Most business expenses will be paid by business check, credit card, debit card, or electronic funds transfer (EFT), or they will be placed on account with the seller. However, small expenses that will be paid by an employee or with cash require reimbursement. Because the amount is typically small, the fund from which the reimbursement comes is usually known as petty cash.

A petty cash fund should be set up to be used for payments of small amounts not covered by invoices. A check should be drawn for, say, $200. The check is cashed and the money placed in a box or drawer. When small cash payments are made for such items as postage, shipping, or supplies, the items are listed on a printed form or even a slip of paper. When the fund is nearly exhausted, the items are summarized and a check is drawn to cover the exact amount spent. The check is cashed and the fund replenished. At all times, the cash in the drawer plus the listed expenditures should equal the established amount of the petty cash fund.

It can sometimes be difficult for owner-managers not to mingle their business and personal money. Some keep a separate notebook in their purse or pocket to record business expenses paid from personal funds. They then report these transactions to their accountant or accounting system and draw business funds to replace them. Others use separate business and personal debit cards to ensure that accurate records are maintained.