Using Prepaid for Improved Business Expense Management

David Johnson
Senior Vice President, Emerging Commerce Products
Posted on August 4, 2016

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A Flexible and Simple Alternative for Businesses on the Go

We have all grown accustomed to the rituals of expense reporting. Every month, we meticulously fill out expense reports, photocopy or scan receipts, submit them for processing and hope for a speedy reconciliation. Once received, the backroom paper chase begins as claims are matched with receipts and client contracts before expenses can be paid. Whether it is for regular business trips or occasional material purchasing, we’ve been doing it like this for years. But with an increasingly online and mobile customer base, exacerbated by the millennial generation and their need for a flexible, real time and mobile experience, alternative expense management solutions are streamlining the process. And let’s not lose sight of what matters: how can the costs and risks of inefficient employee expense management be reduced and while doing what really matters: growing the business. There has to be a better alternative.

A Fistful of Receipts and a Few Dollars Gone

Small businesses often have some unique way of doing things. Driven by necessity, they typically do not have strong expense management solutions for most of their employees. There may be a single corporate credit card that is shared as and when employees need it, but this insecure practice only compounds the reconciliation problems when managing corporate expenses. Some top employees may have their own named corporate cards, but credit cards do not work for all companies, especially smaller firms with more temporary staff and employees ineligible for credit. Worst of all, some businesses are forced to still hand out cash, and then follow up by getting back the change with a supplier’s receipt.

Efficient expense tracking is a very common daily headache for tens-of-thousands of small businesses; constantly tracking spreadsheets and paper invoices, reconciling accounts and keeping track of the company budgets each week, month, quarter and year. It is a complex and time-consuming process, and one that has little impact on growing the business itself. It is costly too. Traditional employee expense reporting for a well-expensed employee that may include travel, meals, materials, etc. can cost a business around $2,000 annually in lost time and productivity. And at no time will the business owner confidently know what funds are available. Even in the large corporate world, huge unnecessary expense and risk is taken by an over proliferation of corporate cards. If an employee only travels twice a year, do they really need their own card given that each card carries a unique liability for misuse?

The headache only worsens when trying to get all the data into accounting software packages and report for end-of-year taxes. The business owner is left clutching handfuls of receipts and spreadsheets and probably some lost money that inevitably slipped through somehow. There is a desperate need for an alternative method of expense handling.

The Prepaid Stored Value Alternative

Making funds available to employees in order to spend company money on business expenses need not be complex. Increasingly, adding the alternative mechanism of prepaid cards is being seen as an efficient way of streamlining and simplifying the expenses process. Prepaid corporate cards with stored value, underpinned by easy to use mobile app interfaces, can provide simple and safe expense management facilities on the go, suitable for even the smallest businesses, wherever they do their business.

With a prepaid card system, a senior employee distributes a pool of corporate funds to the accounts of any employee’s prepaid card as needed. Funds can be added or removed from each prepaid cards instantly, and nowadays the whole process is conducted online or through a mobile device app from the service provider.

A small 15-man tech firm will probably issue its top three or four executives with a corporate card to cover their regular travel costs and frequent company expenses. The remaining employees may travel periodically and have a few meals here and there, but their infrequent expense claims cannot justify a personal corporate credit card. If there is an urgent trip, the employee’s prepaid card can be funded with $2,000 to cover accommodation and meal expenses in real time. It can be topped up instantly if the trip needs to be extended by another week, and any unused float can be recovered once the trip is over. They maybe don’t travel for another 6 months, the employee still possesses the card, however, it can be “turned off” and the funds pulled back into the master purse until the next trip, therefore no liability for the company.

The prepaid card model with a flexible online and mobile interface for instant reporting and top up facilities fits well into a typical small business’s expense policy. No time is lost to paper expense tracking, no funds are misplaced or go missing, and the risks and liabilities are greatly reduced. Prepaid transactions can be tagged and categorized for simplified reporting and analysis and receipts can be electronically attached to payments from phone scans or photos, with all data uploaded into the business owner’s preferred accounting software for simplified end-year tax reporting.

Prepaid Benefits Everyone

Prepaid cards for employee expenses are increasingly seen as a valuable and powerful addition to the credit card. The instant-credit facilities through online or mobile apps ensure simple expense management wherever the business takes you. The prepaid model saves time with the allocation of funds, the reconciliation of accounts and processing of expense reports – this could save four or five hours per week for the boss of small firm. Even larger corporations are seeing prepaid cards as a lower-risk alternative for many low-expanse claiming employees rather than issuing large numbers of underused credit cards. Grow the business instead of chasing receipts, and finally have the exact financial position of funds available in real time, all available through mobile devices.

When delivered with convenient online mobile service delivery, reporting and tracking capabilities, a prepaid card system frees up more time for the already overstretched small business owner. There is a huge market for the use of prepaid cards in small businesses, but increasingly also in larger corporations. It is not a replacement, but a prepaid card is often more appropriate for many employees than traditional card: the intelligent alternative to the default credit option.

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• How quickly can small business migrate towards a prepaid card expense solution?
• Will larger corporations also benefit from using prepaid instead of corporate credit card as default?
• How else can small businesses benefit from the use of online/mobile expense management based around prepaid cards?

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David Johnson
Senior Vice President, Emerging Commerce Products

DJ is the Product Division Lead over Loyalty, Prepaid, EBT – Government and Merchant Products. DJ joined FIS in 2007 and has over 20 years of payment industry experience with roles in product development, strategy, consulting and business development. Before FIS, DJ managed Online Banking and Bill Pay for a Top 15 US bank. DJ earned his MBA from Emory University and a degree in Finance from the University of Florida.