Expense reports and reimbursement can be a huge headache for an already overburdened accounting department. Not to mention, employees and managers may conflict on what is considered a valid business expense. With all this hassle, some businesses have turned to prepaid credit cards to manage employee expenses. Prepaid cards have a lot of benefits but can also have some downsides. So if you are thinking of implementing a system of prepaid cards for employee expenses, here is a pros and cons list to help you decide if they are right for your company.
Pros Of Prepaid Cards
There are many pros of giving your employees prepaid cards for expenses including:
- Prepaid Cards Streamline The Expense Reporting Process: You can cut back on the more labor-intensive parts of the expense reporting process like employee reimbursement and tracking expenditures.
- Prepaid Cards Have Limits: Sometimes when an employee is on the road, they may spend more than you have allocated in your budget for their trip. The limits on prepaid cards clearly inform your employees of the allocated funds, help them manage their budget, and ensure they don’t go over the expected costs.
- Prepaid Cards Are Easier To Implement: Corporate credit cards require a lot of paperwork and approval from credit companies. Prepaid cards can be distributed to anyone, even one-time travelers, so you you don’t have deal with all this extra paperwork.
Cons of Prepaid Cards
On the other hand, there are also some cons to issuing prepaid cards for employee expenses:
- Prepaid Cards Have A Lot Of Fees: From activation costs to monthly fees to ATM and back withdrawal transaction penalties, all of these fees can add up to extra expense for your company.
- Prepaid Card Limits May Adversely Affect Employees: Sometimes when employees are traveling, unplanned costs can come up. They may need to extend their trip or find that a city is more expensive than expected and they may run out of money. This then adds extra accounting work to process employee expenses and could potentially leave your employee stuck while on the road.
- Prepaid Cards Do Not Provide Monthly Statements: Unlike corporate credit cards, prepaid cards do not generate monthly statements for your company, so there is nothing to cross reference if you doubt employee expenses. Therefore, it can be easier for your employees to commit expense report fraud with prepaid cards than corporate credit cards.
Depending on your company’s needs, prepaid cards could be a great solution for employee expenses. However, prepaid cards have some downsides, so make sure that you fully understand these potential issues before issuing prepaid cards to everyone.