Corporate expenses; the challenges, the failures and the (prepaid) solution
Recent years have seen the grubby issue of politicians’ expenses dragged across front pages in the UK and elsewhere. But debate has largely spared the corporate world, where an astonishing £1 in every £5 of expenses is fraudulent. Given the evidence of massive expenses abuse in the business sector – and its negative impact on the bottom line – why do the efforts of companies to tackle the issue leave so much to be desired?
When it comes to expenses, the business world has largely struggled to meet the demands of an austere but modern age. The economic downturn and tighter pockets have led to attempts to crack down on corporate expenses, and many businesses have tightened control on what they are willing to allow employees to spend. At least for now, gone are the days of extravagant wining and dining, as business spending begins to align itself with a stalling economy.
But controlling excessive spending by employees is no easy task. Businesses typically face difficulty using traditional methods such as company credit cards. Outdated and lengthy expenses-claiming processes mean that employees are bogged down with endless paperwork, wasting valuable hours and resources, while expenses payment-methods are equally laborious. The result is a burden on both businesses and their employees.
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Furthermore, most belt-tightening efforts have simply been ineffective, evidence shows. Businesses continue to face a drain on revenue through employee misuse of expenses; particularly those companies that are overwhelmed with expenses claims, and failing to check each claim. This month, analysts Quocirca found that at least £350m leaks out of businesses in the UK annually through false, exaggerated or ‘out-of-policy’ claims, and “hidden costs” such as exchange rate conversions when travelling continue to dog businesses. Predictably, despite an economic downturn and austerity programmes in place, expenses costs are as high as ever.
So, how to stem the leakage of expenses cash out of businesses?
Old problems, new solutions
One way to introduce an element of control into the system is with prepaid cards. These allow a limit to be set on daily spending, while real-time transactions information allows employers to track spending. With less money spent on expense management, incentives and payroll administration, companies can streamline their spending and efficiency, reducing their costs and raising profitability.
“Employee expenses are often overlooked by businesses, says Noel Moran, CEO of Prepaid Financial Services. “But with the right technology, expenses can be easily monitored and controlled, saving organisations significant costs, and preventing fraud.”
The mechanism for prepaid is simple; an agreed amount is loaded on to the card, which is then handed out to employees. Straight away, time is saved that might have been wasted bartering over credit card limits, handling unnecessary paperwork and checking receipts.
As a whole, prepaid cards offer a radically cost-effective expense management system; particularly in industries that are used to producing and distributing cheques. Less space is needed to store hard-copy data, so there is a reduction in overheads and associated costs. There are no interest charges and transactions are either free or extremely competitive, meaning there are significant savings compared to corporate credit cards. The foreign exchange rates available on prepaid cards are also generally much better than the FX rates available at airports and elsewhere, so frequent travellers need not burn a hole in company finances.
Transparency, security, efficiency
Carrying money on prepaid cards also means complete transparency as to where and how these business prepaid cards have been used. Imagine how useful it could be for CEOs and finance directors to understand staff expenses habits in real time: the chance of expense allocations being misused by employees could be slim to none.
“Expenses wastage could be avoided if the right payments methods are used”, says Moran. “Prepaid cards represent the ideal solution as companies no longer have to worry about the misuse of funds and can allot realistic spending limits to their employees.”
Less fraud obviously amounts to greater safety and security for businesses. Prepaid cards are not linked to business bank accounts, which reduces exposure to fraud for the employer. For industries that rely heavily on an unbanked workforce, the elimination of cash payments is crucial in fraud prevention; so prepaid is an increasingly attractive option.
It’s not just the businesses themselves that benefit from more efficient expenses processes. Claiming expenses is a tedious affair for many employees; organisations often face complaints about lengthy waits for reimbursement and inefficient systems. Even while prepaid cards mean a cap on spending allowances and the tracking of payments, they also eliminate unnecessary hassle, allowing employees to use expenses in the spirit that they are intended; as a fair and efficient way to cover working costs. The pre-loaded cards facilitate e-commerce and reduce the need for cash in hand, making it easier and preferable for the end user, and allowing bosses to sleep a little easier at night.
Moran says, “Prepaid methods of handling corporate expenses are beneficial to all parties and are vastly more in tune with modern needs for efficiency than receipt-hoarding, petty cash and paperwork.
“Businesses can cut down costs, save precious worker time, and reduce the risk of fraud, whilst workers can save themselves the hassle of claiming back money, and rest assured that they are spending within their remit”.
For companies concerned about the link between their expenses and their bottom line, prepaid solutions are paving the way to a smarter future. They offer vast savings through fraud-prevention, spending caps, and sheer time and effort. This technology, which leads to efficiency gains and healthier profits, is there for the taking; businesses just need to take the plunge.