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Managing employee expenses is a major task for businesses of all sizes, across different industries. What are employee expenses? Well, the term is pretty much self-explanatory: they are business expenses made by employees for different tasks that come up as part of their professional duties. Typical examples would include petrol or diesel charges for business travel, vendor payments, hotel and restaurant charges during an offsite meeting, etc.
In most cases, the employees do these transactions from their own pocket and then file the expenses with appropriate invoices at the end of the month for reimbursement from the employer. As you may already know if you have experience running a business of your own, this process is rife with challenges. Let’s look at some of them.
Challenges of managing employee expenses
As businesses scale and the number of employees increases, it becomes extremely tedious to sort through expense filing reports and issue reimbursements against them. Moreover, since these expenses and reimbursements have to be reconciled and added into accounting with all the other business transactions it adds a substantial amount of burden on whoever is responsible for these processes in the organization.
Making the reimbursement process a biweekly exercise can be of some help to businesses, but it also means that reconciliation has to be manually done twice each month.
When employees are spending out of their own pocket for business expenses, it can be difficult to maintain a strict budget. Business owners and managers can, of course, inform the employees about spending limits they should adhere to, but it is virtually impossible to ensure that all the employees will do so no matter what. Mostly, this leads to negotiations between the employees and the employer for small amounts of money, causing unnecessary stress to all the involved parties and a waste of everyone’s time and effort.
Risk of fraud
For a small amount of money, an employee can easily get a false invoice for business expenses like hotel charges, vehicle maintenance, office supplies, etc. and there is no sure-shot way in which businesses can make sure that all the expenses filed by their employees are legitimate. In the case of industries like construction companies, restaurants, and others that employ a number of blue-collar workers, this means a serious loss of capital in day-to-day operations.
It is possible, of course, to hire vigilance teams and accounts overseers to minimize instances of fraud, but that also adds up the cost of running a business and may lead to a lengthier process that causes lags in issuing reimbursements to all employees. As much as businesses want to clamp down on the misuse of funds, they also want satisfied employees that stay with the organization for a long period of time.
Logistical issues for urgent transactions
As discussed above, solutions that seek to make the process better by increasing scrutiny at each and every step often end up driving up the costs in terms of increased time, effort, and human resources required by them. For most businesses that need their employees to make decisions fast and keep operations running smoothly at all times, such tedious solutions are not viable. For small and medium-sized businesses which depend upon maintaining good relationships with their vendors, for example, it would not make sense to delay the payments from an employee’s end just because the logistics of reimbursement take longer than necessary.
In the face of all these challenges, Prepaid Cards (also known as Expense Cards) provide much-needed relief. Essentially, these cards are pre-loaded by the employer with a certain amount of money and given to the employees for any business expenses. Let’s look at how this tackles the various challenges of employee expense management.
Prepaid cards for managing employee expenses
Better budget management
Most prepaid cards in the market offer businesses the option of setting spending limits on individual cards. So, suppose you estimate (based on previous data and your own expertise) that the delivery people hired by you will need a maximum of 5000 rupees per week to fuel their vehicles. You can assign a prepaid card to each driver, set the card limit as 5000, and rest assured that they will not be spending more than that over the month. Knowing the maximum amount that will be spent in a specific time period allows businesses to make sure that they always stay within the budget.
Real-time tracking of expenses
Even with spending limits, businesses may struggle to know how much their employees are spending in a given time frame. This information is important in case the spending limits need to be modified or more money needs to be allocated to some employees for urgent expenses. Prepaid cards from industry leaders such as Open make this easy by providing real-time tracking of all transactions made via these cards.
Knowing how much your business is spending on a day-to-day business helps you plan your finances ahead of time and make sure that the available funds are distributed optimally for all business requirements.
Getting all expenses filed in real-time allows businesses to process reimbursements at their convenience in a hassle-free manner. Faster reimbursements, in turn, lead to a more efficient overarching process in which essential business expenses do not get delayed unnecessarily. The finance and accounting team also benefit from not being inundated with a pile-up of expense reports at the end of the month.
Automatic reconciliation of all expenses
With the automatic reconciliation feature that comes with prepaid card providers such as Open, reconciling employee expenses is no task at all because all transactions made via these cards are automatically reconciled. Needless to say, this goes a long way towards streamlining accounting operations and saves up a lot of time and effort that would otherwise be spent manually reconciling each employee expense.
With Open’s expense management solution, in addition to getting prepaid cards, you also get additional benefits like virtual cards, offline expense management, and a single dashboard to track and manage all your business expenses. Also, you get complimentary access to other Open’s neobanking platform that lets you connect all your current accounts together and streamline your business banking and finances with features like seamless payments, faster payouts, loans, tax payments, invoicing, and a lot more.