How Do NGOs Handle Staff Advances for Travel Without Corporate Bank Transactions?

Hello Seniors, I am writing to inquire how the Admin/Accounts departments usually disburse advances to their staff for official travels and expenses. In my company, we had all staff open individual accounts in a regular semi-private bank, but now the bank is asking us to maintain a minimum balance of Rs. 5000. Therefore, I am seeking advice from fellow organizations to assist our finance department.

I understand you may suggest paying them from the office's corporate bank account. However, as we are an NGO, we cannot show credit transactions of any nature in our bank account.

Managing Staff Advance Disbursements

How do you manage staff advance disbursements in your organizations? Any ideas and suggestions are most welcome! 

Thanks,
Vineeta

Advance Disbursement for Official Trips

Normally, when a person has to go on an official trip, they submit a claim for advance according to the destination and entitlement to the finance department. Seventy-five percent of the amount can be deposited into their bank account based on the claim and shown as an outstanding advance. Once the individual completes their tour or duty, they should submit original documents like tickets and boarding passes within, say, seven days. If the claim is not submitted, the finance department should remind them, and at the end of the month, they can recover outstanding advances if necessary. The claim can be worked out, and the balance paid or recovered after adjusting the advance. A clear policy on the submission of claims and the drawl of advances should be made known to all employees for strict adherence. A monthly list of outstanding advances can be made to control outstanding dues.

When employees need to spend money for official reasons, imprest money is disbursed to them. Upon completion of office tours or meetings, they are required to submit the bills and refund any remaining balance to the accounts department. This practice is common in many companies, and imprest money is also known as petty cash.

Another method of covering expenses is instructing employees to use their credit cards for purchases. Upon providing expense details, the amount can be reimbursed to their salary accounts. Additionally, employees earn points by using their credit cards.

Ideally, your accounts personnel should have addressed this matter independently.

Thanks,
Dinesh Divekar

"Alternative Method for Handling Expenses

Another way of meeting expenses is to have employees make purchases on their credit cards. Upon submission of the expense details, the amount can be credited to their salary account. Employees earn points since they spend through their credit cards.

Won't meeting official company expenses through personal credit cards create problems with IT, especially if the amounts are large? I had a friend who would keep booking air tickets for his frequent traveler boss through a personal credit card. He was happy with the accumulation of points but got a shock when IT sent him a notice for heavy credit card payments."

You have written, " had a friend who would keep booking air tickets for his frequent traveler boss through a personal credit card. He was happy with the accumulation of points but was shocked when the IT department sent him a notice for heavy credit card payments".

Two things are evident from the information you have provided. First, he did not use the credit card for his own travel. Secondly, he might have booked tickets for international flights. The government closely monitors international travels, which likely prompted the notice from the IT Department.

There is no issue if a moderate amount, say Rs 5,000 to Rs 10,000, is spent on the credit card occasionally, but it should not become a regular practice. Additionally, the original query pertained to imprest money or petty cash.

Thanks,

Dinesh Divekar

Getting a query from IT does not mean he is guilty. He just has to show details of reimbursement and that no amount of profit was earned by him.

Stop dealing with a bank that is making a stupid demand like that. Open salary accounts for your staff with a bank that is willing to offer zero balance accounts. Thereafter, use the accounts as you have done before.

What we do is that we opened a separate bank account, and all imprest cash is deposited here. I am talking about the account in Hong Kong. We request expenses for 6 months.

Are you both one person or working in the same NGO? Vineeta raised the initial query and Prakasini gave a clarification today. Like other members suggested, are there any issues if the advance is given in cash? And like Saswata Banerjee mentioned, just dump this bank. There are many banks now which allow zero-balance accounts; at most, they would insist on Rs. 1000 minimum balances. "I am talking about an account in Hong Kong"—now this is confusing. Is this the main account from where you get the forex inflows into the separate Indian account, and all imprest cash is deposited here? And it's from this Indian account that individual employees get their advances credited for official travels and expenses into their individual accounts in a regular semi-private bank? Please clarify or confirm. Or did I get something wrong here? And are these 'individual accounts in a regular semi-private bank' different from their salary accounts or the same?

Regards,
TS