Petty cash gets its name from the word “petty,” which comes from the French word “petit,” meaning small or minor. The term has been in use since at least 1678, when it appeared in a publication called Advice to Women & Maidens of London, according to the Oxford English Dictionary. From the start, it described exactly what it still means today: a small amount of cash kept on hand for small expenses.
What “Petty” Actually Means Here
In everyday conversation, “petty” often carries a negative tone, suggesting someone is being trivial or spiteful. But in accounting, “petty” simply means small in amount or importance. It’s the same usage you see in older legal terms like “petty theft” or “petty officer,” both borrowed from the French “petit.” When businesses started keeping a separate stash of coins for minor purchases in the 1600s, calling it “petty cash” was a straightforward way to distinguish it from the larger sums flowing through the main books.
The name stuck because the concept never really changed. Petty cash is still a small, fixed pool of physical money set aside so employees don’t have to run a full purchasing process every time the office needs stamps or a replacement phone charger.
How Petty Cash Works in Practice
A business sets up a petty cash fund by withdrawing a fixed amount, often between $100 and $500, and placing it in a locked box or drawer. One person is designated as the custodian, responsible for handing out cash, collecting receipts, and making sure the numbers add up. The purchases themselves are genuinely small: office supplies, postage, taxi fares, a catered lunch for a team meeting, flowers for a client, or reimbursing an employee who grabbed cleaning supplies on the way to work. Harvard University’s Office of the Controller, for example, caps individual petty cash transactions at $25.
Every time money leaves the box, a receipt or voucher goes in. At any given moment, the remaining cash plus the total on all the receipts should equal the original fund amount. When the cash runs low, the custodian submits those receipts, gets reimbursed by check or transfer, and the fund resets to its starting balance. This cycle is called the imprest system, and it’s the standard method businesses and government agencies use to keep petty cash accountable.
Why Businesses Still Keep Cash Around
Writing a check or processing a purchase order for a $4 roll of tape costs more in employee time than the tape itself. Petty cash exists to skip that overhead. It handles the frequent, low-dollar transactions that would clog up a normal accounts payable process. The fund is intentionally kept small so the financial risk stays minimal, and monthly reconciliations catch any discrepancies before they grow.
That said, petty cash comes with rules. The fund can never be used for personal loans or advances. Receipts need to show the date, amount, purpose, and who received the goods or services. Those receipts get marked after use so nobody can submit the same one twice. The custodian is typically someone who doesn’t also process invoices or sign checks, creating a basic separation of duties that reduces the chance of misuse.
Digital Alternatives Are Replacing the Cash Box
Many organizations now use purchasing cards (sometimes called P-cards) or prepaid corporate cards instead of a physical cash box. These work on the same principle, covering small, routine expenses, but they create an automatic digital trail. The Government Finance Officers Association notes that purchasing cards can significantly reduce the volume of petty cash transactions, purchase orders, and checks a business has to process. They also generate rebate revenue and better purchasing data.
Still, physical petty cash hasn’t disappeared. Plenty of small businesses, retail shops, and offices keep a cash box for situations where a card isn’t practical, like tipping a delivery driver or buying something from a vendor who only takes cash. The name remains the same whether the “small money” lives in a locked drawer or on a prepaid Visa: it’s petty because the amounts are minor, and it’s cash because it’s meant to be spent quickly and without fuss.