How A Prepaid Program Can Help Improve Employee Expense Management
Efficient management of employee expenses can make a substantial difference in the success of a company. However, employee expenses are often difficult to track, especially when your company lacks an effective system for managing expenses. Although employee expenses are a necessary part of business, lack of administration and abuse of company funds can prove detrimental.
According to a blog post by New York Business Journal, 10 percent or more of a company’s budget is related to employee travel expenses. Since employee expenses can be difficult to track, employee claims can easily be outside the company’s budget and policies. Without proper expense management, these discrepancies can often go unnoticed.
According to an article by Michael Sheehan, the CEO of Systems@work, what makes matters even worse is that managers sometimes shy away from challenging questionable claims, especially when dealing with senior employees or difficult colleagues.
Employee expenses range from company to company, but some of the most common ones are:
Food and meals: Meals with clients, food or beverages for company kitchen
Company events: employee recognition events, holiday parties
Supplies and Equipment: Paper, pens, paper clips, stamps, telephone directories, long distance calls
Company vehicle expenses: meeting clients, delivering products, corporate tasks
Employee travel and entertainment expenses: Airline, bus, train, or taxi fares, hotel, meals, and entertainment
With all of these types of expenses, employee spending can easily get out of hand. To prevent that, employers need to find more efficient ways to manage and monitor expenses, in a way that makes it easier for managers and more convenient for employees. One of the best solutions any company can adopt is the implementation of a prepaid card program that is customized specifically for the purpose of managing employee expenses.
Below are some of the most common issues regarding employee expenses and how those concerns can be addressed with prepaid cards:
Issue 1: Company or Employee Credit cards
Many companies give employees a company credit card to use for relevant expenses, such as a business trip. Business credit cards usually have a high credit limit, which can be a serious pitfall, especially if the employee is not given a specific budget for their trip. Between transportation, food, hotels, and other miscellaneous items, expenses can add up quickly.
In other cases, employees are encouraged to use their own credit cards and provide receipts for their expenditures, which the company will then reimburse. In addition to the tediousness of maintaining and documenting all receipts, the problem with this approach is that not all employees have their own credit cards, some don’t have large enough credit limits to cover their expenses, and sometimes they have to pay for the expenses charged to their cards before they have been reimbursed.
By providing employees with preloaded prepaid cards in advance, you have the ability to budget the maximum amount that the employee can spend and track their expenditures. Prepaid cards, just like credit cards, can be used anywhere Visa or MasterCard is accepted; however, they don’t use credit. In this respect, they are similar to debit cards, allowing you to spend only the amount that is loaded on the card, except—no overdraft. Prepaid cards increase financial control and planning for employers and also encourage employees to spend wisely, since they know they have a budget. Prepaid cards also eliminate any undue financial burden from being placed on employees who might have difficulty covering their expenses with their own funds or credit cards.
Issue 2: Tracking receipts and carrying cash
As mentioned above, tracking down receipts can be a trying task, especially if you have multiple employees spending corporate funds. Plus, with the busy schedules of employees out on sales calls or on business trips, receipts are easy to lose and they can be difficult to record, file, and organize. Cash complicates things even more since there is often no proof of the transaction, unless receipts are provided. And if, for any reason, cash is lost, there is no recourse.
Prepaid cards provide a streamlined payment method with zero liability protection, making the process more convenient, more flexible and safer for employees. They no longer have to worry so much about losing their receipts or any cash advances. Similarly, employers are able to worry less about questionable expense claims, since all payment activities are recorded online. If desired, employers can provide employees with their own prepaid cards, making it easy to track the expenses of each individual. The cards can also be customized, providing an appropriate budget for each employee’s needs.
Issue 3: Ineffective management system
Over the last 4 or 5 years, approximately 60 to 70 percent of companies are seeking new ways to manage travel and corporate expense, says Christopher Dwyer (Aberdeen Group senior analyst) in New York Business Journal’s article (link provided earlier in this post) on managing employee expenses. You can reinforce company policies to employees, host meetings, and find a better way to track receipts, and still find employee management difficult to administer. However, a prepaid card solution provides the perfect management system for tracking employee spending.
First of all, the ability to pre-plan an employee’s expense budget on a prepaid card eliminates the chances of overspending, providing more freedom and security for employers and employees alike. Customized and detailed reports also equip the company with a robust back-end that provides critical information:
-Reasons for declines
-Nearing account limit
Real-time reporting allows employers to take necessary action in cases of suspicious activities or nearing account limits. Detailed account reports also provide employers with a better idea of the budget required for future employee expenses, allowing them to plan accordingly.
Looking to Start a Prepaid Expense Card Program of Your Own? Get Started!
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