Letting employee spend on behalf of the company is a necessary part of running a small business. From event planning to construction, small business employees need to make purchases for a wide range of reasons—but traditional approaches to managing employee expenses can be frustrating and time-consuming. But prepaid business cards, coupled with expense management software, provide an alternative approach that small business owners can find useful and practical.
Here are the top 5 reasons why small business owners should consider prepaid cards:
1. Reduce Risk: Use Prepaid to “Pre-Authorize”
Traditional employee spending methods inherently involve a measure of risk. For example, dishonest employees or poor cash management makes petty cash a liability. Although petty cash is supposed to be “petty”—small amounts for small expenses—as outside expenses or the number of employees making purchases grows, petty cash becomes unwieldy and overcomplicated. There was a recent incident where an employee fraudulently expensed $100,000, $24.99 at a time, by taking advantage of a policy loophole.
The same is true for expense reports. Employees dip into their own pockets and submit expense reports and receipts in hopes of being reimbursed in a timely way. Employers don’t see spend until it’s already committed.
Look for a prepaid expense management platform that includes smart technology and prepaid cards to help manage spend. Expense management platform PEX lets you have an innovative approach to employee spending by reducing the risks involved with traditional methods, for example. Unlike petty cash, employees can only spend what’s preauthorized on their card. Small businesses also have the authority to define the merchant categories for each. For instance, you can allow for an employee to spend at hardware stores only or turn off the ability to get gas.
Administrators can monitor spending in real time to avoid the likelihood of fraud. As a result, small business employees have the autonomy to spend what they need—without the hazards of conventional expense methods. Lost receipts, long wait times for reimbursements, and employer reconciliation become a thing of the past.
2. Fund with Flexibility
Conventional approaches to expenses can stop employees from spending what’s necessary to get the job done. Teams in the field might not be authorized to use company credit cards, and a run to the bank for petty cash is impractical. If staff is using personal funds for business expenses, they might not have the resources to make all the necessary purchases without damaging their personal finances.
Prepaid business cards, like PEX Card, offer flexible funds for employees on the go. Money can be added to any card at any time with a simple click of a button. Mobile account management makes money available anywhere at any time. With PEX, accounts can be managed from any computer, tablet, or smartphone with the PEX mobile app. As a result, employees working remotely or on the road have the purchasing power they need without the limitations of conventional approaches to company expenses—all with complete oversight.
3. Budget Better
Small businesses can be volatile, and wise budgeting practices can cushion the blow from industry downturns. Even when small businesses have a budget or plan, traditional expense methods often lead to overspending. Although employees don’t intend to take advantage of the company expense policy, budgets are busted when lack of accountability and untimely filing of expenses drive up the costs of an event or project.
Prepaid solutions for employee expenses let small businesses manage cash flow and avoid overspending. By assigning spending limits and refining merchant categories, small businesses can control where their money goes—and how much of it goes at all. With prepaid cards, employees and employers must budget expenses more wisely, and they can monitor the budget in real time through an automated up-to-date transaction report.
4. Cut Costs
The orthodox approach to employee spend involves an expense reimbursement process fraught with hidden costs. If an employee needs to make a purchase but lacks the funds, delays and inefficiencies result. If an employee loses a receipt, the employee loses funds or spends company time tracking a new receipt. Filing expense reports takes time away from an employee’s main focus and drives up overhead costs, as the report gets processed through the appropriate channels.
The hidden costs of the employee expense reimbursement process are cut down dramatically as a result of prepaid solutions. With software that provides detailed and up-to-date tracking and reporting, prepaid business cards eliminate the paperwork and simplify the employee spending process. Small businesses can empower their employees to spend without a negative impact on their bottom line.
Additionally, costs are approved and budgeted in advance, and there are no delays in reporting which can all lead to overspending. Small businesses with tight budgets or limited funds can’t afford to go over budget on projects and events. With a prepaid business card, spending is curbed through clearly defined limits and real-time purchase monitoring. At any point in the project or event, small businesses can know exactly how much they’ve spent as a result of prepaid expense solutions.
5. Expense with Ease
Conventional expense methods open the door to fraud and employee frustration. Employees need the autonomy to make purchases without having to worry about keeping track of receipts or having to front the money themselves. Also, company credit cards can be lost or stolen, which can be costly if the card isn’t blocked or deactivated right away. If a small business works with different subcontractors, the various invoices and expenses can lead to fraud, and micromanaging everything that happens on site is impractical.
Prepaid approaches to employee expenses can protect from fraud and alleviate employee stress. With a prepaid business card, employees can only spend what’s on the card—and any attempt to spend beyond that amount is blocked. If a card gets lost or stolen, it’s easily deactivated from the administrative back-end. Also, prepaid business cards can be arranged with merchant category restrictions that limit spending to a unique set of clearly defined rules. This empowers employees to make the purchases they need without having to stress over whether a purchase is allowed or whether the funds are available.
Small businesses should consider prepaid solutions for their employee spending needs. With prepaid cards, employee spending for small businesses is easy and cost-effective. When traditional expense methods fall short, prepaid solutions offer an innovative approach to empower employees with independence and agility, and small business owners can run their businesses with comfort and efficiency.
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from Fundera Ledger https://www.fundera.com/blog/2016/04/15/why-small-businesses-should-consider-prepaid/