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How to Manage Petty Cash Effectively in 2023

Vlad Falin

October 26, 2023

5

Not every expense in the company requires you to issue a check. Payments like petrol, supplies, stamps, etc., are paid via cash. For these business transactions, either the employees take cash in advance or put in a request for reimbursement. This mechanism requires you to set some cash aside and employ a person for receipt management and reporting. The cash is referred to as petty cash. 

What Is the Meaning of Petty Cash?

Petty cash refers to a small amount of money that businesses keep readily available for handling minor payments and expenses that are too small to be processed through regular accounting procedures. It is often kept on hand and is reimbursed periodically.

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What are Petty Cash Examples?

Petty cash includes small miscellaneous expenses, such as:

  • Office supplies
  • Gifts
  • Client lunch
  • Refreshments
  • Postage
  • Medicine and first aid
  • Minor repairs
  • Transportation

What Is the Process of Petty Cash Disbursement?

The first step in petty cash disbursement is to define policies and procedures. This includes specifying:

  • The purpose of the fund
  • The maximum cash amount 
  • The types of expenses the fund can cover
  • The process for replenishing the fund

The next step is to appoint a petty cash custodian. They are responsible for handling the petty cash fund. 

Then, you set up the fund by transferring the initial sum of money into a safe or locker. This amount should be sufficient to cover minor expenses for a defined period. 

When employees make small purchases, they request funds from the custodian. After the purchase, they return with a petty cash voucher, receipt, and cash balance. 

The custodian reviews the receipts and provides reimbursement. They maintain detailed records of every transaction, including the date, purpose, recipient, amount, and a brief description of the expense. This record-keeping method ensures transparency and accountability.

After that, the custodian reconciles the petty cash fund at regular intervals. They add up the safe's cash balance and the receipts' value. The total should match the original amount in the fund. 

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What are the Two Types of Petty Cash?

To manage petty cash, the custodian relies on either of the petty cash book systems:

1. Imprest Petty Cash Book

An imprest petty cash system involves maintaining a fixed amount of money in the petty cash fund at all times. 

For instance, you set up a fund of $100. When the fund gets down to $20, the custodian requests reimbursement and replenishes the fund to $100.

2. Columnar or Analytical Petty Cash Book

A columnar or analytical petty cash book is a detailed and structured method of recording petty cash transactions. It categorizes expenses into different general ledger codes for better tracking.

For instance, you create separate columns, such as "office supplies," "refreshments," "meals," etc. Whenever a transaction occurs, the custodian records it in the appropriate column and specifies its purpose.

What are the Challenges of Petty Cash?

While the process of petty cash seems linear and simple, it has many intricacies in practice. 

Imagine the custodian getting hundreds or thousands of requests and receipts every day. So, maintaining a petty cash system is easier in a smaller business with limited expenses and reporting needs. However, for larger enterprises, relying on manual vouchers and physical safes/lockers causes a lot of chaos. 

1. Vulnerability to Theft and Misuse 

Unlike an automated system, a manual petty cash system lacks controls and security measures.

For example, if the custodian is not vigilant, employees can use the cash for personal expenses. Similarly, if the custodian gets stuck between multiple requests and receipts, it leads to oversight.

Moreover, the physical nature of cash in a petty cash box makes it an easier target for theft. Since there's no immediate digital record, anybody can steal money, which goes unnoticed for a while. This lack of transparency and a digital audit trail makes it difficult to identify funds misuse.

2. Poor Receipt Management 

Receipts are the document of proof for the expense. With the traditional approach, custodians have to chase employees for receipts. This results in incomplete or unaccounted-for submissions. 

Moreover, relying on the manual petty cash process makes it harder. The custodians have to manage countless receipts daily, making reconciliation tedious. Hence, you end up with misplaced, duplicate, or even damaged receipts. 

A common example of this issue is when a custodian receives multiple receipts and with an analytical petty cash book to maintain. It takes them hours to reconcile, report, and ensure accurate categorization. 

The worst is when it's time to report, and locating these receipts takes hours.

3. Chaotic Approval Workflow  

In smaller companies, getting approval for expenses is easy. But, in large enterprises, even small expenses can prompt approvals from various departments and stakeholders. This makes the approval workflow complicated and time-consuming. This delays the fund release, disrupting the workflow and reimbursement process.   

For example, imagine an employee who wants to buy a subscription for less than $300. In a big company, it will prompt approval from the manager, IT, finance, and legal departments.  

All this back-and-forth slows things down a lot.

4. Internal Resentment

In big companies, there's tension between the finance team and other departments.  This issue occurs when employees can't access the funds and have to wait for approval. Such a delay disrupts the work or delays the reimbursement.

For instance, an employee needs to buy a subscription for work. But the delay in approval impacted the deadline and client relationship. This creates problems and stress between the finance team and other departments.

5. Branch-Level Petty Cash Management

Large enterprises use separate petty cash systems for departments at the branch level. This means that each department has its own petty cash fund to manage.

Managing small amounts of cash at individual branches is tricky. Employees misuse/steal the money as there's not much oversight. There is no visibility on how money is being spent. Maintaining funds for multiple branches becomes a headache. Also, departments find it challenging to request more funds.  

Reconciliation becomes challenging as the finance teams have to chase branches for complete information. This leaves a lot of loopholes for employees and branch custodians to misuse petty cash.

6. Tedious Reconciliation Process

Reconciliation ensures that the petty cash fund's balance matches the sum of all expenses. 

Manually, reconciliation in large enterprises takes weeks and is prone to errors. Moreover, when adding up expenses, the process is prone to manual errors, which are hard to identify and correct.

For instance, the custodian overlooks a receipt. This mismatch between the recorded expenses and the actual cash on hand can take him weeks to spot errors. 

7. Low Visibility Over Expenses

Traditional petty cash systems lack real-time data. At any given point of time, the custodian is unaware of the fund's current status. This lack of visibility delays financial decision-making. For instance, it can take weeks before the custodian realizes that the petty cash fund is running low. This can lead to temporary cash shortages for essential expenses.

The absence of a clear record makes it slower to notice problems and reconcile the cash. Moreover, transactions and expenses are recorded on paper, which leads to further errors. For example, when an employee uses petty cash to buy office supplies, there will be a delay until the expense is recorded.

Similarly, when many employees spend money simultaneously, tracking them in real-time is tough. This lack of transparency allows employees to misuse petty cash for personal expenses.

How to Manage Petty Cash Effectively With Pluto? 

To overcome the challenges described previously, you can not rely on any automation tool. Instead, you need a product that is tailored to your specific needs. While many tools can assist you in digitizing petty cash management, Pluto goes the extra mile.

With Pluto, you no longer need to maintain a physical safe or countless vouchers and receipts. Pluto records every transaction in real time and gives you visibility at each step. From receipt to reimbursement, you manage everything with complete control and clarity.

Unlimited Corporate Cards

Pluto enables you to issue unlimited corporate cards, simplifying petty cash management. It eliminates the need for physical lockers or safes, promoting smoother cash flow. The availability of unlimited cards allows you to replace shared credit cards. This enables the use of cards for even small petty cash expenses. 

Finance teams get full control and visibility over each petty cash expense in real time.

Employees can either swipe the cards for a seamless process or withdraw cash from ATMs. Every expense made with the corporate card triggers an approval workflow. It prompts employees to add receipts and managers to approve expenses. They can then add the receipts simply via WhatsApp and get reimbursed without any delays.

With all the data consolidated on a single platform, reconciliation becomes easier. This simplified process eliminates the need for a dedicated custodian to manage petty cash.

Not only do you get more control, but you save money with visibility at each step.  

Budget Control

Pluto allows you to specify limits for corporate cards issued. This ensures employees stay within budget. 

When the spending exceeds, employees can request more funds. The budget expands on the manager's approval in seconds, allowing for necessary spending.

Administrators can also issue zero balance cards. These cards with zero balances prompt an approval request for each expense. This approach ensures budget control without causing any delays or resentment.

Easy Receipt Management 

Pluto simplifies receipt management thanks to its seamless WhatsApp integration. 

Your employees can upload receipts via WhatsApp, which are recorded in real-time. The custodians no longer need to run after employees for the receipts.

However, Pluto does more than just store receipts. It extracts vital information through OCR, including vendor names, amounts, and GLs. As a result, your accounting team spends less time on manual tasks like creating logs.

Approval Workflow  

Normally, getting approval for expenses can involve a lot of back and forth. But with Pluto, you can set up custom approval processes to make the process smoother. 

When an employee uploads receipts, Pluto automatically starts the approval workflow. It notifies the custodian and managers to approve the expense, removing the friction.

The reimbursement process accelerates without any compromise on efficiency.

Further, Pluto uses OCR to detect duplicate receipts to avoid dual payments and fraud. This makes it easier to double-check expenses and approve the legitimate ones. 

Digital Expense Report  

Pluto offers digital expense reports that compile data from all the receipts. 

The report simplifies the task for your finance teams to see how each branch/department is spending. It enables them to make adjustments to policies and procedures as needed.

For instance, a company has small office supply purchases spread across various departments. Pluto's real-time visibility and report help to locate these costs. As a result, finance teams can reconsider and promote bulk purchases for cost savings. 

With Pluto, the custodian gets complete visibility into the expenses and the available funds at all times.

Close Books 10X Faster  

Pluto simplifies the process of closing books. 

Since employees can submit receipts directly through WhatsApp, custodians don’t need to chase employees for receipt submissions. This enables you to close the book 10X faster by accelerating the reconciliation process.  

Pluto records all transactions in a centralized digital platform. This streamlines audit logs and eliminates the need to maintain physical records.

With its OCR-based receipt retrieval, finding specific receipts and information becomes more effortless. This simplifies the reconciliation process, making the entire book-closing process faster. 

Replace Petty Cash With Corporate Cards

Small expenses and cash transactions can not be removed. However, finding an expense management tool can make petty cash management simpler. 

Stop relying on manual traditional processes to manage petty cash. Choose Pluto to replace your tedious petty cash books and vouchers with corporate cards. 

Sign up today to digitize your petty cash for complete visibility and control.

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Learn how Pluto is helping Keyper        to eliminate petty cash spending and optimize spend management

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5
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Vlad Falin

Best Virtual Corporate Card For Business [2024]

In modern business, cash and checks have gone the way of the horse and buggy: they’re simply too inefficient. But even their replacements – traditional payment methods like debit and credit cards – are overdue for an upgrade.

Welcome virtual corporate cards.

These digital payment methods offer numerous perks, from faster payments and reconciliation to greater control and security. They’re quicker, safer, and easier to integrate and use for accounting and operational teams alike.

Plus, the industry is on the cusp of an explosion, which could send innovation through the stratosphere. Between 2021 and 2026 alone, virtual card spending is predicted to skyrocket from $1.9 trillion to $6.8 trillion.

Here’s what to know.

First, A Brief Refresher on Corporate Cards

Corporate credit cards are credit cards issued to a business entity – not a person – as the responsible party.

In most other respects, corporate cards are like regular credit cards. They require a credit check to apply, charge a regular interest rate, and even come with reward systems. Corporate purchase cards are also unique in that the business can issue dozens of employee cards on the same account.

Pluto corporate cards come with specific controls to help your business manage spend. Real time tracking, setting limits on the go and quick reconciliations are just a few of the things that Pluto can provide.

But there is more. For companies who need to act quickly and require flexibility in their card issuing, there are virtual cards.

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What is a Virtual Corporate Card?

Virtual corporate cards, like regular corporate cards, are linked to the business’ budget. Employees can use these cards to pay for business expenses without using their own personal cards or cash.

But unlike physical cards, virtual credit cards reside solely in the digital realm. These cards are essentially unique, digitally-generated 16-digit card numbers that tie to a specific spending account. (In this case, the business’ account.) Each virtual card contains other essential card details, too, like the following:

  • Cardholder’s name
  • Company’s billing address
  • Card number
  • Expiration date
  • CVV

Virtual cards are also unusual in that they can be generated and destroyed in moments. They can be designed to permit one-off charges, expire same-day, or hold only a specific dollar amount. Some virtual cards can even be linked to a particular vendor for one-time or recurring payments, perhaps with weekly or monthly spend limits.

Virtual cards can be accepted anywhere that online payments, and even some in-store payments, are accepted. Due to their ability to generate new numbers on demand, they offer additional security and control for business accounts. Plus, they can’t be lost or stolen like a regular credit card.

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Virtual Credit Card vs. Virtual Corporate Card

A virtual corporate card is simply a digital credit card issued to a corporation. For the most part, you can use virtual cards the same way you could use regular cards. However, like corporate cards, these virtual equivalents allow the issuing firm and receiving businesses to set particular spend and monitoring controls.  

Because virtual credit cards are 100% digital and able to generate new 16-digit numbers on demand, they’re optimized for safety and flexibility. They also make it easier to reconcile books and otherwise manage spending.

Why Use Pluto Virtual Corporate Cards?

Pluto virtual cards offer tons of perks and use cases. With more control and yet unparalleled flexibility, your business can remain nimble as you grow.

At the same time, department heads can keep an eye on expenses, spending, and accounting practices.

Flexible Setup and Spending

Modern companies need to be nimble, able to make purchases on the fly and reconcile their books in minutes, not days. Virtual cards let your business do so –without breaking their budgets.

Virtual cards provide unprecedented levels of flexibility to businesses of all sizes. After signing up, cards can be generated and issued to individuals with just a few clicks.

They also permit companies to limit available vendors, set a specific spending limit, expiration dates, and even the specific department budget the card should link to.

Unlimited cards

One of the biggest perks of Pluto's cards is that you can create as many as you need in a matter of seconds.

The times when an employee had to wait several days for the approvals and the card details to arrive are over.

For example - at 9:00, we had a team discussion about additional performance marketing activities.hile we were on the call, the department head created 3 virtual corporate card numbers for us to use.

It took him roughly 2 minutes to create them. All that without missing a beat on the call itself.

Right after we finished the call, we could start setting up ads.

Spend Control

Once you’ve generated a card – either for your team or by employee request – you can quickly personalize them for added constraint.

These controls are admittedly extensive, allowing your business to:

  • Lock cards to a particular merchant or vendor
  • Ensure cards can only pay to specific accounts
  • Generate cards with set one-time, monthly, or recurring expenditure limits
  • Institute purchase approval practices for individual cards, persons, or teams

Companies can use these various limits to prevent overspending, surprise fees, and unnecessary surcharges. Plus, with specific cards linked to individual employees or vendors, compartmentalized spend management becomes even easier. For many businesses, this is a welcome alternative to issuing high-limit cards to every employee that requires one.

In the example above, you can see one of the popular uses of Pluto virtual cards - employee benefits.

When a new employee joins, how much time does it usually take your HR department to get wellness or children's educational benefits to that employee?

With Pluto, it’ll take you leess than 2 minutes.

Higher Accountability

Another perk of virtual cards is that they can be generated for and linked to a single individual or team.

That makes purchase tracking easier, which increases personal and departmental accountability.

By using built-in accountability and analysis tools, your business can better track how and when money is spent at every level.  

Streamlined Accounts Payable

Enhance your finance team's efficiency with Pluto, featuring virtual corporate cards and integrated accounts payable software.  Pluto can integrate with your accounting software, making it easy to sync your chart of accounts, automate mapping your GL accounts, and bulk verify & export your expenses so you can close your books 10x faster.

From there, settlements can happen immediately rather than taking days or weeks. This eliminates the slow, potentially error-riddled manual accounting process with a faster, cheaper, and more efficient digital alternative.

Better Security

Pluto's virtual cards can help greatly reduce your overall card risk profile. Their increased security is due to their unique design, including their:

  • Digital nature, which precludes them from being physically stolen.
  • Set spending limits to prevent overcharging.
  • Ability to block vendors and retailers from storing personal or card information long-term, helping to prevent fraud
  • Ability to include one-time or vendor-specific expenditures and other spending controls, limiting financial hemorrhaging
  • Auto-lock features to freeze cards instantly
  • Ability to delete and regenerate virtual cards in seconds rather than days

Real-Time Reporting

Pluto's virtual cards feed their data directly into a centralized interface, allowing all data to show up in real-time reports, simplifying the analytical process. The spend management systems also offer real-time notifications.

Together, these features offer companies greater real-time visibility over their expenditures. This level of transparency can inculcate a healthier spending culture within a company beyond merely increasing accountability.

Plus, real-time reporting means that accounting teams and department heads can immediately respond to budget requests, verify receipts, and manage card limits.

Pluto expense management dashboard allows you to see everything and makes spend control a breeze.

Simple Reconciliation

Virtual credit cards provide an easy approval system to allow finance teams to take advantage of automatic reconciliations whenever possible.

Accounting teams can set codes for recurring transactions and tag controls to identify transactions before posting them to the general ledger. Each card can be linked to a specific employee to link specific transactions to each employee.   

With the right card and accounting integrations, it’s possible to automate the bulk of manual data entry and reconciliation out of the gate. Plus, you’ll increase the accuracy of your data and insights.

Efficient Vendor Payment and Management

You can also use virtual cards to simplify vendor management.

You can link specific cards to particular vendors, allowing you to track which teams use them regularly and how their prices change over time.

By setting limits and expiration dates to your specifications, you can prevent teams from “forgetting” about upcoming auto-renewals.

Reward Options

Pluto virtual corporate card offers a wide range of perks and benefits!

Instead of giving you Starbucks gift cards, we formed partnerships with some of the most critical services for the day-to-day operations of your business.

Reduce the Risk of Fraud

When multiple employees and vendors share a high-limit physical card, you run the risk of operational problems and fraud.

The more people who can access a single 16-digit number, the more likely unauthorized expenses can slip through the cracks.

Virtual credit cards don’t come with the same fraud and data loss risks that physical cards do.

  • They’re impervious to hacks that come with swiping physical cards at in-person terminals.
  • You can create cards for a particular purchase, vendor or project.
  • You can easily link cards to specific employees and/or vendors, offering full control while minimizing risk.

Virtual Corporate Card Use Cases

Due to their innate flexibility and unprecedented control, virtual credit card programs offer multiple potential use cases. There are too many to go over here – but we’ll address a few of the most common or impactful.

Agencies

Digital agencies need to be able to make payments on behalf of their clients. This can be done using virtual cards, which allows the agency to keep track of spending and ensures that funds are used for the intended purpose.

With Pluto, you can create virtual cards for every PPC campaign or bigger project and keep track of your agency's spending in one place.

Not only does this allow you to scale the clients' performance marketing efforts, but the spend control dashboard shows you exactly how much was spent. You can go as far as naming and tagging your virtual cards, so you can see how much was spent per PPC channel on individual clients.

Event Organizers

Catering, lights, music, production, venues, drivers so many things that even organizers have to keep in the air! If you are an event organizer, chances are you understand how important it is to keep your spending in one place. That way when the time comes to file taxes or show ROI, everything is itemized and accounted for.

With a virtual card, all your charges will be automatically filed under the right categories. You can also set limits on how much can be spent per vendor, so you don't have to worry about overspending.

And if you have a team working on the event with you, you can give them each their own virtual Pluto card (or physical) with their own spending limits. That way, you can see at a glance who is spending what and where.

Startups

When you are a startup, your want to fully focus on your product and leave the rest to someone else. With a virtual card, you don't have to worry about setting up a corporate credit line or dealing with complex expense reports.

Just set up your team with Pluto virtual cards and let them manage their own expenses. You can see what they are spending in real-time and track progress against your budget.

Also, when you are at your early phase, there is no time for lengthy approvals. SaaS, ads, tools, plugins - virtual card can service them all.

E-Commerce

You business is digital and so should be your payment tools. With a virtual card, you can make payments online without ever having to worry about the security of your information.

Worried about that Alibaba supplier? Create a virtual card with a limit just for that vendor and you're good to go. Put a spending limit on it, and you limited any potential risks as well.

  • Need your team to buy TikTok ads? -> Done. TikTok Ads Virtual Card
  • Need to pay an Upwork freelancer? -> Done. Upwork Specific Virtual Card

You see where we are going with this. Create as many virtual cards as you need for as many occasions as you need.

Consulting

Consultants are on the road most of the time, and when they are not - they are seated in the client premises, helping to grow the business.

Employee travel is one of the most commonly-cited reasons for individuals requiring their own corporate cards. Travel expenses may include hotel rooms, a food allowance, or additional budgeting to purchase essential materials while they’re away from home, so to speak.

However, even in your own teams, it’s possible for employees to get carried away. An expensive dinner, unexpected expenses, and hotel room upgrades may all be well within your budget. But if you want to prevent excessive spending on your dime, virtual card controls hand you that power.

Fleet Management

Any company that have a vehicle fleet knows that a lot of time can go into fuel cards management.

Pluto can provide both virtual and physical corporate cards which makes it a perfect solution for efficient fleet management. 

You can issue fuel cards to the drivers as needed, and scale up and down depending on the current business situation.

In addition to that you see the fuel expenses real-time and can set limits and approvals where required. 

Key Takeaways

  • Virtual corporate credit cards pave the way for the future while addressing a multitude of modern business pain points.
  • They hand companies greater control over their spending, simplify accounting across the board, and even help protect employees.
  • Plus, with so many nuances and use cases, it’s incredibly easy to personalize virtual cards to meet your unique needs.
5
All
Guides
November 9, 2023

Mohammed Ridwan

Corporate P-Cards: How to Use Them for Maximum Advantage

P-cards can replace your corporate credit cards. 

If you rely on credit cards, you would have 2-3 cards issued to the executives, which are shared with the employees. Though it seems a great method to ensure approval and budget control, it has many loopholes.

The finance teams are running after employees for receipts, employees are waiting on OTPs and approvals, and the CFO is not satisfied with the numbers.

You look for alternatives and land on p-cards. 

P-cards (or purchase cards) are corporate cards you issue to your employees for business expenses. Then, be it purchasing a SaaS or making vendor payments, employees use it for all work-related spending. 

What Is the Difference Between a Credit Card and a P-Card? 

While both cards are used exclusively for business expenses, there are many differences.

Credit cards make expense management difficult, with no visibility into where the money is going. An executive shares a single card with their team, creating a chaotic financial situation. 

The card owner struggles to manage a constant stream of payment requests. Employees are left hanging with delayed payments, waiting for approvals. Especially in bigger companies, finance teams struggle with reconciliation and zombie spending (which is when a company continues to pay for something that isn’t used anymore, or when it pays for services that former employees had used).  

On the flip side, if you use p-cards, you can issue each employee a separate card for corporate expenses. Each card has a specific budget and restrictions to ensure control and facilitate approval without delays. 

For instance, you issue a card with a $500 monthly limit, restricted to office supply vendors like "Office One."

In this way, you manage budget control and approvals without losing visibility or having to micromanage. 

What Is the P-Card Process?

Moving from a credit card to a P-card isn’t complicated. Here is a step-by-step process of how you can provide your employees p cards and start using them:

Step 1: Generate Corporate Cards

The first step is to choose the type of card you want for your employees: physical or virtual. While a virtual card can be set up in under a minute, a physical card takes about 2-3 days to get delivered.

generate corporate card

Physical cards work well for those who travel or have on-site jobs, making petty cash management easy. Contrarily, virtual cards support secure online purchases, such as buying SaaS tools or paying for digital advertising campaigns.

Once you decide whom to give a card and what type, set the budget and policies. You can incorporate the following policies to customize the cards:

  • Specify the budget and replenishment frequency of the budget on the card- daily, monthly, or yearly.
  • Define the purpose of cards by enabling only specific general ledgers (GL), labels, and tax codes.
  • Switch on/off the ATM withdrawal option.
  • Enable auto-lock for cards in case of receipt policy violation, where if the receipt isn’t attached in 7 days, the card is frozen. 
corporate purchase cards

All these customization options offer you better control without having to chase employees later. Deciding the budget, frequency, and vendors ensures that the card is used rightfully. 

For instance, you would switch off ATM withdrawal for virtual cards that are meant for buying SaaS tools. Likewise, you can establish a monthly replenishment schedule to maintain sufficient funds while preventing excess spending.   

Apart from this method, your employees can also request to activate the P-cards. They explain the card's purpose, after which the admin can approve/reject the request. 

customize corporate p cards

Now that the employees have cards in their hands, let’s see how you can better manage corporate spending with them. 

Step 2: Manage Expenses Via Centralized Dashboard

Every expense on the corporate p-card is visible in real time on a centralized transactions dashboard. You get key information such as merchant name, expense category, card information, amount, and approval status.

corporate p cards for expense management

Along with this dashboard, you get a dedicated tab for each expense where all its information is available. 

You can review the key information such as receipt, department, merchant, date/time, expense category, etc. you can also download the receipt, approve/reject the expense, and check the activity log. 

manage corporate p cards

The activity log keeps track of all the conversations that have been happening with a particular transaction. Traditionally, companies use email and Slack, which makes communication messy. With this log, they can keep all their conversations and important information in one organized place. 

Step 3: Create Approval Workflows

Approval workflows ensure that each expense follows a defined hierarchy for approval by the right stakeholders. You can customize them depending on different amounts, departments, and other factors. 

It is a simple no-code system where you create workflows based on if-then rules.

Creating financial approval workflow

A custom approval workflow ensures timely and effective approval without having to run after dedicated team members. Each of them receives a notification as soon as the expense takes place, and they can approve it easily. 

Approvals and employee reimbursement become easy with a frictionless workflow like this. 

Step 4: Report and Reconcile Expenses

Integrating your cards with your accounting systems becomes the last step to facilitate reporting and reconciliation. 

Integrate Pluto with your ERP

Once you integrate with your accounting software, you can enjoy complete visibility and control over your corporate expenses. 

You get a dedicated insights window to track expenses and identify trends. You can add custom filters and export these for further analysis. 

Get dedicated insights

To understand the entire process better, book a demo and see how you can benefit from switching to a corporate p card. 

Why Shift From Traditional Methods to Corporate P Cards?

Credit cards seem simpler, where a bank gives a few credit cards to share among the teams. But here’s why it doesn’t work:

  • It is difficult to track who spends what, how much, and why.
  • Employees wait for OTPs and approvals, delaying payments and reimbursements.
  • The chances of zombie spending increase because the same card is shared. This also becomes one of the loopholes which leads employees to misuse the cards.
  • The admins have to chase employees for receipts during reconciliation.

While these are just a few, relying on credit cards can cause chaos in expense management. Here are some reasons corporate p-cards are a more suitable option today:

No More Shared Cards

Corporate P card

You ditch the whole system of sharing credit cards, which is the root cause of limited visibility. With corporate p cards, you can issue any employee a dedicated card for specific expenses. 

So, if you issue Rashid from the marketing department a virtual corporate card for running Ads, he can not use it otherwise. He will be accountable for any unnecessary expenses beyond the specified budget.

This means more visibility and control over corporate expenses.  

Easy Receipt Management

Receipt management with Pluto

Corporate cards make receipt management easier with OCR technology in the following ways:

  • Submitting expense reports at the end of the day becomes easier as it auto-populates all the information
  • Uploading receipts in bulk upload with OCR handling the rest makes the process faster
  • Detecting duplicate receipts becomes simpler as OCR eliminates the risk of manual errors 

Apart from OCR, you also get the option to split the transactions to make the accounting process easier. Here, for each transaction, you can split the amount into a separate category, GL account, tax code, etc. 

Split transactions with ease

For instance, a $300 expense can be split into $200 for software purchases and the remaining $100 as consulting fees. Each will have a specific category, GL account, and corresponding tax code.

Budget Control

Corporate cards give more visibility and control over finances. 

Although both credit cards and p-cards can have specific budgets, p-cards enable you to set specific policies and rules. 

For instance, you give an employee a $1,000 monthly budget but restrict them to using the card only for office supplies purchases. 

Similarly, you can set a $500 monthly limit for marketing expenses and restrict the card to "Ad Campaigns" and "Promotions," ensuring focused spending.

Another benefit is to assign monthly, yearly, and weekly budgets.

For instance, you can allocate an annual budget of $500,000 for the marketing department but assign a weekly budget of $10,000 for ad campaigns. 

This facilitates flexibility for the teams to function better and gives the finance team more control over resource planning and allocation.

WhatsApp Integration

Integrate with Whatsapp

Receipt uploading becomes simpler when all you have to do is click a picture on WhatsApp and hit send. 

After each transaction, employees get a notification to upload the receipts via WhatsApp. With this simple integration, receipt capturing becomes simple and fast. 

Not only is the receipt captured, but stored under the relevant transaction tab with all its information intact. OCR makes it easier to extract key details and populate expense reports. 

Admins can approve these expenses, and reconciliation becomes a breeze. 

Eliminate Corporate Card Fraud

P-cards give you more control and security. From setting custom policies to raising alerts in case of duplicate receipts, p-cards ensure that employees don’t misuse the cards.

Additionally, the custom approvals workflows and dedicated activity logs reduce the chances of oversight. This system helps prevent unauthorized spending. 

For instance, an employee tries to use the card for a personal expense, like an expensive dinner. 

The custom approval setup will alert the admins. The active activity log with documented conversations will further ensure that no personal expense is charged on corporate cards. 

Get the Most Out of Your Corporate Cards 

Transitioning from credit cards to corporate p cards can be an exciting move. But to make the most of it:

  • Set an expense policy outlining the guidelines that will govern the corporate cards. This practice will also become the pillar for a healthier financial environment to support internal control over financial reporting (ICFR) efforts.
  • Understand the hierarchies in the company to create approval workflows accordingly. Find a balance between control and micromanagement. Managers should be informed about expenses without being excessively involved in them. 

Do this right, and you will have better visibility and control over your finances. The employees will not be left hanging for approvals. The finance team will be at peace, and the CFO will have more faith in the numbers.

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Mohammed Ridwan

Guide to Accounts Payable Audit With Step-by-Step Process and Checklist

Your employee receives the vendor invoice and goes to the department manager and procurement department for three-way matching — invoice, purchase order, and goods receipt. Once approved, the finance department prepares to clear the payment. Finally, the accounting department makes the journal entries and updates accounting records. This is an end-to-end accounts payable process.

But it isn't as simple and straightforward. The chances of errors increase with various stakeholders involved. These range from manual data entry mistakes and invoice duplications to missed discounts, late payments, and inaccurate coding. This intricate process further results in unapproved invoices, incomplete documentation, vendor communication gaps, and mismatched purchase orders.

Hence, it becomes imperative to conduct regular checks. The inspections look into the internal processes to identify loopholes and act as an early sign. This post will discuss what an accounts payable audit is and how you can prepare for it.

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What is an Accounts Payable Audit?

An accounts payable (AP) audit is a type of accounting audit that investigates a company's accounts payable records, statements, and processes for potential errors, fraud, and non-compliance.  

In an AP audit, auditors track AP transactions from beginning to end, including the purchase order, invoice, approval steps, payment, and reconciliation, ensuring that everything has been recorded and documented correctly. 

The auditors assess the internal records and documentation for the following:

  • Validity - Are all invoices and transactions verified as genuine, preventing payment for unauthorized items?
  • Completeness - Are the invoices, purchase orders, and delivery receipts recorded correctly to avoid missing any payments?
  • Accuracy - Is every invoice amount cross-checked against corresponding purchase orders and delivery receipts to prevent payment errors?
  • Compliance - Are the accounts payable documents compliant with tax and company policies to avoid penalties and ensure ethical financial practices?

Further, the auditors inspect the internal processes for the following: 

  • Segregation of Duties -Are responsibilities clearly divided to prevent conflicts and maintain a system of checks and balances
  • Approvals - Are transaction approval processes in place, ensuring compliance with policies and accountability?
  • Access Controls - Are access controls effectively implemented to protect sensitive information, preventing unauthorized access and potential breaches?

By addressing these questions, the auditors find areas to improve and strengthen the accounts payable system. This process provides a thorough picture of financial operations, identifying weaknesses that could affect accuracy, efficiency, and compliance.

How to Conduct an Accounts Payable Audit

Before establishing an audit plan, you need three things to prepare for an accounts payable audit:

1. Stakeholder Input

Schedule meetings with key stakeholders such as finance managers, approvers, and document handlers. Ask for their insights on pain points, challenges, and expectations related to the accounts payable process. Document their feedback and use it to tailor the audit plan. It helps to address specific concerns and improve efficiency.

2. Documents Repository 

Conduct a comprehensive review of the current document storage system. Ensure all relevant documents are organized, labeled, and stored in a secure, easily accessible location. If you are using digital AP software for the repository, validate that it has proper version control and is updated. 

Checklist of Documents Required

  • Vendor Invoices
  • Purchase Orders
  • Goods/Services Receipts
  • Vendor Contracts and Agreements
  • Payment Records
  • Expense Reports
  • Vendor Statements
  • Credit Memos
  • Internal Controls and Policies
  • General Ledger Entries
  • Tax Documents
  • Bank Reconciliation Statements
  • Vendor Information
  • Access Logs
  • Expense Allocation Documentation
  • Documentation of Disputed Invoices
  • Employee Authorization Forms
  • Proof of Payment
  • Inventory Records (if applicable)
  • Regulatory Compliance Documentation

3. Access Control

Review and update access controls to restrict access to sensitive financial data. Work with IT and security teams to ensure only authorized personnel can access critical systems and repositories. Also, periodically verify user access levels and promptly revoke access for individuals who no longer require it. This helps maintain a secure and controlled environment.

4-Step AP Audit Procedure

With all the documents ready, inputs gathered, and access shared, you can initiate the AP audit procedure. It includes the following steps:

Audit Plan

Establish an audit plan to define the scope of the audit, specifying the departments and time frame under consideration. Assign audit team members and allocate necessary resources for the audit. Identify potential risks such as errors or compliance issues.

Here is what an audit plan looks like.

Audit Plan

Objective: The primary aim of this audit is to express an opinion on the fairness of XYZ Company's financial statements in accordance with Generally Accepted Accounting Principles (GAAP).

Scope: The audit will cover the financial statements of XYZ Company for the year ended December 31, 20XX, including the balance sheet, income statement, statement of cash flows, and accompanying notes.

Audit Team: The audit team will consist of the lead auditor, staff auditors, and specialists as needed. The team members will be assigned specific tasks based on their expertise and the areas to be audited.

Audit Approach: The audit will be conducted as per the auditing standards and guidelines issued by the relevant regulatory bodies. The approach will include substantive testing, tests of controls, analytical procedures, and other audit procedures as deemed necessary.

Materiality Threshold: The materiality threshold for the financial statements is set at $XXX. Any misstatements or discrepancies exceeding this threshold will be considered material.

Risk Assessment: The audit team will conduct a risk assessment to identify and assess the risks of material misstatement in the financial statements. The evaluation will consider both inherent and control risks.

Audit Procedures:

  • Cash and Cash Equivalents:
  • Confirm bank balances and reconciliations
  • Test cash transactions and cutoff procedures
  • Review bank statements and related agreements
  • Revenue Recognition:
  • Test sales transactions and revenue recognition policies
  • Review contracts and agreements for completeness and accuracy
  • Verify the accuracy of recorded revenue
  • Inventory:
  • Observe the physical inventory count
  • Test inventory valuation methods
  • Review inventory turnover and obsolescence
  • Accounts Payable:
  • Confirm outstanding payables with vendors
  • Test completeness and accuracy of recorded payables
  • Review payment terms and agreements
  • Fixed Assets:
  • Verify the existence and valuation of fixed assets
  • Test depreciation calculations
  • Review additions and disposals

Documentation: All audit procedures, findings, and conclusions will be documented in working papers, including supporting evidence and references to applicable accounting standards.

Reporting: A draft of an audit report will be prepared for management review before issuing the final report. The report will include the auditor's opinion on the financial statements and any relevant disclosures.

Fieldwork

With the audit plan in place, the audit team moves on to a detailed examination of the accounts payable process. Simultaneously, it also engages with key stakeholders to get valuable insights into the practical aspects of the AP process. In this stage, it ascertains the effectiveness of internal processes in safeguarding against potential risks. It performs the following assessments: 

  • Verify completeness and accuracy of invoices, purchase orders, and payment records
  • Match invoices with purchase orders and delivery receipts
  • Check for discrepancies in amounts or quantities
  • Evaluate the adherence of the approval process to established policies
  • Confirm proper authorization before payment processing
  • Review vendor master file for accuracy and up-to-date information
  • Implement checks to identify and rectify duplicate payments
  • Ensure compliance with internal policies, industry regulations, and legal requirements
  • Review accruals and prepaid expenses for accurate reflection of the financial statements

  • Verify the accuracy of data entry in the financial system

However, an audit team struggles the most with finding the proper documents. Either the internal team fails to provide the specific invoices, purchase requests, and purchase orders, or it gets lost in the pile of documents. This slowdown in the audit process increases the risk of oversight and incomplete scrutiny, compromising accuracy and thoroughness.

The best way to fix this leak is to go for accounts payable automation.

With AP automation, you streamline approvals and payments and create a centralized hub for bookkeeping. Instead of manual record-keeping, the tool automatically captures and extracts all necessary documents. Its integration capabilities ensure consistent data across the organization, simplifying data management and retrieval.

Audit Report

Finally, the audit team prepares a detailed audit report, including an executive summary, methodology, findings, and recommendations. The report provides a comprehensive overview, detailing identified issues and areas of strength.

To read an audit report and implement it effectively, follow these steps:

  1. Involve the audit committee, executive director, and senior financial staff in reviewing the report.
  2. Identify significant issues, such as financial conflicts of interest, and address them promptly. Classify minor concerns, such as operational inefficiencies and technological deficiencies, for resolution over several months.
  3. Consider the list of best practices and custom recommendations provided by the auditors. Use them to plan and prioritize your organization's next steps.
  4. Evaluate the "scope, nature, and timing" of the audit conducted by the audit team to assess the auditors' efficiency in utilizing resources without redundancy. Explore ways to make the audit process more efficient for the next cycle.

Regardless of the audit cycle, continuously assess and improve auditing procedures. Explore options such as accounts payable automation, process optimizations, and strategic partnerships.

Follow-up

During this stage, the audit team monitors the implementation of recommended changes. It involves continuous communication with stakeholders to address concerns or questions arising from the audit report. The team also ensures that the proposed improvements are effectively integrated into the organization's processes.

Preparing for Your Next Accounts Payable Audit

To make your next audit easier for the auditors and the internal team, address past findings and consider adopting accounts payable automation for efficiency. By addressing previous audit issues, you proactively improve your internal processes by resolving identified issues. It builds a culture of accountability and responsibility, laying the groundwork for a more efficient and effective audit process in the future.

An AP automation software becomes a central hub for the documentation, streamlining the intricate process. Automated document capture and retrieval ensure swift access, minimizing errors. Also, it highlights areas for improvement, enabling the team to address issues beforehand. 

As a result, audits become more streamlined, faster, and less stressful, ensuring strict adherence to rules and optimal functionality. We have curated a list of top AP automation software to help you pick the right one. Check the top 7 accounts payable automation solutions that simplify the accounts payable process and audits.