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How to create a robust expenses policy

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17th Oct 2014
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Companies and employees have become complacent when it comes to expenses, making it more important than ever for businesses to ensure they have a robust and up-to-date expenses policy in place, says Michael Richards of webexpenses.

A quarter of office workers confess to making false expense claims  at work – claiming back more than they are entitled to on company expenses.

The National Fraud Authority has also raised concerns about this issue, reporting that businesses lose more than £100m every year as a result of employees exaggerating and falsifying claims.

Here are five tips on how to create a robust expenses policy for your firm or clients:

1. Create a fair policy

To ensure the task of expenses processing runs smoothly within an SME, it’s important to have a system in place which is both fair and transparent for employees. Respondents to our survey thought their employer handled expenses unfairly and stacked in favour of the company’s interests over the workers’.

While there will always be a certain amount of discontent towards an expenses policy, it is this perception of unfairness which is commonly used to justify expenses fraud. It is how employees, who normally consider themselves as law-abiding citizens, can ‘legitimise’ the act of fiddling their expenses. Without a fair system of compensation, organisations leave themselves open to the risk of becoming breeding grounds for low morale, discontentment and exaggerated claims.

2. Keep it simple

The process of expenses must be made less of a chore in order to promote compliance among a small workforce. With the introduction of digital advances such as smartphone apps, employees are able to effortlessly upload receipts into a digital form, ultimately making the process a lot easier for all people to manage and adhere to. The policy guidelines should also be clearly written in a language that all employees can understand.

3. Keep it up-to-date

Outdated expense management systems are a nest for fraudulent claims. Just under half of employees said their company had not yet implemented an expenses management system.

Many organisations create a policy and then forget about it, but senior managers must develop an effective policy which is organic. It should be revised every few months to take into account price inflation, legislation updates and technological advances. For example, we all know that fluctuations in fuel prices are a common occurrence, so it’s important to ensure that rates and allowances for travel – including mileage and fuel allowances – are kept up-to-date.

4. Choose the right software

Digital expense management systems can be used to minimise expenses abuse. This includes the automation of expenses processes, and the use of technologies which allow companies to monitor expenses in real time. In the past, this was a slow and inefficient process of spreadsheets, forms and piles of paper receipts. Now, powerful digital systems have revolutionised the way expenses are managed.

Another major advantage of these systems is that they produce a rich set of data – helping FDs and CFOs to keep a closer eye on expense spending and tracking. An automated system takes the emphasis away from the grind of processing expenses and lets finance teams focus more on analysing and monitoring the data. With a greater understanding of the nature of expenses fraud, this information can help identify trends and spot potential policy breaches.

5. Monitor and maintain

As part of a policy, you need to clearly define the procedures that must be followed by employees and line managers when it comes to processing and approving claims.

All employees should be made responsible for encouraging good practice when filling out forms, ensuring accurate and specific descriptions are given for the expenses they are claiming for.

With 70% of survey respondents reporting that their expenses had never been queried or challenged before, it is vital that every member of staff takes responsibility for this part of the expenses management process. Ensure that the member of staff who checks an employee’s form is someone that works closely with them and is aware of their movements and day-to-day commitments, helping to avoid any false expense claims from slipping through.  

Michael Richards is chairman of webexpenses – a cloud-based expenses management solution that reduces costs and improves the efficiency of organisations.

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