Many businesses are looking for ways to effectively manage cash flow, curb expenses, and streamline payroll. Companies of all sizes have started to use prepaid cards for tasks including expense tracking and employee payroll.
When it comes to managing employee expenditures, the traditional business model relies on expense accounts, company credit cards, and procurement departments. However, these methods are cumbersome. Additionally, with today’s technology, many of these methods are simply outdated and aren’t effective forms of money management.
Both large and small businesses are turning to prepaid debit cards as expense management tools. From everyday tasks like running errands or ordering lunch for the team to bigger tasks like booking travel and ordering supplies, a prepaid debit card can be the answer to common business budgeting challenges. Find out why prepaid debit cards are the clear choice for managing business expenses.
1. Prepaid Cards Solve Problems Posed by Credit Cards
In the past, business owners relied primarily on credit cards to handle large and small expenses. However, this presented a few problems.
First, credit cards require an application. This can be a challenge for business owners, who may lack the personal or business credit history to get approved. Secondly, credit cards have interest rates that add to overall business debt. Third, credit cards make it hard to rein in spending because as long as the card limit hasn’t been reached, transactions will continue to be approved.
Prepaid debit cards eliminate these problems. Due to their prepaid nature, there is no credit check, so any business owner can get a prepaid card regardless of his or her personal or business credit history. Prepaid cards are also interest-free, as only the amount loaded onto the card can be spent.
This means that business owners will never have to worry about receiving a monthly bill with a prepaid debit card. In terms of employee spending, prepaid cards are pre-loaded with the exact amount needed, creating an automatic spending limit.
Another benefit of using prepaid cards is a reduced workload for other employees. Expense reports, auditing, and approvals are reduced or eliminated because prepaid cares are so easy to set up and monitor.
All transactions are viewable from a laptop, desktop, or smartphone, so owners and accounting staff can see exactly how the money is being spent. As a result, unauthorized purchases are prevented. Additionally, employees are less likely to make purchases that fall outside of the allocated budget or guidelines.
2. Prepaid Cards Lead to Better Communication with Employees
Since prepaid cards make it easier to keep track of business expenses, it’s important to make sure employees understand the rules. The business owner must establish guidelines on what can be spent and when.
This means prepaid cards are a better alternative to paying employees out of pocket or keeping cash on the premises. For business owners who are switching from the traditional reimbursement model to prepaid debit cards, however, a transition period will likely be necessary.
Employees may have become accustomed to charging expenses on business-issued credit cards and could have a hard time adjusting to the new rules. Explaining the benefits for both the employee and the company will make the switch easier. By highlighting the upsides of a prepaid card for expenses, employers can help employees embrace the change.
3. Prepaid Cards Use Technology to Keep Track of Balances and Transactions
As stated before, one of the biggest advantages of using prepaid debit cards for business is the ability to see transactions in real-time. Card transactions are tracked automatically, giving the individual who oversees company finances the ability to see when, where, and how money is spent. This up-to-the-minute reporting is useful for ensuring employees are on track with monthly allocations and giving owners the ability to address questionable spending immediately.
Viewing transactions also serves to improve communication among team members. Managers can discuss spending with team members to gain a better understanding of how money is being spent. Additionally, team members can request that more funds be loaded for specific projects, streamlining approval processes. Prepaid cards also eliminate the need to keep track of receipts, since all transaction information is viewable and printable.
In the event an employee’s card is lost or stolen, prepaid debit cards offer the same fraud protection as traditional debit and credit cards. The online transaction reporting makes it easy for employees and owners to identify suspicious or unauthorized purchases, helping fraud claims get resolved quickly.
Is a Business Prepaid Card Right for Your Business?
Managing expenses effectively can make a world of difference when it comes to a company's bottom line. Using prepaid cards to manage expenses can be a major step toward a better financial picture. For small companies, prepaid cards give owners the power to tightly control expenses and can still be used no matter how successful the company becomes.
Millions of Americans have realized the ease and convenience of using prepaid debit cards, and modern businesses are following suit. Prepaid cards can be used for everything from reducing fraud to tracking expenses. As a result, business owners are starting to rethink the traditional expense account in favor of prepaid debit cards.
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