How IT & Procurement Teams Should Evaluate Spend Management Products

Here’s the difference between a vague and a specific petty cash policy:

Vague: Petty cash can be used for any business-related expenses as needed upon approval.

Specific: Petty cash is used for small, incidental business expenses, such as office supplies, minor equipment purchases (up to $100), business-related meals and entertainment (up to $25 per occurrence), and travel expenses (e.g., tolls, parking fees).

Companies often set vague policies or leave them to employee understanding; after all, having petty cash is about flexibility and saving time. The entire petty cash system sits on the foundation of trust, where a missed receipt isn’t considered a big deal. 

However, as the business grows, these missing documents, owing to a lack of structure, cause monetary setbacks and disrupt operations. The finance team pursues the employees for receipts, and the employees struggle to get them submitted on time and the budget goes off the charts. 

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What is a Petty Cash Policy?

A petty cash policy is a set of guidelines that govern the management and usage of small amounts of cash for nominal business expenses. It outlines the purpose, authorized expenses, and recordkeeping and replenishment procedures for the petty cash fund.

Suppose an employee wants to purchase office supplies. With proper documentation and approval, a policy in place can restrict the use of cash for office supplies and minor expenses up to $50 only. After all, petty cash should be used only when absolutely necessary, for all other larger purchases it is better to use corporate purchasing cards.

Hence, structured petty cash policies and procedures help the business track and control all expenses with proper recordkeeping, enhancing accountability and petty cash management.

4-Step Process to Set Petty Cash Policy and Procedures

Before you set up policies and procedures, assess the need for petty cash and the types of expenses you will cover. This study will become the foundation for your guidelines and provide an estimated figure for petty cash funds.

For example, a transport business’s petty cash expenses include fuel for vehicles, tolls, minor vehicle repairs, and possibly small office supplies for administrative needs. However, a property investment company’s petty cash expenses include office stationery, postage, property maintenance supplies, and likely local travel expenses for property visits or inspections.

Hence, the nature of petty cash expenses will vary based on your business’s specific needs and operations.

Once these fundamentals are clear, you can set your petty cash policies and procedures by following the steps mentioned below.

1. Get Inputs From the Finance Team

Collaborate with the finance team to discuss current processes and challenges. Understand the gaps in existing systems and get feedback for potential improvements and best practices.

For instance, if the finance team struggles with frequent delays in providing employees with adequate cash on time for urgent expenses, you can establish guidelines that they can follow for such instances. 

Another common instance is that the finance team struggles with frequent delays in employee reimbursement due to unclear approval processes. You can establish a streamlined approval hierarchy in the policy. It involves specifying designated approvers and setting clear timelines for reimbursement requests, ensuring timely resolution.

Additionally, discuss compliance requirements to create a framework that ensures legal and regulatory standards adherence. This can include provisions such as documenting receipts and carefully reporting cash transactions above a certain threshold to comply with company reporting & auditability requirements. 

2. Define Procedures

Create a comprehensive document outlining the workflow of petty cash transactions, including authorizations and documentation.

Define the approval process, specifying who needs to approve different transaction amounts. For instance, your approval policy could look like this:

The routine office supplies purchases under $20 require immediate department supervisor approval, larger expenditures for equipment up to $100 need approval from the finance manager, and any expenses exceeding $100 require executive-level authorization.

Similarly, create a standardized process and template for documenting each transaction, including separate fields for date, amount, purpose, and signatures. Additionally, you could add guidelines, such as submission of a receipt within a week. These measures further help you strengthen the structure and avoid any hassle.

3. Specify Controls

Once all the fundamental procedures are defined, you set the rules for operating your petty cash system to ensure proper control. Here are some examples:

“If the petty cash fund balance falls below 20% of the initial amount, the designated custodian is responsible for submitting a replenishment request to the finance department. The replenishment should be completed within two business days to ensure the continuous availability of the petty cash fund for essential business needs.”

“Authorized petty cash transactions for office supplies are limited to $25 per occurrence, while minor miscellaneous expenses are limited to $15. Any transactions exceeding these limits require prior approval as per the designated approval process outlined in this policy.”

“To ensure transparency and accountability in the management of petty cash funds, a policy of custodian rotation will be implemented. Every quarter, a new employee will be assigned the responsibility of a petty cash custodian. The outgoing person must provide a comprehensive handover to the incoming custodian to maintain continuity and accuracy in fund management.”

4. Communicate and Review 

Share the new petty cash policy with relevant stakeholders and conduct training sessions for employees involved in petty cash transactions. 

To assess the effectiveness, establish a monthly audit schedule, in addition to petty cash reconciliation, where the designated team member will verify the log, review the completeness and accuracy of documentation, confirm that the approval process has been followed, etc. 

The audit will help you identify potential loopholes, allowing you to modify the policy and procedure for effective petty cash management. 

In addition to these audits, implement a tracking system, such as a spreadsheet or an expense management platform, to monitor expenses. While the spreadsheet is a cost-effective solution, a dedicated automation platform will make tracking petty cash in real time easier with complete visibility. Moreover, you will have many more controls and features to oversee your petty cash without spending hours maintaining logs and Excel spreadsheets.

Template for Setting Petty Cash Guidelines

Modify this template and include specific petty cash guidelines to suit your business needs:

Petty Cash Policy and Procedures

1. Purpose

The purpose of this document is to provide clear guidelines for the establishment, management, and usage of the petty cash fund within [Company Name]. The petty cash fund is intended for minor, day-to-day business expenses, facilitating the quick and efficient processing of small transactions.

2. Custodian

The finance department will manage the petty cash fund, with [Designated Employee] serving as the petty cash custodian. The custodian is responsible for secure cash handling, accurate record-keeping, and compliance with company policies.

3. Petty Cash Fund Amount

The initial petty cash fund is set at [Enter Amount], subject to review annually or as business needs dictate. Any adjustments to the fund require approval from [Finance Manager/Authorized Approver].

4. Replenishment

When the petty cash fund balance drops to [Enter Minimum Amount], the custodian must submit a replenishment request to [Finance Manager/Authorized Approver]. These requests should include original receipts and a summary of expenditures.

5. Authorized Petty Cash Expenses

The following types of expenses are authorized for petty cash disbursement:

• Office supplies (e.g., pens, notepads)
• Small equipment purchases (under [Enter Amount])
• Minor business-related meals and entertainment
• Travel expenses (e.g., tolls, parking fees) 

6. Unauthorized Expenses

Petty cash funds should not be used for personal expenses, cash advances, or any expenditures unrelated to official business activities. Any unauthorized expenses must be reimbursed by the individual responsible.

7. Recordkeeping

The custodian will maintain a dedicated petty cash log. Each entry should include:

• Date of transaction
• Vendor or payee
• Description of the expense
• Amount
• Receipt verification

8. Receipts

Original receipts for all petty cash transactions must be submitted promptly. Receipts should be attached to the petty cash log and clearly show the date, amount, and nature of the expense.

9. Auditing

The finance department will periodically conduct surprise audits on the petty cash fund to ensure compliance. The custodian is responsible for facilitating the audit process and addressing any discrepancies.

10. Reporting

A monthly summary of petty cash transactions, including the remaining balance and any discrepancies, will be provided to the finance manager. Any significant issues or concerns should be reported immediately.

11. Policy Review

This policy will be reviewed annually by [Finance Manager/Authorized Approver] to assess its effectiveness and relevance. The petty cash custodian can recommend adjustments or issue an official request.

Approval:

[Signature] [Date]

[Name, Title]

[Finance Manager or Authorized Approver]

[Company Name] 

Implementing a Foolproof Petty Cash System

To establish a dependable petty cash system, collaborate and automate. Stay in close connection with the finance team to gather feedback and insights. Use solutions like spend management software to automate the petty cash system and get real-time visibility. They provide more structure to your petty cash management and simplify workflows for employees.

In one of our posts, we have covered more about petty cash management and how you can automate it. It will help you understand the nuances and efficiently manage your petty cash.

Companies use petty cash for managing driver and transport expenses, including maintenance, repairs, and small purchases, by allocating a small amount of physical cash to drivers. Drivers submit receipts for reconciliation, and they manually track these small transactions. 

However, tracking numerous trivial transactions becomes time-consuming, and discrepancies emerge during reconciliation. There's always a risk of misuse or theft, demanding strict security measures. Moreover, negotiating favorable terms with vendors for minor, recurring transactions becomes challenging. They must carefully budget and maintain a sufficient petty cash fund, which strains their overall cash flow.

Overall, the manual process raises efficiency concerns, necessitating a balance between control and practicality in managing day-to-day vehicle-related expenses.

A better alternative to petty cash is a fleet card. 

This post will explore corporate fleet cards, their benefits for transport and logistics, and strategies to overcome potential fuel card challenges for improved spend management.

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What Is Meant by Fleet Card?

A fleet card, also known as a fuel or gas card, is a specialized payment card used by businesses to cover expenses related to their vehicle fleets. It is issued by fuel companies or financial institutions specifically for fuel purchases, maintenance, and other vehicle-related expenses.

What Can Fleet Cards Be Used For?

The fleet cards are primarily used for fuel purchases, maintenance, and repairs. They facilitate seamless payments for routine servicing, tolls and parking fees, and purchasing vehicle-related products.

You get cards with custom spending limits and advanced controls, such as real-time transaction monitoring mechanisms, category-specific restrictions, and automated alerts for enhanced security and streamlined expense management.

Drivers purchase fuel, maintenance, and other vehicle-related expenses at authorized locations with the cards, and you enjoy complete visibility on a centralized dashboard for each transaction.

What Are the Benefits of a Corporate Fleet Card?

Switching from manual petty cash management to a fleet card yields the following benefits:

• Simplifies payment processes by reducing the complexity of cash handling
  
  
• Improves tracking and monitoring of all vehicle-related expenses
  
  
• Minimizes the risk of theft or misuse, providing enhanced security measures
  
  
• Automates the expense management and reconciliation process, eliminating manual record-keeping and ensuring accuracy with reduced likelihood of errors
  
  
• Promotes compliance by enabling you to set controls and restrictions on card usage according to company policies
  
  
• Enhances budgeting by providing detailed reports and insights into the spending patterns for a structured and controlled approach to managing vehicle-related costs
  
  
• Streamlines transactions with vendors, offering an efficient payment method for small, frequent transactions
  

Should I Use a Fuel Card or a Credit Card?

Fuel cards and credit cards share similarities in providing a convenient payment method for expenses. Both can be used at gas stations and offer detailed transaction records for monitoring expenditures. Moreover, both cards come with features such as spending controls, reporting tools, and rewards programs.

However, here are some differences between the two:

• Fuel cards restrict card usage to fuel and maintenance-related purchases, providing greater control and limiting potential misuse.
  
• Fuel cards come with fuel discounts or rewards programs at specific gas stations, providing potential cost savings that credit cards do not generally offer.
  
• While credit cards provide transaction records, fuel cards offer more detailed reporting on vehicle-related expenses like fuel consumption, maintenance costs, and odometer tracking.
  
• Fleet cards partner with fuel providers, service centers, and other vendors, allowing businesses to negotiate favorable terms and discounts for bulk purchases or regular transactions. For instance, a fleet card's partnership with a fuel station yields discounted fuel prices, facilitating substantial cost savings.
  

So, for transport and logistics businesses, corporate fleet cards offer specialized controls for fuel and maintenance, streamlined reporting, and potential fuel-related discounts.

What Are the Risks of Fuel Cards?

Fuel cards, tailored for fleet management, are designed to address the unique needs of companies in the transport and logistics sector. However, organizations face the following challenges when switching to corporate fleet fuel cards:

1. Gas Station Availability Issues

Fuel cards encounter challenges related to gas station availability that limit refueling options. As a result, drivers can not find suitable gas stations, leading to increased travel time and delays in delivery schedules.

3. Location-Dependent Acceptance

The acceptance of corporate fleet cards varies by location, leading to constraints and inconveniences for companies operating in areas where certain cards are not widely accepted.

Drivers will encounter difficulties during interstate routes if you offer a nationwide delivery service and the fleet card is only accepted at specific gas stations or regions. It complicates expense management and hinders the company's ability to streamline fuel-related transactions.

3. Management Complexity

The specialized design of fuel cards introduces an administrative burden when managed separately. For instance, a company using distinct fuel cards for different vehicles finds consolidating expenses difficult, leading to increased administrative efforts and potential operational inefficiencies.

As a result, administrators have a hard time reconciling statements, accurately tracking expenses, and ensuring compliance. This burden increases processing times and errors in financial reporting.

4. Reward Limitations

While crafted to suit industry needs, fuel cards encounter limitations in cashback offers. Consider a scenario where a company's preferred fuel card provides cashback benefits only at select stations, restricting potential cost savings for the entire fleet. 

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Why Should You Switch to Pluto Corporate Fleet Cards?

Pluto fleet cards don't restrict the use of cards at their discretion. Instead, they facilitate advanced controls and real-time visibility. From issuing budgeted fuel cards to creating vendor-specific cards, you can set rules that align with your company's needs and policies. Then, with each transaction, you track all fleet expenses from a single dashboard and get real-time data without manual effort.

So, you set cards and add controls, and you are good to go! Drivers can spend them at convenient gas stations while you enjoy complete visibility and control. Each transaction appears on the dashboard and notifies drivers to upload the receipt directly from WhatsApp. Once uploaded, you can approve the expense, and the data syncs with your accounting software to help you close your books ten times faster.

Here are the top six benefits of switching to Pluto corporate fleet cards:

1. Unrestricted Access Anywhere

Unlike traditional restrictions, Pluto corporate fleet cards liberate your drivers. There are no limitations on locations or specific fuel stations. Enjoy the convenience of using cards at the most budget-friendly and strategically located gas stations, repair shops, or truck stops that welcome Mastercard.

2. Easy Cashback

Pluto corporate fleet cards make cashback benefits straightforward. With up to 2% unlimited cashback on over 100+ currency spends, enjoy seamless cost savings without intricate conditions or restrictions.

3. Smart Budgeting

Pluto fleet cards, functioning as debit cards, provide smart budgeting without blocking cash flow. Drivers can request limit increases in seconds, ensuring operational flexibility with swift approvals. This distinctive feature sets Pluto apart, seamlessly blending budget management and uninterrupted cash flow for efficient fleet operations.

4. Driver-Friendly Controls

Provide drivers with budgeted fuel cards and set spending rules. Real-time data and advanced controls give you complete transparency of fleet expenses, enabling strategic decision-making.

5. Grow With Ease

Whether you have hundreds or thousands of drivers, the streamlined process of issuing corporate fleet cards and setting controls remains hassle-free, supporting your scalability with ease.

6. Eliminate Fraud

Lock or freeze cards instantly from the Pluto app, ensuring proactive measures against fraud. Enable company policies to ensure in-policy transactions, eliminating the risk of unauthorized spending.

Enhance End-to-End Spend Management

Pluto eliminates the need for separate investments in corporate fleet cards, offering an all-in-one spend management solution. 

Pluto's comprehensive platform facilitates both corporate purchase cards and fleet cards, streamlining your financial operations. Enjoy the same benefits as traditional corporate fleet cards but with enhanced functionality, all within a unified platform. With Pluto, you get unparalleled efficiency in managing corporate expenses, ensuring a seamless and integrated approach to financial control. 

Transform your spend management today. Book a demo and discover how Pluto can optimize your financial processes and elevate your business operations.

The finance landscape is undergoing a seismic shift in an era of unstinted technological advancement. Back in 2018, a PWC report found that amongst the top 12 challenges that financial organisations faced, 4 of them were technology-related. It wasn't about deciding whether to implement digital transformation technologies but more about understanding the enterprise value these investments would add.

According to Deloitte, adopting the right digital transformation strategies can increase market value by up to $1.25 trillion across Fortune 500 companies. But how can organisations implement these strategies successfully?

The CFO's Perspective on Digital Transformation

Digital transformation is no longer just a buzzword; it is a mandate for modern businesses, and the CFO plays a central role in this paradigm shift. Gone are the days when the Chief Financial Officer (CFO) position revolved solely around balance sheets, budgeting, and compliance. The modern CFO is now tasked with leading the charge in the digital transformation of the finance department.

With its vision of becoming a global technology and innovation hub in the UAE, the need for digital transformation is even more compelling.

Why is digital transformation so vital for a CFO?

• Real-Time Financial Insights: Real-time access to financial data can be an invaluable asset in combating expense fraud. Digital transformation allows CFOs to detect irregularities promptly, leading to timely intervention and reducing the financial losses associated with fraud.
• Enhanced Reporting: CFOs can generate comprehensive financial reports more quickly and accurately, aiding in transparency and stakeholder communication.
• Cost Reduction: Automating financial processes can lead to cost savings, such as reduced labour and operational costs.
• Strategic Planning: Digital tools help CFOs analyse financial data and create insights to make strategic decisions and adapt to changing market conditions.
• Compliance and Risk Management: Digital solutions assist in maintaining compliance with changing regulations and mitigating financial risks.

What is the best digital transformation tool for you?

As a CFO, your journey towards a comprehensive digital transformation should be guided by specific features that enhance financial efficiency and help combat one of the most prevalent issues—expense fraud. Here's what you should look for in a digital transformation tool to achieve these goals:

1. Full Control Over Budget Allocation and Spend Visibility:

Access to complete control over budget allocation and clear visibility into how those budgets are spent is the foundation of sound financial management. Your chosen digital transformation tool should empower you to allocate resources efficiently and make data-driven decisions.

2. Real-Time Closure with ERP Integration:

Moving from traditional month-end closures to real-time closures is a game-changer. This transition ensures you have real-time insights into your company's expenditure, allowing you to address financial challenges swiftly. An essential component of this is seamless integration with your ERP system, which provides instant access to financial data.

3. Elimination of Petty Cash Usage:

Digitization of financial processes is a fundamental aspect of modern financial management. To achieve this, focus on strategies to eliminate petty cash usage as much as possible. Consider solutions that offer alternatives, such as merchant-specific cards, fuel cards, and PRO cards, which reduce inefficiency and enhance security.‎

4. Advanced Expense Fraud Detection:

Expense fraud is an all-too-common challenge faced by many companies. Leveraging digitization to combat this issue is essential. Look for a solution equipped with world-class Optical Character Recognition (OCR) technology to identify duplicate receipts and suspicious transactions. The goal is to ensure transactions are monitored in real-time and in an automated manner, such that financial compliance is continuously maintained.

5. Improved Audit Process for Accounting Teams:

Ensuring an enhanced audit process is a vital component of your CFO responsibilities. You must seek a digital transformation tool with two critical features for this. First, accounting automation powered by ERP integration streamlines financial processes and reduces the potential for human error. Second, the tool should provide 100% visibility into all receipts across the company, creating a comprehensive audit trail and reducing the likelihood of discrepancies.

6. Insights and Forecasting:

To thrive in a rapidly changing business environment, a CFO must have a finger on the pulse of their company's finances. A 360-degree digital transformation solution offers complete real-time visibility into all company expenditures. This feature allows you to provide timely, data-driven insights and forecasts, enabling proactive decision-making.

7. Multi-Subsidiary Expense Tracking:

In the UAE, as businesses achieve a reasonable size, they often evolve into multi-subsidiary or multi-branch entities. Given this common trajectory, it's imperative that the chosen digital transformation tool supports multi-subsidiary expense tracking. This ensures that financial data from all parts of the organization is aggregated and analyzed effectively. Not only does it provide a holistic view of the company's financial health, but it also enables consistent monitoring and control of expenses across the entire organization.

To illustrate the power of these digital transformation features, let's look at real-life business examples from the UAE:

1. Dubai Blockchain Mandate: Dubai is on a mission to become the world's inaugural blockchain-powered city. The Dubai Blockchain Mandate, led by the Smart Dubai Office, lays out a clear path for integrating blockchain technology across the city. By embracing blockchain technology, Dubai has the potential to realize annual savings of 5.5 billion dirhams in document processing alone, equivalent to the value of one Burj Khalifa every year.

2. Dubai Government Services: The government is committed to digitizing its services, the rate of which in 2023 stands at 99.5%. Currently, 87% of all government service transactions are digital. Furthermore, the government has also developed over 100 smartphone apps with cybersecurity and data law compliance.

The digital transformation process is an ongoing journey that entails mobilising the entire workforce and instilling a change-oriented mindset with no pre-defined endpoint that might extend well beyond your current leadership. It serves as the fundamental framework for an organisation's survival in an era marked by disruptions. Achieving success in this context involves formulating a strategy around making purposeful investments in the digital realm. It requires the prudent allocation of resources toward innovative technologies that can drive the organisation's strategic initiatives.

Ultimately, the successful execution of digital transformation mandates the ability to communicate to stakeholders that every digital initiative undertaken is a deliberate move to enhance the organisation's prospects for sustained success.