What Your CFO Wants to Know: How to Improve Financial Due Diligence, Risk and Compliance Management in Disbursements - Compliance-1

What Your CFO Wants to Know

Category

Mass Payments, Sales and Service

How to Improve Financial Due Diligence, Risk and Compliance Management in Disbursements

Is your organization thinking of using Prepaid cards, virtual cards, or digital transfers for your corporate disbursement and payout programs? We have already discussed the ins and outs of branding payments for customized experiences, customer engagement, and loyalty, but there’s so much more to Prepaid.

If you’ve been struggling with cheque reconciliations, paper vouchers, per diems, or petty cash management, the idea of an instant, electronic, and trackable payout instrument should grab your attention. These instruments include Prepaid cards, virtual cards, or digital transfers for your corporate disbursement and payout programs. As we know it can be daunting to look at changing existing processes while meeting financial, risk, and compliance objectives. Careful planning is the key to success regardless of which instrument you choose.

To get some insights on what to expect when implementing a payout program using Prepaid, we sat down with Bhavna Kaushal, our VP Partnerships & Payment Strategy.

What do you need to know about the setup?

To begin with, Prepaid cards or virtual cards are a financial instrument issued by a bank. So when setting them up, expect to provide identification information for your organization, similar to when you open a new banking service. This will include Business Incorporation Articles or financial statements that prove the existence of the business as a valid legal concern.

Similarly, identification of the officers of the business or the signing authority for your contract may be required. It is important to plan for this at the start of your program.

Of course, if your organization is already a client with the bank issuing the prepaid cards, this process would have been completed already, so you’ll save time. Many Berkeley corporate clients like working with us as it gives them the option of working with both the “Big 5” and other regional Canadian and international banks they may already have a relationship with. This makes the onboarding process faster. Plus, when working with Berkeley, a client manager will walk you through the steps and ensure the process is smooth and seamless.

How does funding work?

For corporate programs, any funding for your programs would come from a corporate source. This can be in the form of an EFT from your company account or a corporate cheque. You may also use a corporate credit card for funding, but it’s important to note that if you go this route you also end up paying for the fees associated with credit card processing to ensure the full amount is applied to the prepaid instruments. Of course, it’s good to have the option if you need it.

Since the funds loaded need to be on deposit prior to the prepaid card or payment being sent out, you want to ensure that you have apportioned time for that in your program plan, whether it is to meet invoicing, vendor management, or other internal requirements.

What are the considerations regarding payees?

For single-use, low-denomination payments such as consumer rebates or employee gifts, details regarding the recipient are not necessarily required. When planning a recurring payout program, or for programs with high denomination payouts, you will be required to provide payee details such as their name and full address.

Whose responsible for ensuring funds are safe?

All funds loaded on Prepaid instruments should be deposited directly with the bank issuing the card or e-card. When working with a program manager, you want to ensure that they have set up their financial systems and processes accordingly. Additionally, funds loaded on Prepaid Mastercard and Visa programs are protected by the card network’s zero liability policy. This reduces your risk from lost, stolen, or fraudulent activities after the funds are disbursed. Why deal with the risk associated with forged cheques or highly fraud-susceptible cash-based systems when you don’t have to?

What about tax considerations?

That’s the easy part. Moving from cheque or paper-based payments to prepaid does not change any of your existing tax and benefit reporting processes. All you are doing is changing the instrument by which the payment is made (and in the process making the payment faster, easier to use, and more trackable).

For example, if you currently issue tax forms for per diems or incentives, you would follow the same process even when you switch to Prepaid. Prepaid payments simply make it easier to reconcile and review your payouts. And if you prefer, a program manager like Berkeley can even provide the forms for you, which means there’s less administrative work on your end.

How do you track and report on payments?

The advantage of electronic disbursements is that you have end-to-end tracking and reporting of funds and transactions. Additionally, if the funds are for corporate use, you can get full reporting on spend which makes reconciliation and adherence to policy easier to track.

All payees have access to their individual transaction and spend reports, similar to credit card or bank account transactions, and if the program is used for corporate spend, your organization will also have access to regular, consolidated spend reports, as well as a variety of other reports that help manage the program. As with other financial records, Prepaid transaction records are stored for the time period required by your local regulations, and you can access them as needed.

Final Thoughts?

The beauty of Prepaid payments is that you get the speed, innovation, and convenience of real-time payments, tracking, and reporting, combined with the security and compliance measures put in place by the banks and card networks. Ultimately, it’s far easier to implement and use a trackable payout instrument than it is to deal with cheque reconciliations, paper vouchers, per diems, or petty cash. Once you get started, you’ll wonder how you managed everything before.

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