Accounting services Iraq businesses can rely on must treat petty cash as a controlled company asset, not an informal wallet. The practical system is simple: one fixed float, one named custodian, numbered evidence for every payment, approval limits, independent counts, and a reconciliation before replenishment.
Quick answer: Set a fixed IQD float from real small-expense history, prohibit personal borrowing and salary advances, require a voucher and receipt for each payment, separate custody from approval and bookkeeping, and reconcile cash plus approved vouchers back to the fixed float. Investigate every difference before adding more money.
This guide is general operational information, not tax, legal, audit, or accounting advice. Evidence and record-retention requirements can change by transaction and authority review. Confirm your policy with a qualified Iraqi accountant or advisor.
What is petty cash in an Iraqi business?
Petty cash is a small, fixed amount of physical money held for low-value, urgent business expenses that are inefficient to pay by bank transfer. Examples may include minor office supplies, a local delivery, a small repair item, or an emergency operating purchase.
It is still company cash. The IFRS Foundation's IAS 7 guidance treats cash on hand as cash and requires clear reconciliation of cash components in financial reporting. A box in a Baghdad office, a restaurant till, and a branch expense float all affect the company's real cash position.
Petty cash is not a substitute for procurement, payroll, owner withdrawals, supplier settlements, or undocumented reimbursements. When large or recurring purchases pass through the box, management loses visibility and the monthly close becomes slower.
Why do petty cash controls fail?
In Iraq, the practical problem is usually not the arithmetic. It is unclear ownership. Several employees take cash, receipts arrive late, IQD and USD are mixed, the same person approves and records payments, and the box is replenished whenever it looks low.
That process creates four risks:
- Missing evidence. Finance cannot explain what the money purchased.
- Duplicate reimbursement. One receipt may be claimed through cash and again through payroll or accounts payable.
- Hidden advances. Personal loans or employee advances remain inside an expense account.
- Late reporting. The ledger shows an unchanged float while most of the physical money has already been spent.
The solution is a small control cycle that staff can actually follow, including during busy shifts and across multiple branches.
How should you set the float and transaction limit?
Start with four to eight weeks of actual low-value expenses. Remove purchases that should move to approved suppliers, cards, transfers, payroll, or accounts payable. Divide the remaining monthly need by the planned replenishment frequency, then add a modest operating buffer.
| Control setting | Illustrative amount | Purpose | Review trigger |
|---|---|---|---|
| Main-office fixed float | 750,000 IQD | Small urgent office and operating items | More than two replenishments a month |
| Branch fixed float | 400,000 IQD | Local minor expenses | Repeated idle balance above 250,000 IQD |
| Single-payment limit | 100,000 IQD | Keeps larger purchases in procurement | Any split transaction near the limit |
| Receipt exception limit | 25,000 IQD | Handles rare evidence gaps | More than one exception in a month |
| Surprise-count tolerance | 0 IQD | Every difference requires explanation | Any shortage or overage |
Figures are illustrative and can change with branch activity, purchasing method, exchange rate, and current requirements. Verify the policy before making a financial decision.
A limit does not permit splitting a 280,000 IQD purchase into three vouchers. Evaluate related same-day purchases together and move predictable spend to procurement.
Which roles should be separated?
Even a small Iraqi SME can separate the most important duties. The custodian holds the money and prepares the voucher. The requester explains the business need. A manager approves within a documented limit. Finance posts the expense and reconciles the account. Someone independent performs surprise counts.
| Role | May do | Should not do alone |
|---|---|---|
| Requester | Describe need and submit evidence | Approve their own reimbursement |
| Approver | Confirm purpose, amount, and budget | Hold the box and post the entry |
| Custodian | Pay approved voucher and protect cash | Approve, alter, and reconcile the same payment |
| Bookkeeper | Code and post approved transactions | Replace missing evidence without escalation |
| Reviewer | Count and sign the reconciliation | Announce every count far in advance |
Where headcount is limited, use compensating controls: an owner reviews a weekly voucher report, finance inspects scanned evidence, and a different employee witnesses the monthly count. The goal is not bureaucracy; it is preventing one person from controlling request, approval, cash, and records.
What must appear on a petty cash voucher?
Use sequential voucher numbers. Each number should be used once, and cancelled numbers should remain visible with a reason. A practical voucher records:
- Date and branch.
- Payee or employee receiving the cash.
- Business purpose in plain language.
- Amount and currency.
- Expense account or category.
- Receipt or alternative evidence reference.
- Requester, approver, and custodian signatures.
- Whether the payment is an expense, reimbursement, temporary advance, or refund.
Scan evidence while it is readable because thermal receipts fade. A missing-receipt exception should identify the supplier, item, purpose, date, and reason. Repeated exceptions signal a process problem.
For the wider evidence trail, connect this routine to Hanooot's guide to expense approval controls in Iraq.
How does the imprest reconciliation work?
Under a fixed-float or imprest method, physical cash plus valid unreplenished vouchers should always equal the approved float. The box returns to its fixed amount only after finance reviews the vouchers and provides exactly the approved reimbursement.
1. Stop activity and count cash
Count IQD by denomination. Count USD separately if the policy permits foreign currency; do not translate it informally inside the sheet. Record the date, time, custodian, witness, and last voucher number.
2. Total approved vouchers
Separate complete vouchers, temporary advances, and exceptions. Do not hide an unresolved advance inside office supplies simply to make the total balance.
3. Compare with the fixed float
Use this equation:
Physical cash + valid vouchers + documented advances = authorized float ± unexplained difference
4. Post and replenish
Finance posts expenses by account, records any approved difference separately, and replenishes only the reviewed voucher total. The cash count and accounting entry should refer to the same voucher range.
Worked example: reconciling a 750,000 IQD float
Assume a Baghdad service business authorizes a fixed float of 750,000 IQD. At Friday close, the custodian counts 286,000 IQD. Approved vouchers total 449,000 IQD, and a documented temporary advance is 10,000 IQD.
- Physical cash: 286,000 IQD
- Approved vouchers: 449,000 IQD
- Documented advance: 10,000 IQD
- Accounted total: 286,000 + 449,000 + 10,000 = 745,000 IQD
- Difference: 750,000 - 745,000 = 5,000 IQD shortage
The business should not replenish 464,000 IQD and ignore the shortage. Finance first verifies the count, checks the voucher sequence, asks whether a 5,000 IQD receipt is missing, and documents the review. If the shortage remains, it is posted to the approved cash-difference account and escalated under policy. The reviewed replenishment is 449,000 IQD, while the temporary advance remains open and the 5,000 IQD difference remains visible.
This example is illustrative. The lesson is that reconciliation explains the float; replenishment does not erase exceptions.
How often should you count and review petty cash?
The custodian should self-balance at every replenishment and month-end. High-cash branches may need a daily or weekly routine. An independent reviewer should conduct surprise counts based on risk, not on a predictable calendar.
A practical monthly dashboard includes the float by branch, number and value of vouchers, replenishment count, missing receipts, open advances, shortages or overages, transactions near the limit, and spend by category. A sudden increase in local delivery or repair payments may signal a procurement problem rather than a cash problem.
Link the final reconciliation to the bank reconciliation and monthly close process. Hanooot's finance workflow targets a Day 5 close when complete records arrive on time; unresolved cash boxes are one reason a close slips.
How should multiple branches and currencies be handled?
Give each branch its own custodian, float authorization, voucher sequence, general-ledger subaccount, and reconciliation. Never combine three physical boxes into one spreadsheet balance. Head office should receive a standard scan pack and exception report on a fixed schedule.
If operations use IQD and USD, maintain separate physical compartments and reconciliation columns. Record the approved accounting rate and date through the normal finance process rather than allowing the custodian to choose a rate. Where possible, pay larger USD expenses through traceable banking or accounts-payable channels.
Hanooot is an Iraqi operating partner founded in Baghdad in 2022. Its accounting services in Iraq combine bookkeeping, IQD/USD discipline, reconciliations, management reporting, and audit-ready evidence instead of treating petty cash as an isolated form.
What should the month-end file contain?
Close each month with one organized folder per branch:
- Signed float authorization and current limits.
- Cash-count sheet and independent review signature.
- Voucher register from first to last number.
- Receipt images linked to voucher numbers.
- Missing-evidence and limit exceptions.
- Open temporary advances with owners and due dates.
- Replenishment proof and accounting entry reference.
- Trend report for shortages, frequency, and spend categories.
The file should let a manager, accountant, or auditor trace the ledger balance back to real cash and approved evidence without reconstructing the month from chat messages.
Frequently Asked Questions
How much petty cash should an Iraqi business keep?
Keep only the amount needed for approved small expenses between replenishments. Set the float from actual spending history, then lower it when cash remains idle or raise it only when documented demand repeatedly exceeds the limit.
What documents should support a petty cash payment?
Use a numbered voucher, receipt or alternative evidence, business purpose, account code, amount and currency, requester, approver, custodian signature, and date. Record missing-receipt exceptions separately and resolve them quickly.
How often should petty cash be counted and reconciled?
The custodian should balance the box whenever it is replenished and at month-end. A manager or finance reviewer should also perform periodic surprise counts, with higher frequency for busy branches or repeated differences.
Can Hanooot set up petty cash controls for multiple branches?
Yes. Hanooot can define float limits, approval bands, voucher formats, branch custody, surprise-count routines, accounting entries, and month-end reporting as part of a wider Iraqi finance operation.
Conclusion: make small cash visible
Petty cash is small only transaction by transaction. Across branches and months, weak controls can hide meaningful leakage and delay reliable reporting. A fixed float, clear roles, numbered evidence, independent counts, and visible exceptions turn the box into a manageable accounting process.
If your business needs cleaner cash records, connect petty cash with monthly close controls for Iraqi SMEs, then contact Hanooot to review your accounting workflow and branch evidence.