How to Manage Employee Expenses
Over the last few years, we have all been shocked and disturbed at the extent of the politician expense scandals. However, it’s not just these high power, high profile individual’s that have been known to abuse the system; it’s reported that 14.5% of business expense reimbursement schemes are abused. In fact, over 4 years The Royal Academy of Music was defrauded of £200,000 by a director.
Employee expenses are often politely described as a ‘headache’ – headache? Let’s try migraine inducing. In all seriousness, they can present themselves as one of the biggest challenges that owners will face.
It’s a fine line, in this era of trust and transparency, where the business hierarchy is removed and employees are all treated with equal respect and responsibility – you may feel pressured to supply your team with company credit cards with revolving credit limits. The bottom line is, don’t succumb to this if you are cautious, especially if you are still in the early days; but with this in mind the process needs to be addressed and formulated into one that is clear and fair; employees are within their rights to claim for genuine business expenses.
Expenses involve money, and money is an inherently emotive issue. Can you really blame employees from becoming disgruntled for having to front company costs out of their own pocket and having to wait until the end of the month to recoup the money? Its time consuming, perhaps difficult to manage on both the employee and employer side, and is potentially damaging to relationships within the workplace.
Also, from a business owners perspective – there is no control being administered on the employee spending until the receipts and expense forms are handed in at the end of the month; imagine the nasty surprises that owners must experience!
“Employees should be aware and the expense must wholly relate to their employment and no personal benefit must be gained” explains Taylor Rose TTKW, “For instance, if an employee is injured and seeks private medical care in order for them to return to work quickly, it is unlikely that this expense would be reimbursed as the procedure was not wholly for work purposes and a personal benefit was encountered”.
So how do you manage these expenses efficiently and effectively? We’ve put together some advice below.
- Your expense policy should be created in the early days (pre employees) and communicated in a way that is clear and simple. You are required to tell employees what they are entitled to claim for and how they can claim it. Don’t let it become a bureaucratic policy – encourage employees to come forward with any suggestions and questions.
- If you do feel comfortable in doing this; enable your employees by providing them with their own expense cards. You can choose the way that this is implemented to suit your level of anxiety! Many businesses have chosen to give these cards to every employee; the ownership is placed on the individual to take ownership and budget accordingly.
“We gave our staff business expense cards for a number of reasons. Firstly it helps to empower them to take their own decisions on expenditure such as subcontractors, software and other operational costs, but also it enables them to travel, entertain clients, and get food & drink whilst out of town at meetings at conferences”, comments Ben Barker, co-founder at Datify, “Not having to have director sign off on every small transaction saves a lot of time, and allows our staff to get on with doing their jobs rather than having to constantly ask the directors to pay for things, or have to worry about paying for things themselves.”
- Look – its 2016 and there is minimal time for forms, paperwork and paper receipts; it’s outdated, inefficient and unnecessary. By placing a limit on the cards you can regain some control and peace of mind; be sure to communicate this policy to all employees along with the pre-determined areas of expenditure.
- Consider the policy with regards to fuel expenses and entertaining as these areas are considered as ‘high risk’. You must make sure that employees know whether they are allowed to spend money on fuel, food and drink or if these areas are prohibited. If you want to be extra cautious in this area, you can block specific types of purchases or use separate technology for fuel and mileage.
“Our system eradicates the erroneous mileage claims and have made the process of claiming much more efficient as it requires minimal administration.” Explains Chris Miller CEO at ABAX, “The technology reduces unnecessary paperwork and also protects the business and employees from tax authorities due to inaccurate or incomplete mileage claim records.”
- Although you don’t want to create an environment of mistrust, you may want your expense policy to include the fact that the accounts will be monitored and abuse of the system will be dealt with accordingly.
In conclusion, a well written policy will enable you to keep on top of the costs, prevent abuse of claims and create workplace relationships built on trust and fairness; it also prevents any anxiety attacks on your end. Whatever process you decide to implement, make it a priority to prevent long delays in paying staff expenses; ensure that your financial operation (regardless of its size) strives to pay any expenses accurately and prompt
