Employee expense reimbursement is a necessity for many companies, but it is rarely prioritised over other more pressing concerns. The result can be inconsistent and poorly managed procedures, which lead to unnecessary costs and delays.
However, with a little time and investment, you can create an efficient system that works for both your business and your team. Read on for a look at the best ways to successfully manage employee expense reimbursement.
What is employee expense reimbursement?
Just in case you’re not familiar with the term, employee expense reimbursement is the way in which your employees are compensated for any out-of-pocket expenses sustained whilst doing their job. Common examples of expenses would be travel costs or business lunches.
The increase in remote working has also seen a rise in other expenses. Many people have had to purchase home office equipment or obtain an 8×8 VoIP number in order to use their home phone for work.
Most companies have some form of expense reimbursement procedure in place, but aspects such as the approval process and required proof can vary. A clear employee reimbursement process is important not only to ensure your staff are not financially burdened in the course of their work, but also to keep your financial and tax records in good order.
Clearly define your expense policy
In order to successfully manage employee expense reimbursement, you need to have a detailed and clearly defined policy in place. This should cover all possible kinds of expenses that may need to be compensated.
This means outlining everything you will reimburse your team for, whether it’s ballpoint pens or international flights. You should also be careful to impose limits on expenses.
For example, for employees on a work trip, set a reasonable cap on how much they will be reimbursed for food per day. The exact amount will vary depending on your business, but budgeting for small businesses is particularly tricky and expense limits are a good way to keep costs down.
Remember also to explicitly state the proof that will be required when they submit their expense requests, such as receipts, booking confirmations or invoices.
Ensure you comply with regional laws
As with any business financial transactions, expenses can have tax implications and these will vary depending on where you are based. If your company has offices in different countries, you may have to adjust your policy accordingly for each one.
There are a plethora of online resources available to help with tax compliance for your region. If you’re based in the USA and trying to get your head around exempt vs. non exempt employees, then Paylocity’s exemption classification guidelines will be of service.
Likewise, if you’re based in the UK and want to know what expenses are allowable, then take a trip to HMRC’s website. There you’ll find a wealth of information to help you navigate different scenarios.
If your call centre operations management team goes on a training trip that includes an overnight stay, you would certainly need to reimburse them for certain expenses such as meals and accommodation.
However, if one or more of the team members needed to pay for childcare as a result, it is unlikely that this would be allowable as an expense that is exempt from taxation, as it is not an expense anyone in the role would incur. This is an important distinction to understand.
Choose the right technology
Reimbursing expenses can be an admin-heavy and time-consuming task. Thankfully, the days of being buried in paper receipts, forms and signatures are no more.
Using an expense management software solution will help you to streamline the process and save you heaps of time and resources. A good system will enable you to automate a lot of the processes and produce expense reports.
Digitizing the process eliminates a lot of errors, resulting in far more accurate records and freeing up your employees’ time to be better spent elsewhere. It is also a more secure way of handling sensitive financial information.
A good software solution will make sure data is kept securely. This should be a high priority in order to keep financial data secure, alongside regular cybersecurity risk assessments.
Make sure your team knows the deal
Whether you are implementing a new employee expense management procedure, or refreshing a new one, make sure your staff are fully informed. It’s great to have a crystal clear plan in place, but in order for it to work, everyone needs to follow it.
This may require additional training on exactly how the process works. Doing this will also give you the opportunity to set expectations and remind staff members that everyone is responsible for expenses.
These expectations should include the time frame in which you expect expenses to be submitted – no one wants to deal with a year’s worth of expenses arriving at the same time, as can frequently happen. Plus, it’s bad for reporting and for smaller businesses it can cause budgeting issues.
Another aspect you should clarify is how long it will take for an employee to be paid. Remember, even if it doesn’t seem a large amount, you don’t know their financial circumstances and it could be a significant sum to them. Be up front about the maximum time it will take them to be reimbursed and make sure it’s adhered to.
It is wise to regularly review expense reports to make sure everything is up to date, accurate and accounted for. Make sure to task a team member, or members, with the responsibility of reviewing reports frequently.
That way, if there are any discrepancies, issues or missing documentation, a resolution can be found within a decent amount of time. The longer any problems go unnoticed, the harder it may become to solve them.
Regularly reviewing them can also be financially beneficial. If expenses are creeping too high, you are better placed to identify cost saving opportunities. This may mean taking steps like reducing spending caps, or looking into how fuel cards can reduce expenses.
Using an expense management software solution will help you to streamline the process and save you heaps of time and resources. A good system will enable you to automate a lot of the processes and produce expense reports. Digitizing the process eliminates a lot of errors, resulting in far more accurate records and freeing up your employees’ time to be better spent elsewhere. It is also a more secure way of handling sensitive financial information.
Using an expense management software solution will help you streamline the expense reimbursement process and save you heaps of time and resources. A good system will enable you to automate a lot of the processes and produce expense reports. It is also a more secure way of handling sensitive financial information. By leveraging the right technology, you can simplify and expedite the reimbursement process, making it more efficient for both your HR team and employees.
In addition to effectively managing employee expense reimbursement, it’s essential to consider the broader impact on your organization’s operations. By implementing an efficient expense management software solution, you not only streamline the expense reimbursement process but also enhance overall operational efficiency.
This includes optimizing processes beyond expenses, such as streamlining the recruitment process. By leveraging technology to automate and simplify administrative tasks, such as expense reporting, your HR team can dedicate more time and resources to strategic recruitment initiatives. This integration of expense management and recruitment processes ensures a more seamless and efficient experience for both employees and HR professionals.
Moreover, consider utilizing employee recognition tools within the software to acknowledge and reward employees who consistently adhere to the expense policy and submit their expenses on time. Recognizing their responsible financial behavior can foster a positive expense reimbursement culture within your organization.
Additionally, some expense management software solutions offer integration with payroll systems, allowing for seamless reimbursement and payroll processes. This integration can ensure accurate and timely payment of reimbursed expenses while providing the best payroll solutions for companies.
While employee expense reimbursement can easily be overlooked, it is important to get it right. By utilizing the right technologies, implementing clear procedures, getting your team on board, and regularly reviewing procedures, you can save your company both time and money.