Cash Allowance

From CEOpedia | Management online

Cash Allowance is definied as the expense that is re-paid in cash. Usually is given by employers to employees to cover the costs such as meals, accommodation and office supplies. Generally, allowance is sum of money regularly give someone.

Many countries offer cash allowances to cover the costs of LTC (Long-term care, services which help meet needs of people for long periods) along with institutional care and HCBS (Home - and Community-Based Services). The advantages of cash allowances are that consumer choice is maximised, in particular allowing informal caregivers, often family members, to be compensated. Also, they can be relatively simple to administer, and are often seen as saving money (although see below). In many cases the allowance is provided to people with disabilities of all ages, but only spending relatin to care for people aged 65+ is included here. These allowances are all specifically designated as covering LTC, whether paid to the caregiver or care recipient, although in many cases it is uncertain how people actually use the money[1].

Example of a cash allowance

Petty cash - the word petty means small or minor. In most offices there is a pool of money called petty cash, or a float. This money is used to pay for minor items of expenditure where the use of a cheque is impractical, or it is used for payment of expenses where the supplier would be unwilling to submit an invoice and wait for payment. The responsibility for recording payments of petty cash is usually delegated to a junior clerk who enters them in a petty cash book. However, in a small business it may be done by other people such as the person dealing with mail, or the receptionist. The following are examples of petty cash expenditure[2]:

  • postage stamps
  • window cleaner
  • parking fees
  • packing materials
  • refreshments
  • cleaning materials
  • travel expenses
  • tips
  • minor stationery
  • newspapers and magazines.

When cash allowance is the best way

Cash allowances should not be used to postpone decision. However, when necessary, cash allowances do offer unique advantages and may be best for the following[3]:

  • Items that cannot be designed or selected until the project is partially complete, including murals, sculptures, furnishings and accessories, and landscaping.
  • Items such as testing, the magnitude of which can be determined only during construction.
  • Acceleration of the design schedule when the benefit outweighs the potentially higher cost involved with items purchased with cash allowance funds.

Disadvantage of cash allowances

Cash allowances can be problematic. Although they establish the product price, the prospective constractors are, to some degree, blindly pricing installation. Some products satisfying the cash allowance description can be installed at less cost that others. This applies particularly to brick, hardware, and some kinds of equipment. Hardware selections, for instance, will affect hardware preparation cost for doors and frames[4].

Other approaches related to Cash Allowance

To further understand the concept of Cash Allowance, there are other approaches to consider:

  • Reimbursement: This approach involves the employee incurring an expense and then submitting a claim to be paid back in full.
  • Salary Advance: This approach allows employees to receive a certain amount of money in advance to cover their expenses.
  • Gift Cards: This approach allows employees to receive a gift card that can be used to pay for their expenses.
  • Allowance for Travel: This approach allows employees to receive an allowance to cover their travel expenses.

In conclusion, Cash Allowance is a form of compensation that is paid out to employees in order to cover their expenses. Other approaches to consider include reimbursement, salary advance, gift cards, and allowance for travel.


  1. C. Gori, J.-L. Fernández, R. Wittenberg 2016, p.56
  2. A. Whitcomb, G. Clarke 2000, p.220
  3. Construction Specifications Institute 2013, p.155
  4. Construction Specifications Institute 2013, p.155

Cash Allowancerecommended articles
Full service leasingCoupon bookDisposition feePrepaid rentBarter agreementExclusive agency agreementPlacement feeCost reimbursementVoid Transaction


Author: Katarzyna Siedlarczyk