Many companies have a spend-and-reimburse policy in place for employee purchasing. This requires team members to pay out of pocket for company expenses and then submit expense reports to recoup their money. However many employees, particularly Millennials and Gen Z workers, struggle with the requirement. This practice can even cost you quality staff in a tight labor market.
Financial Reality of Many Millennial and Gen Z Workers
For many employees in these two demographics, paying out personal funds for company expenses is more than an inconvenience.
According to a Deloitte study, 47% of Millennials and 46% of Gen Z live paycheck to paycheck, dealing with a constant fear they won’t be able to cover their monthly expenses. Additionally, the average Millennial is dealing with approximately $36,000 in debt, and Gen Z is dealing with around $16,043.
No wonder these employees are unhappy when asked to put up their own money for company purchases.
Zero Percent Loans to Employers?
Employees don’t want to spend their money to buy things for their employer, even if there is a system for reimbursement. In effect, employees are providing their companies with a short-term loan with 0% interest and seeing no benefit for themselves.
Not only are they lending money to their employer, but they also have to do more work to get their money back. For most companies, after the purchase, employees still have to gather receipts and turn in expense reports. Some employers only reimburse expenses monthly, which can delay repayment for several weeks or longer. For cash-strapped employees, this is extremely stressful!
At the same time, there is mounting frustration from employees who know there’s an easier way to handle company purchasing that doesn’t require them to pay upfront. These age groups are quite used to digital purchasing and sending money to people via a myriad of apps.
Employees Expect Modern, Digital Tools
Employees today are used to digital tools. On the consumer side, they’re using tap-and-go purchasing, texting payments, online banking, and real-time account balances. There’s no paperwork necessary. The digital and streamlined processes are quick, easy, and efficient.
Yet, they aren’t seeing similar practices when it comes to company purchases.
This can be a big negative for employees, who see a lack of digital tools at companies as a lack of innovation. Yet, the majority of team members want to work for progressive companies. 69% of employees said they would leave their current position for a company that is a leader in innovation.
Such frustration can mount, leading to turnover, disengaged employees, and what’s known as “quiet quitting.” With quiet quitting, employees stay on the job but put in the minimum effort needed to get a paycheck.
Companies Are Also Using Cumbersome Credit Card Systems
Despite this, many companies still use legacy systems and ask employees to pay upfront, save receipts, submit expense reports, and wait for payment.
Even businesses that offer company credit cards to employees, for the most part, still work with legacy processes and go through manual processes. On the back end, accounting teams have a lot of manual work to verify accuracy, hunt down employees for receipts, download monthly statements for reconciliation, and manually enter information into the general ledger.
Yet, there is no longer a reason to deal with these time-consuming and error-prone processes. Today, more modern solutions significantly streamline operations and improve accountability, providing efficiency gains for both purchasers and accounting teams.
New Generation of Card Issuers Offer Alternatives
A new generation of credit and spend management solutions like Torpago allows companies to use physical or virtual credit cards, which automates purchase records by enabling employers to digitally capture receipts on their phone. There are no expense reports to fill out (or chase), and reconciliation happens automatically.
Not only does this avoid employees having to spend their own money on behalf of their employees, but it significantly reduces the paperwork for employees and accounting teams.
Digital tools let employers issue virtual cards on demand for single-use or recurring payments, set spending limits and authorizations, and restrict payments to preferred vendors, which provides greater transparency and accountability.
Modernize Your Business
Employees shouldn’t have to be their employer’s bankers. Companies that make their employees pay upfront are aggravating their team members, many who may be stretching their already limited resources.
By employing a modern credit and spend management solution, organizations can ease the financial burden on their employees, reduce overall paperwork and management, and have greater accountability for company spending.
Torpago Has a Better Way!
Torpago empowers companies with simple and easy solutions that make employees and business happy. We'd love to show you how. Request a demo!
