Big payments usually go through the bank, where they leave a trail. Small ones, such as tea, stationery, transport, a plumber's call-out or airtime, often come out of a drawer. Because each amount is small, nobody checks, and over a year these payments add up to a surprising sum. An imprest system is the oldest and simplest way to keep control, and it works as well for a corner shop as for a large office.

What an imprest is

An imprest is a fixed amount of cash, the float, held by one person for small payments. Whenever money is spent, the holder records it with a voucher and a receipt. At any moment, the cash in the box plus the vouchers must equal the float. When the cash runs low, the vouchers are checked and approved, and the cash is topped up by exactly the amount spent, restoring the float. The total spent is then recorded in the books.

Set the float and the limits

Choose a float that covers a normal period of small spending, such as one or two weeks. Too large a float invites misuse; too small means constant top-ups. Set a limit for a single payment, say KES 5,000, above which payments must go through the bank or need approval. Write the rules down and give the holder a copy.

Appoint one custodian

One person holds the cash and keeps it locked. Others should not dip into it. If the custodian is away, hand the box over formally, count it and sign. A single responsible person makes it much easier to find where an error arose.

Use a voucher for every payment

For each payment, write a voucher showing the date, the amount, what it was for, who received it and who approved it, and attach the receipt. If no receipt exists, as with a boda boda fare, record that fact and get the payer's signature. The petty cash book (imprest) records the float, the payments and the balance, and the payment voucher template provides a standard form.

Count the cash regularly

Count the box at least weekly, and have someone else do it occasionally without notice. The cash and the vouchers must always add up to the float. A small difference should be recorded and explained, not hidden. Repeated shortages are a signal to look more closely.

Top up and record

When the cash runs low, total the vouchers by category, such as transport, stationery and refreshments. Have the owner or manager check and approve them, then issue a cheque or transfer for the total spent. In the books, record each category as an expense. Bank reconciliation, step by step covers the control for the bank side, and how to run a month-end close for a small business includes the petty cash check.

VAT and tax points

Receipts matter for tax. A deductible expense needs evidence, and input VAT can be claimed only on a valid tax invoice. A scribbled slip does not qualify. Ask suppliers for eTIMS invoices wherever possible; eTIMS and your expenses: what changed explains why this affects what you can deduct. Use the VAT calculator to separate the VAT from a receipt total. Expenses small businesses can deduct lists what qualifies.

Avoid common mistakes

  • Mixing personal and business spending from the same float.
  • Lending from the petty cash to staff, which hides a loan.
  • Accepting round-figure vouchers with no receipt.
  • Topping up without checking and approving the vouchers.
  • Using petty cash for large or regular payments that belong in the bank.

Consider mobile money as a float

Many small businesses now use an M-Pesa account for petty spending. The same principles apply: a defined float, a record of each payment and a regular reconciliation to the statement. Mobile money creates a record automatically, which helps; see keeping records with M-Pesa Business. Whether cash or mobile, the discipline is what protects the business: a float, a voucher, a count and a top-up. Small leaks cost more than people expect, and an imprest system closes them cheaply.

An example

A shop sets an imprest of KES 10,000. During the week, the custodian pays KES 1,200 for transport, KES 800 for stationery and KES 2,500 for repairs, each with a voucher. The box now holds KES 5,500 and the vouchers total KES 4,500, which together equal the float. The owner approves the vouchers and tops up KES 4,500, and the books record the three expenses. Anything that does not add up is caught immediately.

See also how to keep business records for KRA, bookkeeping for small businesses in Kenya and the daily cash-up sheet.