27 June 2011
All expenses paid
Dealing with your employees' expenses can sometimes feel like a full-time job, says Rich Wagner, CEO of Advanced Payment Solutions, but there are several ways to make this tricky task much easier
Employee expenses have long been a headache for most small-to-medium (SME) businesses. Why? Because employees are reluctant to part with their own cash when paying for business entertaining or travel, and SMEs are typically unwilling to hand out company credit cards to all of their employees – and rightly so.
However, this impasse between employee and employer can cause a number of problems. For a start, resentment can quickly build when employees are asked to use their own money for business expenses, and then wait a month (or more) to be reimbursed. With many of them paying off personal credit cards with APRs of 14% and higher, cash-strapped employees will often bristle at the thought of providing their employer with what is essentially an interest-free loan.
At the same time, expenses management is no picnic for the employer either. It is time-consuming, often complicated, and just one more thing to worry about at the end of the month. Plus, it can also provide a nasty shock from a financial point of view. As these expense claims begin to pour in, there are bound to be some unwelcome surprises for the finance department, especially if it's already struggling to manage cashflow.
The good news is that there are ways to make this whole process run more smoothly. For example:
- Make sure that you set a clear policy for employee expenses and stick to it. Employees should have no doubts about what, when, where and how they are allowed to incur any costs on the company's behalf. Unless these rules are made clear from the outset, you'll be setting yourself up for time-consuming disputes further down the line.
- Think about issuing prepaid expenses cards. Not only will prepaid cards help to teach employees greater responsibility and budgeting skills, but it will also make it very easy to enforce agreed spending limits and any other company rules related to expenses.
- Reduce the use of untraceable cash expenditures. Businesses can now choose to block ATM and cash withdrawals altogether in order to maintain greater control and insight over how and where the company's money is being spent
- Make sure that all employees know that their expenses are being monitored in order to avoid any conflict. They say that prevention is the best deterrent when it comes to the abuse of expenses, and so employees should be aware that all of their disbursements are being reviewed on a regular basis, so that they are encouraged to behave responsibly from the outset – before any disputes arise.
- Try to discourage employees from using their own personal credit cards for business expenses, as this practice will only further complicate the month-end headache of untangling business and personal expenses. To alleviate this problem (and also reduce the risk of expenses fraud), it would be better to issue an employee with a prepaid card that is to be used for business expenses only, so that business and personal spending can be kept completely separate.
These simple tips will help to make expenses much easier to manage, not only for employees, but also for the company itself. After all, the issue of employee expenses has repercussions that extend far beyond any financial considerations. By taking a more proactive approach to business expenses, companies can provide their employees with greater responsibility and autonomy, which means that they will feel more valued, respected and loyal to the company as a result.
Ends.
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