How internal expense auditing minimises compliance risks
We tend to think of HMRC audits as being the financial equivalent of a trip to the dentist - scary, painful and, very often, costly. And one area that’s likely to trigger a visit from the tax watchdogs is employee expenses.
This is because it’s an aspect of company finances that organisations have traditionally struggled to control, making it a happy hunting ground for skilled auditors looking to root out compliance problems.
With the threat of resource sapping audits, investigations, fines, demands for backdated costs and even prosecution, it’s something where finance professionals can’t afford to take their eyes off the ball.
And just like dental health, prevention is better than cure when it comes to minimising the risks of an external audit. It’s something which digital technology is helping more businesses to shield themselves against.
The move from paper to digital processes has turned a prohibitively slow and fiddly auditing process into something which is quick, simple and effective. It means that regular internal audits are something that all finance teams can now achieve.
A digital system such as webexpenses automatically tracks and stores every aspect of employee expense costs. Integrated reporting tools allow information, that would previously have taken hours or days to collate, to be pulled together in a matter of minutes.
It allows any murky areas within expense accounts to be identified and dealt with before they are ever allowed to pique the interest of an eagle-eyed HMRC inspector. Here’s a look at the main benefits of internal expense auditing:
Any uncertainties over the details you supply to HMRC will increase the chances of triggering an audit or investigation. Suspicions will be caused by any kind of errors or incomplete account information.
An internal audit provides a chance to identify any inconsistencies or weak spots before data is submitted. By catching these problems early, you can significantly reduce the risks of having to undergo the stress and costs of an external audit or investigation.
Even the most efficient of expense set-ups is liable to go slightly ‘saggy’ over time. An internal audit provides the opportunity to identify those areas where accounting standards have slipped and to tackle them.
The way expense costs are categorised is one area that will benefit from regular tidying. There’s a tendency for any kind of miscellaneous category to be used for a wide range of different costs.
It creates an area of finances that will attract the interesting of HMRC officials who want to see accurate information and categorisation of each and every business cost.
The worst possible time to discover any problems with account information is when you’re up against a deadline. It’s when you find out that details are missing or incorrect but you don’t have sufficient time to properly rectify it.
A properly scheduled internal audit will allow any of these issues to be identified well before any external deadlines. It reduces stress and minimises the risk of submitting incomplete or overdue information.
An internal audit provides a powerful ally in the fight against expense fraud. Access to digital data allows detailed costs to be analysed and any suspicious reimbursement trends or patterns to be identified.
It allows a finance team to target resources on those areas that pose the greatest risks and to tighten up compliance procedures. Done properly, an internal audit is something that dishonest employees should learn to dread.
Along with the practical business benefits of switching to internal expense auditing, there’s also the change in mindset that this can bring to an organisation.
Rather than immaculate bookkeeping and effective compliance controls being something worried about when an external inspector calls, these are practices that become instilled within the company culture.
Webexpenses provides a smarter and safer way from finance professional to manage employee expenses. Find out for yourself by requesting a free demo.