Understanding imprest
Correspondent | Monday July 27, 2015 14:48
He has been given his tickets for his flight on Tuesday, and has been told that his hotel accommodation has been booked and paid for; his employer has given him the necessary paperwork confirming the hotel booking and payment. The additional expenses will be paid for from Freddie’s “Imprest Advance” that he has just received and signed for.
Freddie is a little unsure of the best way to manage his Imprest Advance and asked us for some tips.
Understanding Imprest
The first thing we need to understand is that an imprest advance is actually a loan that has to be accounted for, it is not ‘free money’ that has been given as a gift or as part of our salary.
It is similar in nature to carrying a petty cash box. For any money that is taken out, a receipt for that same amount must be put in to replace the spent funds. At the end of the business trip, the cash and the receipts must add up to the amount the employee was first given, and handed in to the employer.
An employer will expect the ‘balance’ - the cash not spent - to be returned, and a pile of receipts that equals the amount of missing money.
The definition of imprest is an advance of money paid by the employer to someone doing work for the employer, or a petty cash fund used by businesses to meet expenses.
The word itself stems from the Italian word: impresto, meaning loan, and from imprestare, to lend.
Is This Repayment
of Imprest Unfair?
Imprest money is supplied in advance to the employee to pay for any company expenses. Companies have to keep a record of all the money coming in and going out of the company - for this reason most companies have an accounts department.
Based on this, the requirement of the employer to require receipts for all the money spent is absolutely fair and above board. It is important to realise that imprest advances are not to be used for purchasing non-company items. All your personal items purchased, even if you are on a business trip, must be paid for by yourself from your personal money.
Accounting for the Money
Q:Why do we have to ‘account’ for the money?
A: Your employer must record all their expenditures, and personal expenses are not allowed using the imprest advance.
The first thing to do with your imprest advance is to put it somewhere safe, where it is completely separate from your personal money. The easiest way to do this is to use a second wallet or an envelope.
Secondly, keep a constant record (on an income and expenditure sheet) of all money coming and going from your Imprest fund, including all the receipts. Balance this daily, so that you can rest assured all the money is present and accounted for.
How does an Income and Expenditure Register Work?
In the example above, you can see we have recorded the amount received as the imprest advance, and then the amounts spent being deducted.
At the end of the business trip, P1,254 must be repaid to the employer, and the receipts for the recorded expenses supplied. If you have some queries, ask for help to run your imprest income and expenditure reconciliation.
It is vital that you also manage your money. You must plan how you are going to spend your money each month, and if you have extra, perhaps you can use it to pay off your debts quicker and start saving.
Q: What will happen if I don’t reconcile my Imprest advance and return the balance of the cash?
A: If you fail to declare your expenses and supply the slips and balance of the cash, your employer has the right to deduct the amount in full from your next salary.
This can put many people at risk of Zero Nett Pay - as this will be an unplanned debt.
If you are at risk of spending your employers money as your own, it is time to seek help through debt counselling. This solution is not a quick fix, but effective help over time to help you achieve a debt free lifestyle.
How can you make sure you stay “within your means”?
When you plan your money, you must account for every responsibility you have. You must list by writing down your income, and then all your expenses, making sure you have enough money for all your commitments.
Once you have prioritised your commitments, making sure all your needs have been met, then and only then can you spoil yourself with the luxuries you want.
The best way to work out what you can afford is to budget your money by planning your monthly income and expenditure.
“Remember: It is important to keep coming back to the basics with your money”
Now is the best time to start living within your means!
Your financial wellness is up to you. Follow these simple life rules, and be comfortable and happy with your money. If I was in your shoes, I would Start Today!
Author: Oarabile Tuelo – Debt Counselling and Collections Manager with S.C.I. Training (Pty) Ltd. © S.C.I. Training began as a BQA accredited training institution specialising in Financial Education. We now also offer Debt Collecting services for companies with bad debtors and Debt Counselling services for those in financial distress. For help and information contact them on 3180243 or 75797242 or rabbie@wellness.co.bw.
* Names in this article have been changed