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Accounting Best Practices, Fifth Edition by Steven M. Bragg Englewood, Colorado

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3–19. Eliminate Cash Advances for Employee Travel

Many employees with few funds on hand will come to the accounts payable department asking for cash advances so they can go on company-mandated trips. By doing so, the department may be handing over more cash than the employee really needs, which can make it difficult to collect any unspent cash. In addition, employees who have already been paid for their expenditures have no incentive to submit an expense report, especially when the report may reveal that they must pay some of the original advance back to the company. The usual result is a prolonged process of asking employees for expense reports, while the amount of the original advance remains, incorrectly, on the accounting books as a prepaid asset.

This problem is eliminated by denying cash travel advances. However, this is much easier said than done. In reality, many employees simply cannot afford to be out-of-pocket on any company-related expenses. If so, the company can purchase many of their expenses for them, such as airline tickets. Also, such an employee can travel with another employee who has the financial wherewithal to absorb cash expenditures for both employees. As a last resort, the company can also issue company credit cards to employees, though this raises the risk of having the cards used for noncompany purchases. Through some combination of these actions, a company can reduce its reliance on cash advances to employees.

Cost: Installation time:

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