Reclaiming expenses is a system out of date. Innovative ways, such as prepaid cards, can help you keep control over business expenses and keep your employees happy.
In a growing business, managing employee expenses is often not given the attention it deserves. There are risks and you should have modern systems in place to minimise the bureaucratic burden and maximise your protection from fraud.
Your company is at risk, regardless of whether you are a large multinational or a small not-for-profit organisation. A report on Occupational Fraud and Abuse by the Association of Certified Fraud Examiners found that some 14.5 per cent of schemes being investigated involved expense reimbursement fraud. The Royal Academy of Music, for example, was defrauded of £200,000, over a four year period, by a former director.
In a growing business companies commonly start by operating a simple petty cash system. However the hassle of needing to give out cash, even for small items, and then trying to remember to get back receipts and change, soon means that companies move to either issuing credit cards, or relying on employees to submit monthly expense reports with receipts.
Because credit card bills come in after the expenditure, fraudulent behaviour will take some time to be spotted. The employee can spend any amount up to the credit card limit, with no restrictions on what they use the card for.
Reclaiming expenses is hardly popular with employees, particularly if they are junior or low paid. Waiting to get their money back usually takes around a month and, if they regularly have to pay out, it means that they are nearly always out of pocket and carry a cashflow burden that may make them resistant to incurring costs that benefit the business. It also commonly means that employees are spending considerable time every month going through piles of receipts, and the accounts department then doing the same. Add up that time and you'll see just how much it could cost your business. With so many receipts, of course, the risk of a mistake, either genuine or fraudulent, is high.
What is the answer, then? An innovative way to manage expenses is to use one of the new breed of business prepaid cards. Employers load the card with the money needed, when they need it, and the employee is then free to spend on approved expenses. The advantages will depend on the provider, but the key advantages you should look for and expect are:
Total centralised control. You should be able to manage all your business’s cards and reconcile expenses for all employees via an online centralised card management system
Decreased administration time and employee fraud. There should be no need to sift through employee receipts as employers are provided with full oversight of all spend. You should also be able to track employee expenses and block cards online
Improved audit trail and expenses reconciliation. You should be able to download statements for each card online 24 hours a day.
Significantly reduced costs. If you choose the right card you could save hundreds of pounds over equivalent business credit cards as you pay one low annual fee to get an account.
Richard Wagner is the CEO of Advanced Payment Solutions.