Managing project expenses is much like juggling flaming torches while riding a one-wheeled bicycle. In many cases, a finance department’s primary challenge includes collecting and reconciling receipts, preparing and reconciling Excel spreadsheets, and chasing down team members for their expense report submissions, rather than using existing data to determine their organization’s spending trends.
With the advent of prepaid company credit cards, companies now have an effective tool that addresses these challenges head-on. Prepaid business credit cards provide project managers with a way to restrict employee spending by providing a fixed amount of money and trackable spending, allowing them to access and control their business expenditures in real time. Prepaid company credit cards can help you move from a disorderly process to an organized way to track your company’s expenses.
1. Set up individual cards for each project
It is critical when allocating funds to have a systematic method of monitoring spending. Using a single corporate card for all projects may create uncertainty and mistakes about which project incurred which expense; thus, issuing individual prepaid cards for each project/initiative is essential.
True project budgets should be established for each project and include the funds loaded onto the credit card associated with that particular project. This way, when a project exceeds its budget, it will naturally limit any further expenditures being charged against that project by using subsequent project budgets.
You need to establish accountability by assigning the card to a specific employee who will be responsible for all expenses associated with that specific project. Designating one accountable person per project makes it easier to identify the responsible person when an issue arises related to spending.
You also need to assign descriptive names to each of your project cards so you can easily associate the correct budget with each card when reviewing transactions. This eliminates confusion when determining the relationship between a card’s expenses and multiple documents used to reference the budget.
Agile collaboration tools could help teams managing multiple projects collaborate effectively to make spending decisions collectively, while enabling constant communication within their teams.
2. Monitor transactions in real time
The real-time visibility of transactions uniquely positions prepaid cards in comparison to expense reimbursement processes. Regardless of whether budgetary overruns have occurred for several weeks, prepaid cards inform the consumer of transactions as they occur.
Set up alerts for transactions
Create alert settings for designated transaction types or amounts. For instance, have the ability to receive immediate notifications once 50% or more of the project budget has been depleted, or when purchases made exceed a pre-established category of items.
Observe transaction history
Tracking weekly purchasing activities and related patterns in prepaid card usage will help you identify trends and patterns in your organization’s budgeting.
- Are your organization’s marketing expenses consistently higher than anticipated?
- Are your rental equipment expenses negatively affecting the amount of contingency funds available?
Tracking information as it happens can provide the foundation for adjusting your cost structure before a small overrun becomes a large budgetary issue.
Monitor spending patterns against milestones
Tracking your expenditures against project milestones helps you assess the cost-effectiveness of completing a project deliverable. In instances where 80% of the allocated budget was expended, and only 40% of the deliverables were completed, this indicates that a budgetary change in scope or an adjustment is warranted.
3. Categorize expenses automatically
Besides its tediousness, manual expense categorization is fraught with errors. Businesses that use prepaid business card solutions are likely to experience faster expense categorization by leveraging the automatic categorization features offered by most prepaid business card providers.
Such automatic categorization mechanisms use both the merchant code associated with the transaction and the transaction type to assign transactions to the appropriate expense category. Create an expense category structure that adequately meets your project accounting requirements before issuing cards. Common expense categories would include equipment, software subscriptions, travel, marketing, and professional services.
Organizations can also establish custom categorization rules to assist with expense categorization. If you regularly buy from certain vendors, you may want to set up categorization rules that automatically assign those business expenses to the vendor/expense category. Also, many modern prepaid business card solutions integrate with most bookkeeping applications available in the market.
As expenses flow directly into an organization’s accounting application, all transactions are automatically categorized, reducing double data entry and allowing reconciliation time to drop from several hours to only a few minutes. Businesses that prefer to track expenses with a fully automated expense management solution should seek solutions that offer comprehensive prepaid business card management with integrated bookkeeping functionality.
4. Create spending limits
A prepaid card enables you to proactively manage employee spending and your budget. Unlike business credit cards, where you become aware of overspending after it has already occurred, prepaid cards enable you to prevent overspending before it occurs.
- Set transaction limits: You can set the maximum amount that can be charged to the card per transaction or per day. This allows you to avoid accidental or unauthorized large purchases while still granting employees latitude for valid business expenditures.
- Control merchant categories: Limit use of the prepaid card to merchant categories that apply specifically to your project. For example, the prepaid card for the technological project would only be usable by suppliers of technology products and services (e.g., software and related services); conversely, entertainment and retail purchases would be blocked.
- Implement time-based limits: For projects that have specific completion dates, set card expiration dates based on the actual completion of the project. Therefore, no purchases may be charged to the project after it has been closed, which greatly simplifies reconciliation of final expenditures.
- Use multi-tiered approval: Require managerial approval for purchases exceeding specific limits. This provides an additional layer of oversight for larger purchases and allows minor purchases to be processed without undue obstacles to the employee.
5. Automate Reports and Insights
The potential of prepaid business cards is maximized when spending data is turned into actionable insights. Many business card platforms offer excellent reporting capabilities, enabling users to transform unprocessed transaction data into actionable insights.
Create a custom dashboard that includes the measures you want to monitor in a project. It could include total spent versus budgeted amounts, spending categories, average transaction size, and burn rate in one location for easy access. While you’re at it, build an automated report (weekly/monthly) so that team members, including management, will always have access to updated information without having to wait for each user to manually create their own reports.
When managing several projects at once, comparative reporting will give you an idea of how much money you are saving on each project compared to others. By reviewing these reports, you can adjust your budgets for future projects based on actual historical data.
Moreover, reporting can help identify unusual spending patterns (negligent spending) and flag them for investigation. Not detecting fraud early enough can make the investigation process time-consuming.
6. Improve Receipt Management
Documentation is critical for tax and audit purposes, even when using automated transaction tracking systems. Today, prepaid card solutions include built-in receipt management capabilities as part of the expense process workflow.
- Capture receipts via mobile: Employees can take pictures of their receipts shortly after purchase and attach them directly to the transactions through a mobile application, eliminating the issue of lost receipts and the delay in obtaining receipts at the end of each month.
- Key transactions instantly: Smart systems automatically match uploaded receipts to their associated transactions by comparing transaction amounts, dates, and merchants. Finance professionals don’t have to key receipts into financial statements manually. They only need to review the matches, flagging any anomalies.
- Digitally store receipts: All receipts are stored in a digital format along with the associated transaction data. This creates a complete audit trail that can be searched and retrieved for years to come. Therefore, there is no need to rummage through filing cabinets or shoe boxes to find your receipts.
7. Review the budget regularly and iterate continuously
Expense tracking goes beyond simply keeping a record of everything you have spent; it also provides data you can use to improve your decision-making. Therefore, regular budget reviews will keep your projects on track while providing insights into how you can optimize them.
- Weekly Check-Ins: Check your weekly actual expenses versus your planned expenses to catch any issues as they arise and to be able to address them before they become major issues that need to be fixed for the entire project.
- Update Forecasts: Use actual spending against your planned forecast to update your original project cost estimate. If an expense category has consistently been either over- or under-budget, adjust your estimates accordingly.
- Reallocate Resources: When one part of your project comes in under budget, while another part is struggling with expenses, quickly shift funds by adjusting the limits of your corporate credit cards. This allows you to avoid delays caused by waiting for approval processes and budget amendments.
Using an iterative budget management approach is a good fit for current project management methodologies.
Conclusion
Prepaid corporate cards have made managing project expenses much easier. Instead of reacting to problems after they happen, project managers can now see spending in real time, set controls, and use automatic reports. This helps keep projects on budget and reduces the time spent handling expenses.
By implementing the seven expense management best practices above, project managers can reduce time spent on expense management and gain more insight into their projects’ financial management. Your team can focus on delivering quality services without chasing receipts, and your Accounting Department will have greater confidence knowing every dollar spent is logged, categorized, and accounted for in one place.
