Payments and expenses are a part of everyday business operations. Payments like employee trips and online tools are essential costs that the company swallows to get business done.
Ideally, your business and its employees will use company cards connected to comprehensive software to set limits and get visibility over spending. But, when team members pay from their own funds, they will likely need to be reimbursed.
However, not all expenses are reimbursable, and distinguishing them with a robust expense policy is vital but not always straightforward.
Company cards are increasingly replacing reimbursable expenses thanks to the greater governance/control options available. But, some forms of business expenditure will always be in the form of reimbursable expenses, e.g., per diems, mileage, and other ad hoc purchases that employees make on behalf of the company.
Well, this largely depends on a) the company and b) any relevant legislation around business reimbursements, tax, etc.
Generous companies competing in a talent war might decide to reimburse travel costs for commuting, even if that's far from standard practice. But, in the UK, for example, these travel costs will need to be in line with relevant legislation, e.g., 45p per mile up to 10000 miles, then 25p after. Anything above this gives rise to tax liabilities for the employee and employer.
Client entertainment is also non-deductible in the UK for VAT and corporation tax. So, it can create a significant source of non-compliance with anti-bribery policies, etc.
The point is that there is no definitive answer to this question. Each company must make up its own mind about what expenses it'll allow within the law. While also considering the consequences this has on employee satisfaction and well-being.
Common expense categories in companies include:
As you can see, all these categories have something in common. They either keep the business running by allowing employees to visit clients, attend training or participate in industry events. Or they deliver some value back to the company through higher employee morale, client retention, or business effectiveness.
Not all employee expenses are reimbursable.
Companies must be very clear on this point. Employees who submit a claim very much count on its timely reimbursement. The contrary is a sure way to frustration and resentment.
Employees will incur expenses to maintain business operations and drive value into the business. To be eligible for reimbursement, they need to meet the following criteria:
Firstly, we must remind ourselves that these people are getting paid for their time. According to the ONS, the median hourly rate ranges from £11 to £20, depending on the sector.
The figures above reveal that to get the average £123 unclaimed expenses, these employees must put in almost a whole day of work. Shocking when they could do it simply by spending time submitting these claims.
But instead, such is the hassle, as perceived by some of these people; they would rather never see the money again and spend their time carrying out a different task.
The above is the ultimate evidence that company expense management systems (or lack thereof) are painful with a capital P. After all, nobody likes to do repetitive data entry, let alone knowledge workers who are also stressed with deadlines and problems to solve.
So, why allow such a state of affairs to take place?
Modern companies know that their workers must remain focused on their projects and would prefer to let seamless expense management software, and company cards take care of spend management instead.
Instead of letting employees use their own cards and seek reimbursement, work with a spend management company like Payhawk. We help companies empower their employees with company cards and software, which includes vital features including:
When company cards aren't an option, and you have to stick to reimbursements, mistakes can be common, especially when the system people have to use is outdated and manual. Many mistakes are due to human error, either because the process is too complex or because compliance is too hard to remember/ adhere to.
However, other mistakes constitute fraud, which is sadly also very common.
At Payhawk, we make it easy to avoid fraudulent claims and empower employees to get their money back safely and promptly. We also help finance teams stay in control of company spend.
But mistakes are harder to swerve for those companies (and their employees) still not using Payhawk. Here are the most common mistakes employees make when submitting expenses:
This is one of the most painful mistakes and can lead to untold frustration if the approval chain rejects the claim. It's just a matter of timing.
Finance teams want to remain in control of their accounting and forecasting, so they ask employees to be timely with their claims, perhaps asking for a three or even six months limit. But if the claim process is laborious and employees put it off, claims might come later than ideal.
This scenario makes a seamless and hassle-free expense management tool so appealing. By offering company cards and expense management software with built-in controls, businesses can help their employees submit expenses on the go without breaking compliance.
Have you ever been travelling for work with your head stuck in the task ahead? Whizzing through the airport with your hands full between the luggage, the passport, and now a triple mocha?
Not much thought is spared by non-finance people when it comes to the humble receipt, which is pushed to the depths of their pockets only to disappear later mysteriously.
Most employees will not submit a small claim for which they lost the receipt, and some of those who do will get their claims rejected.
Similarly, employees might keep and attach the wrong receipt. Perhaps an entirely different or irrelevant receipt.
We've all been there. The business meeting in Paris has gone wonderfully.
Only one of the team has forgotten that the limit for dinner on international travel is £20, even though that doesn't even cover the vin rouge.
One of the biggest problems with this static approach to expense policies is that they disregard taking care of the context.
With Payhawk, updating limits is easy if your colleague uses the company card instead of their personal card and associated reimbursements. If the card user needs more money, they can simply make a fund request via their app, and it will be approved according to the inbuilt workflows. This process means the user doesn't have to go without important funds, but the finance team also gets to keep control and governance.
An employee leaves his home in Reading to visit a client in Brighton. On the way out, he notices the tank is close to empty and, not wanting to worry about it, fills it to the brim for a total of £40.
How much will the employee claim? He can't claim £40 because that's more than what they used to travel; however, how much he used is not that easy to calculate. Not only that but what evidence can they give?
Instead, Payhawk can calculate the correct amount based on the distance travelled. The employee can simply input the start and end points (or more), and we do the rest.
Sometimes, the costs associated with business travel are enormous. But you can reduce a significant portion with some planning and foresight.
Read the below tips for some ideas on cutting travel-related business expenses.
A specific policy setting out limits and circumstances can really curb spending on travel expenses, especially internationally.
You'll need to consider flight rules, including whether your colleagues should fly economy, business class, etc., often depending on their seniority within the company. You could also include flight times, etc., as these can significantly impact price.
Hotels will also make up a big part of your travel expense policy. You'll need to set boundaries around costs per night, minimum stay, the star quality level of the accommodation, and where the rules can be flexible (if, say, your colleagues want to stay near the office/meeting points when on trips, etc.).
You have to include taxis and rental cars too. And here you'll need to consider things like when you prioritise public transport, for example.
Whatever your approach to business travel expenses is, drafting a policy and sharing it with people before they go on travel can make all the difference. With Payhawk, your people get access to a hard-to-break travel policy and accommodation bookings via our integration to Travelperk and streamlined expense management as provided by us and our software.
When a big group from work travels together, costs can quickly spiral out of control.
Use the group numbers to your advantage. Ask the office manager or someone else relevant (and capable) to book transport and accommodation for everyone, thereby accessing group discounts and leveraging negotiations. Most hotels will be willing to negotiate for a big group which can mean a 25% discount, just like that.
If your employees often travel across the country, there might be special cards from train operators or other forms of public transport. For example, Railcard in the UK offers excellent discounts to frequent travellers. Do the maths and see if it would be worth buying one for those most often travelling.
Ask employees to sort their travel as soon as they know of commitments that need attending. People tend to be really good at avoiding last-minute bookings for personal expenses, so it's just a case of reminding them not to leave business travel bookings for last too.
This can be particularly effective for smaller companies running a bonus scheme. If people understand the impact of their last-minute bookings or reliance on taxis on their bonuses, they might be more willing to act responsibly.
Payhawk helps companies stay on top of reimbursable expenses by facilitating real-time expense management that empowers employees to do their job, not repetitive admin.
Companies can set spending limits and controls, set up an approval chain, apportion budgets to different teams and give visibility to finance teams about what's being spent and where.
Because of its satisfying UX enabling employees to snap pictures of receipts and automate data entry, receipts are submitted without delays, making month-end close easy and painless.
Ready to find out how expense management can help you control your company spending and lead to happier employees? Book a demo today.
Whether you have tens, hundreds, or thousands of employees, we’re making your business spend work for you, giving you control over spending at scale with a single solution. Say goodbye to tedious finance tasks, schedule a demo with us today.