Inevitably, travel, personal, and other petty cash business expenses will be incurred by your most trusted employees as they attend meetings, advertize your products/services in new regions, or as they’re assigned to large, lengthy projects.
Such allocations result in compensating employees for business-related expenditures (reimbursements proper), giving allowances or advances to cover those expenses, or figuring out workable per diem (daily) or car allowance arrangements.
Admittedly, a certain amount of complexity is unavoidable with reimbursements, but yet, there are ways to make the process as burden-less and simple as possible.
It’s not as easy as learning how to block your number so people whom you call cannot see it, but it’s very achievable. If, on the other hand, you want to flatten out the entire process to absolute zero in terms of simplicity, you could always just pay each employee a set wage that will cover all their expenses. That wipes out the paper shuffling on your end.
But most often, you can make the system more fair and cost-effective by refraining from simply eliminating reimbursements. Read on to learn more.
There are three key elements involved in setting up a petty cash reimbursement fund: creating a petty cash fund (PCF), selecting a PCF custodian/manager, and establishing policies and “rules” to govern the system. In total, this approach is called the “imprest system.”
You need to determine the amount of money to keep in the petty cash fund. Best practice is to provide enough to cover the sum of all minor, recurring expenses across a 4-week period. You may want add more than that amount to avoid frequent shortfalls (but not too much over or the expenses will somehow magically grow and consume it all).
Your department manager can act as PCF custodian, or he/she can appoint someone else to that role; but it has to be someone with access to business accounting computer files. Choose someone you can trust and whom your employees will fear to get on the bad side of, but feel free to approach with all legitimate reimbursement requests.
Next, create a detailed policy book outlining exactly which types of expenses the PCF applies to and what is the maximum amount that can be allotted to them. Then, you need to state which expenses will be handled as advances from the fund and which reimbursed to employees later. Everyone should be clear on the policies: so communicate it in as many ways as possible: verbally, on paper, and electronically.
Unless you actively monitor your PCF, expect some to be as flexible with the meaning of “reimbursable expense” as a certain TV show was with the word “Smurfy.” There need to be controls that are easily enforced. Here are some best practices:
- All disbursements from the PCF are made via check, creating a paper trail.
- A voucher form plus all relevant receipts must be turned in to get a reimbursement.
- The maximum voucher amount should be relatively small but enough to encompass multiple small expenses: $50 is a commonly used limit.
- All reimbursement requests must be turned in within 4 weeks of the purchases they are based upon.
- All documents submitted with a voucher should be attached to it with a paperclip to avoid damaging them. Then they should be rubber-stamped PAID after the reimbursement is made.
- The PCF custodian must reconcile all vouchers/receipts against the amount left in the fund at month’s end, and then ask for the fund to be replenished for the next month.
- The custodian will need a safe location and a cash-box to store checks and documentation during nights and non-work days.
- Optionally, you may want to send out all reimbursements electronically so you can get rid of paper checks, which after all waste time and money and kill trees (consider that it takes between $4 and $20 to process each and every paper check from start to finish). If so, backup your disbursement records online, thus using “the cloud” in place of a “paper” trail.
>> Source Link