Managing business expenses carefully and with strict procedures in place is very important. If this process is not implemented and managed correctly, it can lead to cash flow problems and disgruntled employees. This is especially the case in large companies that have several hundred employees. Here are some tips to help you manage business expenses.
Business expenses policy
A policy should be implemented within a business so employees clearly understand what they can buy and claim back through work and what isn’t permitted. The policy should be agreed to and signed when the employee starts working for the business. A copy should be provided to the employee so they can refer back to it when needed.
One of the key parts of the policy will be a list of expenses employees can claim back from the company. This will vary depending on the business's practices and values, but it often includes things such as petrol for formal work meetings, train tickets for work purposes, work lunches or catering for work purposes. Some company business expense policies will be less specific and simply refer to anything that is required for work purposes. The type of wording and the level of detail you opt for will depend on your company culture.
Another part of the policy may include the level of expenses that employees can claim without getting in touch with their manager before buying. For example, costly flight tickets or train tickets might need to be approved by the employee's manager before they’re purchased. Other expenses below a certain threshold may be acceptable; this threshold should be clearly stated in the policy documentation.
The process of claiming back expenses also needs to be explained to employees clearly. This process might include taking a picture of the receipt or invoice and uploading it into an online expense platform where a manager can review it. Another part of the process might require the employee to submit the expense within a certain period of time. This clause can prevent issues with business cash flow if employees hold onto receipts for several years or months and make a large claim at once.
Accounting software such as Xero can include add-ons to help manage employee expenses. A tool that automates expense management through an app or online will encourage employees to submit expenses on time to quicken the process. Employers can also view reports to see the level and type of costs that are being claimed. This report can help the company save money if they find a typical expense that can be negotiated to include a discount if the company buys the item directly. If the accounting company you use is a Xero partner, they will be able to advise and train you and your employees on how best to use the expense add-on tool.
Expense reminders
It is unrealistic to expect employees to remember the business expense policy they signed when they first started. If staff members don’t regularly claim expenses, they may forget about the restrictions or limited time frame to submit them. A simple email regularly asking employees to submit their monthly expenses can work well to prevent late claims that could impact the business cash flow.
Flexibility
If you want to promote a positive business culture, it is important to be flexible within reason. When employees buy things for the company, they are leaving themselves out of pocket to help the business. If employers completely refuse to pay expenses if they're submitted a bit late or don’t completely comply with the policy, it can leave employees disgruntled and unwilling to help the company again by using their own finances in the future. However, there needs to be a balance between flexibility and just allowing employees to do as they please. This could lead to issues with employees misusing their expenses or cash flow problems for the business.
Claiming back expenses can be a frustrating task for employees. Companies should make the process as simple as possible to encourage their employees to submit expense claims on time and follow the set process. An app or online tool is one of the best ways to reduce expense administration through automation.
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