Best Practices for Expense Reporting

Expense reports hold the key to silky-smooth financial operations, drama-free business trips and compliance. Many companies put expense reports on the back burner, but with professional financial outsourcing, you can get them done without even lifting a finger. 

What Is an Expense Report?

An expense report is a document comprising an itemized list of expenses made on a company's behalf. It informs the employer of how much money a particular employee or team spent and what they purchased. It also shows how much of the expenditure qualifies for reimbursement. 

Employees or relevant team leaders submit the expense report for legitimacy and accuracy checks. The company can then approve or reject the spending. If approved, the financial team can record it as a tax-deductible business expense. The receipts from expense reports must be kept for external storage. 

You'll typically find these elements in an expense report:

• The client or team the expense was purchased for 
• Descriptions detailing what was included in every expense
• The account to which the expense will be charged 
• Each expense with a title, date and amount
• Details of the person submitting the report

Why Do Companies Need Expense Reports?

Expense reports are a necessity for most businesses. They are beneficial for streamlining processes and offer a range of other benefits:

• Simplifies the process of identifying unnecessary transactions
• Minimizes the risk of fraudulent overspending 
• Enhances operational efficiency 
• Reduces financial errors
• Maintains the company's finances 
• Manages corporate expenses
• Ensures the company is compliant with regulatory requirements 

Expense Report Best Practices

Expense reports are a pivotal financial monitoring and reporting tool. They authenticate scrupulous expenses and help track employee spending. Here are the best practices to ensure they're accurate and effective:

Create a Clear Expense Management Policy

Provide employees with a clearly defined way to create their expense reports. This ensures that they cover all the vital information in a structured manner. 

Conduct regular checks on your expense management policy to ensure it's effective. It should include the following stipulations:

• Date or time details 
• Mileage rates for travel and expenses/entertainment (T&E) 
• Limits for expense claims 
• Other purpose-specific criteria

Establish Accountability Among Employees

Educate management and supervisors on your expense management policies. Find a way to hold employees accountable to ensure effective expense reporting. 

Provide them with a way of tracking their teams' expense behaviors. You can outsource your financial and budgeting services to get expert help in constructing budget plans based on performance. Here are some simple tips for establishing accountability:

• Highlight the benefits of sticking to the expense management policies.
• Reward compliance and excellent performance.
• Explain the consequences of deferring from the policies.
• Be open to constructive feedback and create a platform for it.
• Offer training and support on working within the allocated expenses.

Process Reimbursement on Schedule 

Creating an effective employee reimbursement system shows employees that you respect their finances. It also helps manage cash flow and prevents future abuse of expense funds. 

You can outsource reimbursements to an accounts payable team to maintain compliance and ensure they're paid on time. Paying reimbursements on schedule is crucial for ensuring your company's tax compliance.

Remove any multilayer approval processes, like administrative bottlenecks that may prevent timely reimbursement. Stick to a fixed timetable to give employees peace of mind and streamline the approval process. 

Keep the Policy Short and Simple

If your expense report policy is too complicated, it could frustrate employees, delay reports and waste labor hours. The main time-consuming factor is filling out the details about each expense. A recent survey of frequent business travelers found that more than 50% stated that the time it took them to complete the reports was the biggest burden in the entire process. 

Let employees know they don't need to provide comprehensive expense details. They should share relevant details only. Use expense report tools to ensure they only share pertinent information. You can also set up a system to notify employees of each cash flow so they don't have to share excess details. 

Concise expense reports can help you file faster and reimburse employees on time. Go digital for a more accessible and less overwhelming way to do expense reports. Employees could use their smartphones to load the receipts and use them toward their reports for a greener, more efficient process.