When it comes to expense reporting, having rigorous financial controls is critical to operating a profitable business. You should monitor expenditures incurred by employees on behalf of the company. This enables your organization to track spending, control costs and maintain accurate financial records.
Establishing and adhering to strong policies, using technology correctly, and complying with tax regulations are important ways to ensure accurate expense reports. Here are six tips to help your organization get a better handle on the expense management process.
1. Establish formal expense reporting policies. It’s important to define allowable expenses and set spending limits for every employee. You should also stipulate the required documentation to accompany each expense reimbursement request. Communicate the policy to employees and have them acknowledge their compliance with every expense request they submit.
2. Set deadlines for submission. Employees need to submit expense reimbursement requests in a timely manner. Regular submissions make it easier for employees to track and remember expenses. It also provides them with quicker reimbursements for out-of-pocket expenses.
3. Encourage or require the use of credit or debit cards. Card transactions offer many benefits over cash payments. For instance, they create electronic transaction records and detailed statements for substantiation. Card usage also makes it easier for employees to separate their business and personal expenses, ensuring a more accurate and efficient expense reporting process. Many credit card companies offer potential rewards or cash back that the cardholder (either the employee or the business owner) can later redeem.
4. Require documentation and substantiation. Employees should keep itemized receipts, including paper and digital receipts, and record the business purpose for each expense. For business meetings, this should include the purpose and the people who attended. Mileage logs must include similar details, such as the purpose of each trip and who traveled in the vehicle.
5. Leverage technology. Expense reporting software can automate the receipt capture and expense categorization process and integrate with accounting reporting solutions. This streamlines the reporting process by reducing the paperwork an employee must manage and minimizing the need for manual data entry. It also improves accuracy in expense reporting and enhances compliance.
6. Audit your reporting processes. Careful review of expense reimbursement requests can help identify compliance violations and detect potential fraud. Auditing transactions can also ensure sufficient documentation exists to comply with state and federal tax regulations.
An effective expense reimbursement process depends on policies, technology, and oversight. By adopting best practices, organizations can create a robust and efficient reporting process that promotes financial transparency and compliance. Contact us for help to review your existing expense reporting process and suggesting ways to improve it.
For more information about the above article or other outsourced bookkeeping services, contact Nick Wheeler, CPA at (334) 887-7022 or by leaving us a message below.
