Expense reimbursements are always considered a challenge due to the importance attached. Reimbursing employees requires accounting teams to sift through piles of receipts, audit them and approve the expense reports.
If the volume of reimbursements are high, the process is prone to becoming inefficient. Another problem will be delays in payments, this is can result in employee being displeased. In this post, we shall learn the importance of expense management in the month close process.
Why expense reimbursements matter?
According to Association of Certified Fraud Examiners (ACFE), 15% of business fraud stems from reimbursements with a median annual loss of $26,000. Organizations cannot allow reimbursements to go overlooked–otherwise, they risk losing thousands of dollars to expense fraud.
If you’re looking for an easier way to manage this process while still maintaining the integrity of your data and expense management operations, here are some concrete methods for simplifying reimbursements for your team.
Identify Reimbursable Expenses?
An organization must lay down a clear policy identifying expenses which can and cannot be reimbursed. By setting clear boundaries around what is and isn’t considered a reimbursable expense, you’re much less likely to have employees submitting irrelevant reimbursement requests. Here are some common reimbursable expense categories:
- Travel and accommodation
- Meals and entertainment
- Communication and office supplies
- Medical reimbursements
Implement an effective reimbursement policy:
A policy needs to be comprehensive. Since, expense are incurred by employees across departments, a policy must be evolved after due consultations with all departments. An ideal policy must contain:
- Expenses which can be reimbursed
- Spending limits based on job roles
- When & how to submit claims
- Process for approving the claims
It is important to note that recording all the expenses incurred is vital on time as they are tax deductible. Needless, to say they have to be submitted within timelines.
Employees in the organization must have easy access to the policy. Such policies must be drafted in simple languages and must be easy to read.
How to facilitate payments?
The end result of a reimbursement process is the payout to the employees. Direct deposits to the employee’s bank account of approved reimbursements are very efficient.
Another way to handle payments would be use expense cards. These cards can be issued to frequent spenders. These cards which are preloaded can be used to track expenses.
One must take care to ensure that reimbursements must not be part of the salary slips. This will save taxes for the employees.
How to implement an expense reimbursement process?
An expense process must ensure:
- Expense policy is adhered
- Easy submission of claims
- Automate pre & post travel approvals
- Flag policy violations
- Pass the audit test
- Reduce risk of frauds
- Processing of large claims
These can be achieved by using an expense management tool. A tool like, Zoho Expense, can automate the claim submissions using workflows regardless of the volume.
Automating Expense Reimbursements:
With digitization, you can re-engineer the way expense reimbursement is handled in your firm and better manage your finances.
Firstly, it provides employees the ability to capture and record an expense as and when it’s incurred via a mobile app. Your employees no longer have to save receipts and wait until the business trip is completed to enter their expenses manually. Thanks to the defined workflows, each expense report is automatically forwarded to the approver, validated, and processed within minutes.
As for the finance team, any expense report submitted to them would have already been thoroughly audited by the software to fish out policy violations, notifying employees of any flags immediately. Also, the software provides your finance team with digital copies of relevant documents as well as notifications on approvals and deadlines to ensure they don’t miss out any report.
Impact on accounting:
Despite being a routine accounting task, expense reimbursement has a massive impact on your P&L. Finance controllers must ensure that all the expense claims are submitted on time, provisions are made for payments. Not just that, accounting teams must ensure that employees are paid on time.
An effective expense management tool must minimize errors, cut overspending or overpayment at its source, and provide insights into discretionary spending to improve your firm’s productivity, cash flow, and overall financial health.
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