What is an Imprest Fund?

An imprest fund is a small amount of cash that is set aside for use in paying for incidental expenses. The fund is typically stored in a box or drawer, and is controlled by a custodian who has the authority to make payments. When a payment is made, the custodian hands out cash and replaces it with a voucher that states the purpose of the payment. When the amount of cash in the fund is drawn down to a low level, additional cash is forwarded to it from the company's central accounting system, and the vouchers are used to prepare a journal entry that charges the disbursements to expense.

Advantages of an Imprest Fund

There are several advantages to operating an imprest fund, which are as follows:

Flexibility for unexpected costs. Imprest funds provide flexibility in handling unforeseen expenses that would otherwise disrupt daily operations, such as sudden repairs or emergency supplies.
Avoids clogging payables. Having an imprest fund keeps very small expenditures out of the accounts payable system, where it can be inefficient to process them.
Faster payouts. Having an imprest fund allows people submitting reimbursement requests to be processed more quickly than is usually the case in the accounts payable system, where it can take several days to obtain payment.
Simplicity of operation. The imprest fund is quite simple to operate, so that someone without much accounting background can operate it.
Improved cash flow control. By setting a fixed amount, the organization maintains control over small cash outflows, as expenses are only reimbursed once receipts are provided. This setup minimizes the chance of overspending and maintains a clear record of minor expenses.