Reimbursement of employee expenses—for travel, meals, and accommodation—is an area of business life that, in theory, should be simple. So how is it that something so seemingly straightforward has become such a painful, troublesome, and risk-filled area of company finances? Why do our finance teams continue to struggle to keep proper control of these costs?
It’s estimated that U.S. companies are losing around $2.8 billion each year to employee expense-related losses. The average amount that an employee who falsifies and exaggerates their expense reports gets away with is $2,448 per year.
And it’s not just fraud that’s a problem. It’s also the time and company resources required to track, manage, and monitor these expenses. Just consider the effort required as finance professionals manually process expense reports while at the same time safely handling the intricacies of Internal Revenue Service (IRS) tax rules.
The truth is that effective management of expense reports has been a far from simple task. This is due to a combination of ineffective management systems and the complexities of legislation, making it a notoriously tricky area to get a grip on.
Finding better ways to overcome these challenges inspired the formation of webexpenses. The company was set up by a pioneering team of finance professionals in the UK who had become frustrated with the limitations of traditional paper-based ways of managing expenses.
Combining accountancy expertise with a team of software engineers, they created a smarter way to control employee expenses. Constantly iterated and improved, the software is now used by companies across the globe—from small startups to major international corporations.
Whatever the shape or size of an organization, the key requirements for effective expense management are the same. Today, use of digital processes can virtually eliminate the need for paperwork, removing a reliance on cumbersome and error-prone manual tasks.
The key to success is having the knowledge and tools required to create a robust and equitable expense policy, one that can be easily managed and maintained. The first step for any business using traditional methods to manage reimbursements is to switch to a digital setup.
The move to automated and real-time ways of working fundamentally transforms the way that reimbursements can be managed. It allows any company to manage a tax-efficient accountable plan with each and every employee expense being tracked.
One powerful tool is to provide employees with a smartphone app they can use to instantly convert any paper receipt or bill they receive into digital form. By making the claims process so quick and simple, the need for finance teams to deal with a monthly flood of paperwork is removed.
Another major advantage of digital is the way that it allows regulatory compliance to become an active part of employee workflow. On-screen notifications and checks allow a company expense policy to be delivered to employees at the point-of-entry.
These notifications can be customized to provide checks and guidance relating to the costs being claimed. This real-time way of working gives finance professionals the tools they need to adopt a much more proactive form of management.
The systems provide a warning whenever a claim falls outside of company policy or exceeds any kind of custom spending limit that has been set. This allows issues over the validity of any claim to be resolved before costs are incurred.
This capability provides a powerful tool to protect a company against losses from expense-related errors and fraud. It means finance teams are no longer having to try and manually root out problems from a mass of paper claims.
A real-time expense system is particularly effective when it comes to navigating the complexities of IRS tax rules. The system automatically generates all the information that’s required for a tax-efficient accountable plan.
Reports that would take days to compile with a paper-based system can be created in a matter of minutes, with all information being handled digitally. In addition, a business is then able to prove to the tax authority that proper checks and balances have been carried out.
It’s when this kind of accurate information isn’t available that the IRS is liable to become suspicious, with an increased likelihood of an inspection or audit being triggered. So, while handling tax can seem daunting, it’s something that companies are now able to safely manage.
There are plenty of online resources available to help untangle the complexities of the tax system and ensure that your company meets the requirements of an accountable plan. When this basic knowledge is combined with an effective digital system, businesses have the power to properly control employee reimbursements.