As an employer, one of your many roles is to keep track of incomings and outgoings. You will need to balance the books and have a rough idea as to how much you will spend each month.
One tricky area to keep on top of is employee expenses. Some months these are going to be higher than others, and so you need to budget accordingly. But what are the best ways to manage these expenses for you and your workforce?
The tried-and-trusted system for many decades has been for employees to pay for their expenses and then claim them at the end of the week or the month or to take the money out of petty cash.
However, this doesn't work well for either party. Employers do not know how much has been spent until they receive the expense forms which makes it difficult for them to budget or to keep track of company spending.
Employees are left out of pocket. If they are on a relatively-low salary or have a hefty mortgage to pay, this could leave them short of money. They also have to keep hold of all receipts, which isn't always easy.
This system is not good for staff morale, with many left feeling that it is unfair of the company to expect them to find the money for legitimate expenses. This is especially true when there are apps and business credit cards to simplify the process.
These may prove useful for more considerable expenses, such as petrol, travel or business lunches. However, they are not perfect.
Again, it is difficult to keep track of expenses, and the individual card may have a credit limit on it, but this could be quite high. They are difficult to supervise, and misuse or overspending are only spotted once the mistake has been made.
On some occasions, someone may incur a substantial, albeit legitimate business expense which could adversely affect cash flow.
Using a prepaid card is a win-win situation for everyone. Employers can preload the cards, so they know the maximum spend each month. Employees have their expenses in advance; no more paying out of their own pocket. In addition, they can easily keep track of all costs and won't have to keep all their paper receipts. It's far better for bookkeeping too. Everything can be traced as it is spent.
With a prepaid card, such as those offered by Soldo, the finance department can determine precisely how much each employee may have available on their card. That eliminates the risk of misuse and overspending.
The finance team will also have access to the Soldo dashboard to see all transactions as they occur, top up cards or set different limits or spending rules.
Finance can also export the data to find out how and where the company money is being spent. They can set define (and refine) rules at individual card level such as imposing a geographical constraint which means that the card can only be used in the UK or perhaps purpose-based rules, allocating specific funds to, say, travel.
Employees can also use the Soldo mobile app to take a photo of any receipts and send it to the platform to record the details.
Another advantage of these prepaid cards? When an employee has paid for something, it automatically becomes an expense. However, with Soldo cards, the company can control spending by imposing limits before it becomes an expense. It also makes managing expenses far more straightforward.
HMRC has strict guidelines as to what is admissible as a business expense. These guidelines include any cash sums you give to employees to meet their expenditure, costs they pay which you reimburse and any allowances you make.
Whilst you can offset legitimate expenses again your tax liabilities, they must adhere to the rules. Any private expenses count as earnings and are, therefore, taxable and need to be declared.
In any eventuality, you will need evidence of these costs for the tax office. Our app and cards ensure that everything remains transparent and that all expenses are automatically logged. This allows you to account for every transaction by each and every employee.
For further information on our market-leading expense management solutions, why not visit us here.