Reimbursing Your Employees: How To Avoid It Completely

Initially, you may express some confusion about this topic. We’re not talking about how to avoid reimbursing your employees from the perspective of just not repaying them at all. Rather, we’re considering how you can prevent the need for reimbursement altogether. 

Believe it or not, the act of repaying your employees can be extremely tedious and problematic. You rely on them having all the records in order, and it can take so long before you’re able to make payments. Not to mention what this does to your cash flow. You think you have x amount of money coming in, and y amount leaving. But, you then have to factor in the reimbursements leaving your company - it’s all a confusing mess. 

What can you do to prevent this from being a problem? In this guide, you’ll discover one very easy and simple solution. Firstly, let’s ask one other question…

Why would you need to reimburse your employees?

Countless scenarios can lead to your employees paying for things out of their own pocket. The best example of this is in a business where your employees are active and spend lots of time away from the office. They drive around delivering services, meaning they have to pay for things like fuel, lunch, or other transportation options. 

Put simply, your business may cover specific things for your employees. So, when they have to pay for them, they will be entitled to a reimbursement. Cue the painful process of dealing with receipts and double-checking that your employees are claiming what they’re entitled to, etc. 

If you can find a way to cut this out completely, it makes your life easier - and it’s way better for employees too. 

The simple way to avoid employee reimbursements

How do you negate the need to reimburse your employees? It’s simple, you stop them from using their own cash to pay for things. Yes, this feels like a straightforward idea, and that’s because it is. The trouble is that many businesses don’t know the right way to go about this. 

What are your options? 

• Provide employees with the business credit card

• Give employees a handful of cash

• Offer them a prepaid card

The first option can work, but only in certain circumstances. For example, if you have a couple of employees, it makes sense to give them access to the business credit card. They can use the card to make any purchases related to the business - such as buying new supplies, paying for fuel, and so on. But, as your employee base grows, you can’t hand out dozens of credit cards. Banks simply won’t do this, so you’re left with a select few using the card and plenty of others without it. Effectively, you’re back in the same situation as you were before. 

What about handing out cash? Well, you have the issue of not knowing how much someone is going to need. What if they run into an issue and need more cash than you gave them? Again, they have to dip into their own pocket to cover extra expenses. Plus, you really depend on your employee to provide receipts and evidence of what they spent the money on. Who knows, they could claim to have bought lunch and fuel, but they’ve really pocketed half the cash for themselves. It’s way too dodgy and confusing to give your employees a sum of cash - there is a far better option. 

That’s right, a prepaid card is the best option to consider here. It takes the downsides of the previous two ideas and completely wipes them out, providing a very convenient way for your employees to use the company account to pay for expenses. 

What are prepaid cards and why use them?

Essentially, prepaid cards are any cards that you can load with money to pay for things. Commonly, you will find many companies opting for fleet cards under this category. As mentioned in The Business Owner’s Guide To Fleet Gas Cards, these cards can be pre-loaded with money for your employees to use. In essence, they take the fleet cards with them when driving around, using them to pay for gas, lunch, and all other business-related expenses. The same concept can be followed with any type of prepaid card - it’s simply a card you load money onto for your employees to use. 

Unlike credit cards, you can hand out as many as you like to different employees. Unlike cash, you have full control over everyone’s spending and can track what they’re purchasing. As the overall account owner, you can see precisely where every transaction goes. You’ll see how much someone spends on gas, or if they buy a massive lunch that they really shouldn’t purchase. 

So, it lets you track your employees to ensure they aren’t overspending while also stopping them from using their own money. There’s no reason for an employee to claim they should be reimbursed if they have a prepaid card. Should they require more money, you simply load more cash onto the card as per their request. This can be useful in instances when there’s an emergency expense that isn’t usually factored into daily expenses. Plus, the more these cards are used, the more data you have to see exactly how much is spent every day. It could help you load less money on the cards in the future to save money.

Overall, using a prepaid card is the easiest way to avoid employee reimbursements. This streamlines your accounting and makes it so much easier to manage your expenses and cash flow. Similarly, a business credit card can be just as useful if you have a very small business. If it’s just you and two or three other people, there’s no harm in having a credit card that everyone can use. The larger your business gets, the harder it is to give credit cards to every employee. Finally, avoid handing out cash to your workers as it just makes everything so much more difficult than it needs to be.