While practitioners are gearing up for self assessment season, spare a thought for our friends in business, as finance teams find themselves in the grip of an expenses nightmare before Christmas.
Thinking of submitting your expenses this week? If so, you might want to avoid 21 December as it’s officially been identified as the busiest day of the year for submitting expense claims.
The number of claims made on this day is 132% higher than the average, as employees rush to recoup costs ahead of the Christmas break, said travel and expense management experts Concur.
The annual surge in client hospitality and office parties taking place over the Christmas period was cited as one contributing factor, but many of the claims can also be attributed to pent-up costs incurred by employees during October and November that need to be processed before the end of the year.
“As Christmas approaches and holiday spending begins to erode personal bank account balances, it’s only natural for employees to look for ways in which to boost their cash flow”, said Barry Padgett of Concur Europe.
“Cue the Christmas expense rush, as employees everywhere dig through desk drawers and travel bags to find any forgotten receipts from three months previous and submit a claim. But what about the person up in accounts who is trying to finish up for the festive season? Is it honestly fair that they work nights while everyone else heads out to the party?”
Ten steps to better expenses
According to expenses experts Signifo, the following measures will help companies improve their expenses processes throughout the year:
1. Automate the process and capture data once, at source
A Web-based expense claim application can reduce the processing cost of submitting, approving and processing expense claims by by capturing data at source. This reduces approval time and allows the accounts department to export consolidated data to the payroll system and company accounts for VAT reclaim purposes, client bill-backs, P11D and other purposes.
2. Choose an automated system that is user-friendly, allows a rapid implementation and does not require training
While the cost savings from implementing an automated expense claim system are considerable, your return on investment will be significantly higher if you can avoid a costly implementation.
3. Ensure that claims are independently authorised within the firm
In particular, look at who approves the claims of senior managers. The approval structure not only affects financial control within the organisation but can also be an issue for tax authorities with regard to relief from reporting expenses payments and benefits-in-kind.
4. Write or update your existing policy and query all claims that fall outside policy
A policy should be agreed and then clearly communicated to employees. An automated policy allows for more transparency than a paper or Excel-based system and hence encourages self-policing by claimants. Needless to say, an automated system allows claims that fall outside the company policy to be queried as a matter of course.
5. Consider reviewing less than 100% of expense claims and/or expense receipts
Many organisations review 100% of expense claims and/or receipts. Frequently, the cost of 100% review exceeds the savings that result and will serve to slow the repayment of expense claims. Instead, consider reviewing only a percentage of claims, including the largest expense claims or expense items that are prone to errors.
6. Centralise checking of expense policy compliance and receipts in the accounts department
There are two major disadvantages in allowing line managers to check receipts and conformity with company expense policy. First, as this is work that will be repeated in the accounts department, an approving manager’s time is better focused on higher value tasks. Second, it creates an issue of split accountability; suspect claims will often be approved because the line manager gives a claim only a cursory glance, while an accounts person accepts the claim on the basis that “it’s already been approved by the boss”.
7. Consider reducing the use of cash advances and/or corporate credit cards
One advantage of an automated expense claim system is that it can reduce the processing and payment cycle to as little as two days. A rapid processing and payment cycle makes it more acceptable to ask employees to "fund the company" by paying travel and entertainment expenses themselves, without using cash advances or corporate credit cards. Not only does this encourage employees to submit claims in a timely fashion, but it also encourages employees to ensure their spending falls within the company expense policy guidelines. In many cases both processing costs and total T&E spend fall after the implementation of such a policy.
8. Identify claims in the pipeline
An automated system allows you to look at not only those expense items that have been paid but also claims at other stages of processing. Not only does this allow for accruals but it also identifies employees that are failing to submit or approve claims in a timely fashion.
9. Seek to recharge expenses to customers
In a professional services environment, it is common practice to recharge expense items to the relevant client. In other environments, there may also be instances in which it is appropriate to recharge expenses. An automated system, in which expense data is captured on a database, allows accurate recharge statements to be compiled quickly and efficiently.
10. Claim VAT from across the European Community
If you are registered for VAT in any of the member states of the European Community, you are entitled to reclaim VAT paid in any other member state. If you are not currently reclaiming VAT on your non-domestic travel and entertainment spending, you should be doing so. An automated expense claim process will classify expense items by country and will identify VAT refunds due.
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I've been a journalist for four years, writing on a wide variety of topics from business and finance to travel, culture and celebrities. I began my career as an editorial assistant for Palladian Publications, a B2B publisher specialising in technical magazines for professionals in primary industries. I later moved into consumer magazines as a...