'Deposit of Petty Cash' and then choose your Petty Cash account from the list that appears.
Option 2: bank deposit of remaining funds
If your team member hands back cash which you wish to deposit in a current account, you can do this via the Bank Deposit screen and record it as 'Plus Cash Added from Petty Cash'.
You will then need to bank match this bank deposit in the match transactions screen, when you subsequently upload your bank statement.
Option 3: depositing into another Petty Cash account
If you have a small amount of residual cash that you wish to deposit into another Petty Cash account, you can record this as a 'Transfer between Petty Cash accounts'. This is done in the Petty Cash module, following the process shown above in Step 2.
Step 5: Close the Petty Cash account (next financial year)
After the financial year has finished and the account balance of the new Petty Cash account is £0, you will be able to close the Petty Cash account in the Bank & Cash Accounts settings screen.
How is a cash advance different from recording Petty Cash expenditure?
Petty Cash expenditure (which is not the same as a cash advance) should be recorded after the purchase has been made. If this is the case for your project, you should record expenditure in your Petty Cash module as usual.
The process we've outlined in this article covers the situation where you'd like to give a team member cash for purchase(s) before the purchase(s) have been made.
To help you better understand the Petty Cash module, please visit the module overview page here.