Remember when the two things that crowded your mail box were catalogs and credit card offers? Have you noticed how few card offers there are these days? I'm sure all those trees are happy, but for the rest of us it's proof of what we already knew - the credit crisis has affected us as well.

We've been hearing it from our customers and reading about it in the papers - businesses are moving to a cash model to pay for regular expenses. They want to conserve their credit line for important things like emergency repairs for equipment or an upgrade that will make them more competitive.

The big question is - how do you make this happen?
If you're a small company, with less than 100 employees, you are at the highest risk to fraud and abuse (http://www.acfe.com/resources/view.asp?ArticleID=9), and must take additional steps to protect yourself. So, moving to a cash (or same as cash) system may seem unwise, because these are inherently riskier forms of payment (http://www.afponline.org/pub/pdf/2008PaymentsFraudandContolSurvey.pdf).

As someone who works for a prepaid business card company, I know that prepaid cards can help bridge the gap between controlling payments and a cash based system. Here's how it works: in advance of purchases you load the card with funds. In the PEX Card system, you can decide what merchant categories are allowed, how much is on the card, as well as a daily spending limit. You can also cancel or block card usage at any time. The PEX Visa Prepaid Card can be used wherever Visa debit cards are accepted, so making purchases is convenient. When purchases are made, you can see them posted in real time. Additional features to keep your company safe from fraud and abuse, include separation of company funds and card funds, ability to remove excess funds from cards, as well as no access to cash advances or ATMs.

If you do use an actual cash or check model, you need to set up regular controls and audits to ensure that your system is the least susceptible to fraud as possible. We suggest hiring a certified fraud examiner to audit your current process and suggest places for improvement or additional control mechanisms. We also suggest that payment paths are separated, so that one person is not responsible for everything from request to payment. And lastly, when employees go on vacation, be sure to review their work - especially those in financial positions. If someone refuses to go on vacation - insist they do. It is often the people who seem to be the most dedicated that are your biggest threat.

Click here if you'd like to see a demo of the PEX Card administrative interface.

Labels: Budgeting, Expense Fraud, Finance Tips

What do you need to know as you decide on a per diem rate for employees or negotiate a per diem rate with consultants and contractors? It can sometimes seem like a random number pulled from the air, but there a number of per diem rate considerations that you should be aware of.

Federal Rates
As we’ve mentioned here before, the federal per diem rates can play a significant role at tax time. On the plus side, they provide valuable guidelines. That said, it may be easier to work with only one rate, or maybe you don’t feel the federal per diem is adequate. But beware - any amount above the federal standard rate is considered additional compensation, and with that comes all the tax implications of wages.

Receipts
No matter what you decide on per diems, make sure that the actual spending and recuperated funds are accounted for. This is for your own records as well as for the IRS. Without them your system will not be considered an accountable plan, and you and your employee may be getting a tax bill.

Electronic Payments
The big advantage of having a per diem rate instead of reimbursable expenses is that you pay a flat fee and don’t have to worry about all the incidentals. Take it a step further and manage your per diems electronically to improve allocation and recuperation documentation.

Labels: Accounting, Expense Fraud, expense management, IRS, Per Diems, Travel Expenses

The inspiration behind our company came from personal experience. At other jobs we saw spending control problems which included theft and misuse, inconvenient expense management processes and inefficient processes for managing checks and payments. This was very disruptive for our employers to deal with and the owners were uneasy about trusting employees. I saw an employee purchase a vacation for his mother, another buy personal clothing and yet another order furniture for their apartment. All on their company credit card. A friend recently told a story of an employee who wrote himself a check from the company's checkbook and cashed it! These stories are common among people who have worked in offices.

When doing our market research, we spoke with many business owners who said they don't issue cards to employees. Many believe that cards are convenient and would issue them to employees if there was a way to limit the risks. To solve this problem, we started PEX Card. Employees of customer companies can now carry a reloadable prepaid Visa® card with no spending ability until the employer funds the employee's card for authorized purchases.

Every employee in our office has a card. Because the service segregates funds between our business account and cards, I know there won't be any surprises. When our marketing director needed to post a press release on the wires, I funded her card with $200; when we need office supplies, I load up our admin's card. It takes less than thirty seconds for me to login, add funds and log out. Because the service summarizes balances for me online at both the card and business level, if anything seems off, I can investigate immediately.

My colleagues and I are prepaid card veterans. We took what we learned from our prepaid card experience, past work experiences and market research and created a product that delivers controlled card spending for SMBs.


Toffer Grant, Founder
Do you have similar experiences or thoughts about this? Share them by posting a comment!

Labels: Accounting, Expense Fraud, Finance Tips, Petty Cash

A survey by the Association for Financial Professionals showed in 2007, 71% of organizations experienced occupational fraud. And it takes 18 months on average for employee fraud to be discovered, resulting in significant losses. This trend of widespread abuse of corporate funds is worrisome. While the finance team should manage funds without having to police business spending, they often are at the front lines. Fortunately, just a few safeguard measures can help improve cash management, increase accountability, and prevent fraud.

1. Create policies that carefully protect sensitive information. This includes shredding all financial documents before throwing them out and educating employees on keeping passwords and documents away from potential prying eyes.

2. Check and double check bank statements and credit card purchases within a month of receiving them. This spending process audit is time consuming but arguably the most important step you can take. If the numbers don't match up, it's time to start asking some questions and time is often of the essence.

3. Set employee spending limits. If you have firm guidelines on what to spend for supplies, hotels, and other expenses, it's easy for employees to follow and easy for management to flag anything beyond the acceptable budget.

Labels: Expense Fraud