Most businesses have a process to handle expenses incurred by their employees. These expenses can range from fees associated with a business trip (e.g., flight tickets, lodging) to fringe benefits (e.g., reimbursed costs for purchasing home office equipment). Establishing controls for this spending is necessary to properly track each transaction and ensure that the business banking information remains secure. Controls are especially essential today, in an era where data breaches seem commonplace and proper cybersecurity protocols are paramount.
If you are a business owner, or a member of the leadership team, you need the agility to permit your employees to spend money on behalf of the business while also maintaining established security practices. However, doing so is difficult if you have outdated or inefficient processes and controls, as different issues and challenges will appear. If you are currently operating in a virtual environment or are looking to in the future, the complexities around setting controls will grow. With that in mind, detailed below are the types of controls you should consider implementing.
Pre-approved controls, such as budgets, allow you to allocate a specific amount of money for your staff to spend. Instating this control means that your employees do not have to ask your permission to spend a certain amount on a purchase because they already know how much they have to spend. At Summit, we work with Divvy to help us implement controls for expenses paid for with credit. Divvy is an integrated solution that pairs credit cards and software to increase the number of controls a business owner has over their spending.
The company also has a function that allows users to allocate money to specific budgets or departments within an organization. This type of control means that fringe benefits and expenses associated with daily operations can be separated, as team members use different cards for each. You can also customize controls for these budgets. For example, you can set a spending limit so the transaction is declined if an employee exceeds that limit. This safeguard allows you to keep a tighter grip on your employees' spending and allows your company to operate within its established financial parameters.
Controls Over Business Cards
Controlling who has access and the authorization to use credit cards linked to your business is crucial when managing the type and frequency of transactions. It's not uncommon for businesses to have a physical credit card that multiple people use within the company. However, providing several people access to a single card can become complicated and cumbersome as you try to track the expenses associated with each employee. Physical credit cards also increase the likelihood of someone obtaining the card's information and misusing it. As the Director of Technology, this is a huge fear of mine.
Our firm uses Divvy’s virtual cards to avoid the challenges mentioned. The company allows you to create and use as many virtual cards as you want and provides the credit card holder with immense flexibility. For example, you can add a specific amount of money to the card for an employee to use and limit the balance to ensure transactions larger than the agreed-upon amount do not go through. You also can cancel the card after one use to avoid data breaches.
These controls help you accurately log transactions so that you can review business expenses, compare them to your existing budget, and determine what your team's spending will look like moving forward. If you do not already, consider having your team log business transactions immediately after they occur. This step is essential for expense reconciliation, as inaccurate or missing transaction information can delay your month-end close.
Our team at Summit is great at logging transaction information associated with purchases made on business cards because of Divvy. The platform prompts the card user to log purchase information immediately after a transaction has taken place and makes it easy to do so. This information then syncs with our accounting platform.
Businesses just starting out are more likely to implement many spending controls due to the set amount of money available and the company's smaller size. However, as the company grows, instating these controls becomes more difficult. Thinking about the controls you currently have in place and should implement can help your business run more smoothly and protect your finances and operations as your business grows.