Ad-Hoc Payment

What is an Ad Hoc Payment?

Ad Hoc Payment is made outside the usual invoicing system and official check request processes. It is not included in the employee’s monthly salary and is an extra allowance provided on specific months. These payments are carried out during exceptional circumstances and particular situations.

A few cases of ad hoc payments include:

  • Missed payments
  • Late or adjusted timesheet
  • Extra or miscellaneous costs
  • Special requests

What is the difference between Ad Hoc Payments and Recurring Payments?

Ad Hoc Payment is a one-time occasional payment given to an employee, contractual worker, vendor, etc, whereas recurring payments are given to full-time employees after a regular interval (every month). Recurring payments are a part of an organization’s official invoice system whereas ad hoc payments happen outside of the invoice system.

Here are the differences between the two based on various factors:

Factors of differentiationAd Hoc PaymentRecurring Payment
MeaningOne-time, irregular payments initiated as neededRegular, scheduled payments with fixed intervals
Use CaseOccasional or unplanned transactionsRegular bills, subscriptions, memberships
FrequencyIrregular or sporadicRegular and predictable (weekly, monthly, etc.)
InitiationInitiated on a per-transaction basisAutomatically initiated at scheduled intervals
AuthorizationRequires individual authorization each timeAuthorized once; subsequent payments automated
Payment AmountVariable. May differ with each transactionFixed or predefined amount for each recurrence
FlexibilityOffers flexibility in payment timing and amountFixed schedule, less flexibility for variations
ExamplesOne-time online purchases, ad hoc services, freelancing, contract workMonthly utility bills, subscription services, employee salaries

What are some examples of Ad Hoc Payments?

Ad hoc payment examples include additional one-time payments given to employees as bonuses, incentives during festivals, and more.

Here are some examples:

  • Over time bonus
  • Nightshift
  • Incentives
  • Petrol Allowance
  • Diwali Bonus
  • Service charge
  • Gift Voucher
  • Consultation Fees
  • Freelancing Services
  • Emergency Expenses
  • Event Tickets
  • Donations

What are the benefits of Ad Hoc Payments?

The benefits of using Ad Hoc Payments include:

  1. It provides a means to resolve irregular payments that fall outside the usual invoicing procedures.
  2. Ad hoc payments provide flexibility for both payers and recipients.
  3. These payments are often quick and straightforward.
  4. It is well suited for contractual workers and temporary projects.
  5. Ad hoc payment enhances cash flow by consolidating payments into a single lump sum amount.
  6. It simplifies administrative processes as there is no need to set up and manage recurring billing systems.

What are the challenges of Ad Hoc Payments?

Despite the various advantages of Ad Hoc Payments, there are several challenges associated with it. They are:

  1. It is difficult to manage expenses effectively with ad hoc.
  2. There is a lack of traceability for payments.
  3. Ad hoc payments have higher associated charges.
  4. Managing global liquidity risks can be inefficient when relying on sporadic and unpredictable ad hoc payment patterns.
  5. Irregular ad hoc payments may lead to accounting errors and oversights.

How do you process Ad Hoc Payments?

Ad hoc payments may need approval before processing, and the payment undergoes formatting validation before transmission. In Keka, ad hoc payments are processed under the salary components and structures in the payroll section.

Here are some of the best practices to follow while carrying out ad hoc payments:

  • Establish a transparent approval process for ad hoc payments.
  • Maintain comprehensive documentation, including invoices and receipts.
  • Use secure and reliable payment methods to prevent fraud.
  • Implement an effective expense tracking system for accurate reporting.
  • Reconcile ad hoc payments promptly for accurate financial statements.
  • Ensure compliance with organizational policies and legal requirements.
  • Explore automation solutions (Keka Payroll) to streamline ad hoc payment processes.
  • Regularly review and optimize processes for continuous improvement.
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