It is essential to keep good financial records for your church, including having a reimbursement system that creates paper trail for all church expenses. But what happens if a staff or volunteer can’t front the expense and wait to get reimbursed? Using a prepaid card for petty cash may just solve your dilemma.
I prefer a true reimbursement method because it is the surefire way to get receipts turned in: just put the church expense on your personal credit card, turn in the receipt right away, and have the reimbursement check in hand before your credit card bill comes due.
But that doesn’t work in every situation. I’ve worked with planters and their volunteers that:
- Had bankruptcies that prevented them from getting a credit card in their own name
- Lived on a fixed income with no margin to float church expenses
- Were philosophically opposed to credit cards and other debt instruments
Petty Cash
Back in the day, churches and small businesses might have a small lock box or drawer with, say, $100 in it for small, incidental expenses. No need to create a requisition or invoice for $1.87 worth of postage to mail a large envelope! Receipts for purchases would be placed in the petty cash box so that the total of cash and/or receipts always added up to exactly the starting amount ($100 in our example).
When the cash balance got low enough, you’d turn in all the receipts to the bookkeeper like any other expense report. Then they’d write a check for that amount to be cashed and used to replenish the petty cash.
Now that so many purchases are made online and so many organizations don’t have physical office space, using a prepaid card for petty cash is a great replacement. You’d run it almost exactly the same way, but instead of there being a physical petty cash lock box, the amount gets loaded on to a reloadable prepaid Visa, MC or Amex card (see below). The total of the balance left on the card and the stack of receipts should always add up to exactly the starting/funded amount.
Unfortunately, neither the petty cash system nor the reimbursement system rescues you from having to fill out and submit expense reports. But that’s kind of the point: keeping good records.
How Much is Too Much?
So you’ve decided to use a prepaid card for petty cash but don’t know how much to load it with? I’m no accountant, but the more I searched, the more I found no indication of any legal or GAAP limits (generally accepted accounting principles) to a petty cash fund (aka imprest system). So use your common sense and err on the side of caution. The bigger the amount, the more exposure the church has to a financial loss.
One way would be to figure out the total of the typical monthly expenses such a card would be used for and start there. But also make sure that the staff or volunteer who has the card is aware of budgeted amounts they’ll need to spend within. Just because there’s a $500 balance on the card doesn’t mean that can be used entirely on coffee appointments.
At the end of the day, using a prepaid card for petty cash ends up functioning almost identically to having a church credit card, too: there’s a card with a limit, receipts are saved and turned in, etc. But instead of the staff or volunteer borrowing the $500 on credit every month, they are spending up to $500 of the church’s cash every month. That’s an important distinction – in the same way that a family can find themselves drowning in credit card debt, churches can get caught in that, too.
Choose Your Weapon
It was easy to find top 10 lists of best cards and other comparative sites for prepaid cards. Here are two I found particularly helpful:
- Best Prepaid Debit Cards in 2018 on LendEDU
- Best Prepaid Debit Cards of 2018 on The Simple Dollar
So you can ask the right questions, typical fee structures include one or more of:
- purchase/activation fee
- monthly fee
- reload fee
- minimum balance to waive fees
- direct deposit to waive fees
Using a prepaid card for petty cash can be a feasible alternative to a true reimbursement system and might be just what your church needs.