Expense reimbursement: 5 ways you can manage the process better

Expense Reimbursement

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How to improve your expense reimbursement process

For those making a claim, it typically entails gathering endless piles of receipts, faffing around with spreadsheets, and a one-to-four week wait to get their money back.

As for finance teams, somebody — or, more often than not, several somebodies — will usually have to go through every single transaction manually. A process that’s tedious, time-consuming, and prone to errors that risk losing you money and throwing budgets and financial forecasts out of whack. The good news is that expense reimbursement doesn’t have to cause a company-wide chronic migraine. Here are five steps you can take to make the process simpler, more straightforward, and more efficient for everyone.

1. Be clear about what you’ll reimburse… and what you won’t

The cornerstone of effective expense management is a clear, straightforward expense policy. Written rules make it easier for line managers and finance staff to approve and process expense claims. There’s no need for lengthy discussions about whether Andrew from Sales can claim his daily Americano, or whether Doris from HR can claim her monthly Tube pass. The policy sets out exactly what is and isn’t allowed. It’s also harder for staff to argue they didn’t know or misunderstood the rules. And that means they’ll be less likely to try their luck and claim expenses they shouldn’t be claiming.

According to HMRC, staff are entitled to claim expenses they made ‘wholly and exclusively’ in the course of their employment. Put simply, this means they made the whole expense — or, if the expense has both a personal and business element, a definite part of it — purely because of their job.

Expenses that fall into this category include:

  • Business-related travel
  • The cost of entertaining clients
  • Office supplies
  • Software subscriptions

That said, you may also decide to reimburse the cost of professional development, health and wellness, and other out-of-pocket expenses that, while not strictly related to your staff’s day-to-day jobs, make your company a more attractive place to work. Alongside what staff can and can’t claim, a good expense policy should also set out how much they can claim for a particular expense. This helps keep spending within specific limits and, more importantly, increases accountability. When we surveyed 2,500 UK employees, 40% told us they’d spend more responsibly if their company had tighter controls in place.

2. Streamline the process

How difficult is it for your staff to submit an expense reimbursement claim? It sounds obvious, but the more hoops they have to jump through, the more likely they are to make mistakes or put it off. And if a flurry of poorly-filled-out expense reports all hit your finance team’s desks at the last possible minute, it’ll make their job harder, cause payment delays, and increase the likelihood of further costly mistakes. So how can you make the process as painless as possible?

Here are three tips to get you started:

Standardise how staff make expense reimbursement requests

Creating a standard form and spelling out exactly what it should include will save your finance team having to chase up missing information. And because all expense reimbursement requests will follow the same format, they’ll be easier to check and approve.

Set up a single channel for expense reimbursement submissions

It’s much simpler for finance to keep track of requests and their status if they receive them all through a specific email address. Or, even better, through an online dashboard or app. By contrast, if there’s no standard procedure and staff submit claims in all sorts of different ways — sometimes by email, sometimes through Slack, and sometimes by leaving a printed expense report on your finance team’s desk — individual requests risk getting lost in the shuffle.

Cut down on paperwork

Case in point, staff could submit photos of receipts online. This requires less effort than setting aside paper receipts. It also eliminates the risk of them being misplaced or getting damaged and causing issues down the line.

3. Automate repetitive tasks

The single biggest reason expense reimbursement is a pain for many companies is that, in many cases, it’s still an inherently manual process. Before you can add an expense claim to a payment run, somebody has to go through every line item on the report, match it to a receipt, confirm it’s allowable, and, more often than not, input it into the accounting system by hand. If that sounds incredibly inefficient, it’s because it is.

It typically takes around 60 minutes for a single expense claim to get processed. Seeing as a company with 450 staff generates around 135 expense reports every month, this means your staff could be spending 804 hours a year on expense management. With accounting automation software, there’s no need to do any of this manual work. The system automatically records, verifies, and categorises transactions, so approving and reconciling them is quick and easy.

A good platform will also have built-in spending controls and integrate seamlessly with other financial systems. There’s no need to query individual transactions, because the system will block disallowable expenses or payments that go over a pre-established limit. Transactions are also automatically imported into your accounting software, so there’s no need for your finance team to input them one by one.

4. Increase real-time visibility

Aside from being a huge time-saver, automating the expense management process also has another critical benefit: it gives you more control over where your money is going. Improving spending controls could save UK businesses £69 billion a year. But when you depend on spreadsheets, card statements, and paper receipts, making changes is easier said than done. By the time your finance team gets a chance to review how different departments are using their budgets, the money will have already been spent and it’s too late to correct course.

In comparison, because automation tools record transactions in real time, they enable you to be proactive. If the sales team racks up a four-figure restaurant bill, you can step in and have a word with them straight away, before they do it again. Similarly, you can quickly identify areas where money is being wasted — duplicate subscriptions, for instance — and take steps to fix the issue.

More to the point, with greater visibility, you can be more flexible and responsive to change. For example, if the marketing team has used almost all of their budget but human resources are yet to make a dent in theirs, you can reallocate the money instead of having to pause an important campaign or approve extra budget.

5. Stop out-of-pocket expense payments

A clear, well-understood expense policy, a simpler process, and automation can make expense reimbursement much more efficient. But, do you know what’s even easier? Not having to reimburse employees in the first place.

There are two main ways you can manage expenses without staff having to pay out of their own pockets. One alternative is to issue every team with a corporate credit card. Staff members can use the card whenever they need to pay for something — making travel arrangements, paying for a software subscription, or buying office supplies, for instance.

But while this approach means there’s no need to claim expenses, credit cards have their own set of challenges. In particular:

  • Unlike bank accounts, credit card accounts rarely integrate with accounting software, which means data entry and reconciliation will still have to take place manually
  • Because several people share the same card, it’s harder to attribute specific transactions to individuals, so there’s less accountability. There’s also a greater risk of the card being misused. And the credit card provider may not be willing to cancel fraudulent transactions, as it’s more difficult to prove you didn’t authorise them when the card is regularly passed around the office
  • While there’s no need to compile expense reports, staff still have to save and submit receipts
  • Corporate credit cards can get inadvertently maxed out. This becomes easier as you grow and more people share the same card

A better alternative is to issue staff members with prepaid cards linked to a central online dashboard.

Each employee gets their own card, pre-loaded with a set amount of money, so they can’t overspend. You can also set limits for specific spending categories or disallow them altogether. When a staff member buys something for work, they can snap a photo of the receipt, upload it, and link it to the transaction. You can also link the dashboard to your accounting software so transactions are imported and categorised automatically.

There’s no need to reimburse, collect paperwork, or manually input and reconcile transactions. Better still, you can see exactly how much every team member is spending and on what in real time.

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Take the pain out of expense management

Nobody benefits when expense management is clunky and admin-heavy.

It’s frustrating for staff. It’s a time-suck for your finance team. And, worst of all, it usually leads to overspending and a lack of visibility that can cause cash flow issues and hamper your growth.

As our CFO Dynshaw Italia observed during an episode of The CFO Playbook: ‘You have to change to survive. You have to change to grow. You’ve got to change to be successful.‘ By streamlining the expense management process, making it more user-friendly, and increasing visibility, you’ll be able to make better use of your resources and access data that will help you adapt more quickly to changing circumstances.

Soldo lets you set spending rules and limits, automatically records expense transactions, and gives you full visibility into how your teams are spending their budgets.

Book a FREE demo to find out how we can help you take the pain out of expense management

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