Financial components are one of the most important aspects of a company. Various organizations spend crores of rupees to hire the right professionals. A correct balance between income and expenditure is vehemently important to remain solvent and retain investor confidence. One of the more important line items on the balance sheet of a company is the prepaid expenses. Although reported as a current asset on the financial statements, these expense items are critical and are used to measure the liquidity position of a company at any given time. These are upfront costs incurred by the company, much before the utilization of a service or a product. The tenure of these expenses generally does not exceed one year and is hence marked as current assets. A company needs to keep a close eye on the line item to be able to manage their working capital and eventually their cash flows. Any organization would ideally like to collect cash as soon as products are delivered or services are rendered and buy goods or use services upfront and expend cash on a later date. This shows the inherent strength of the company and the demand it commands in the market where the users of their services or products are willing to spend cash upfront and the vendors or raw material suppliers are willing to sell their goods or services on credit.
But this may not necessarily be true at every given point in time. In fact, companies and their HR managers are plagued with the influx in demand for monthly advance salary that have to be marked down as prepaid expenses. This may be due to various reasons, factors, and events occurring in employees’ life. A majority of the employees that work for companies in India generally live hand to mouth. This means that their monthly salaries are just enough to meet their own and their family’s expenses. An unforeseen circumstance can financially severely burden their family members. The individual may want an advance on the salary to fulfill an emergency payment such as a family member admitted to the hospital. In fact, many employees are compelled to live on credit perpetually due to their circumstances. They may have an outstanding payment or an equated monthly installment that may find them struggling with cash at the end of every month. These circumstances and events are not uncommon and lead these individuals to depend upon an extra amount of cash payments monthly that may be accomplished by taking advances on their paychecks.
This may compel the company to make advance cash payments to employees as and when needed. As these expenses cannot be foreseen, they may lead to the distortion of the company’s monthly cash projections and difficulty in managing its expenses. We at FatakPay present an excellent solution to this problem with our virtual credit facilities. Online Credit facilities can help individuals gain access to cash when in need at a zero-interest rate and can help them fulfill their expenses at minor transactional costs. The virtual credit facilities also make it easier for the companies to better manage their working capital and the expense accounts as credit is given directly to the individual without the involvement of the firm. Using our services may be beneficial to both the employers that will be free from the burden of these prepaid expenses and the employees in need who can access surplus funds at any given time
