Business owners have a lot to oversee. They typically have so many tasks on their to-do list, that neglecting a few of them is simply a fact of life. Frequently, the oversight of expense reports is one of the first tasks to fall by the wayside, which can cost small business owners much more money and time than they realize.
If you don’t have concrete policies in place and you aren’t keeping close watch of your employees’ expense reports, chances are, you’re losing money. Not only does the lack of oversight allow for innocent but costly mistakes in expense reporting, it can embolden dishonest employees who are tempted to lie about expenses for their own gain.
“A recent survey conducted by my firm, Certify, found that at least 20 percent of expenses are in violation of corporate policy,” states Bob Neveu for .
This can take many forms, such as employees claiming that personal expenses are work related. It can also be seen as employees lumping expenses together so that it is hard to detect what parts of a business trip are actually allowable expenses.
“While it’s easy to believe a few dollars here and there won’t hurt, expense fraud adds up over time and is difficult to detect,” states Chris Farrell, contributor to Entrepreneur.com.
Whether the mistakes are intentional or not, a clear policy is necessary. If you don’t currently have one in place, you can remedy that by taking the following steps:
1. Many experts recommend that business owners require expenses to be submitted within 30-60 days. Make a concrete determination for your business and ensure that all employees understand.
2. It is also beneficial to require receipts for purchases over a certain price. For most businesses, $25 is a good cut-off point.
3. Require that employees itemize categories of expenses instead of grouping them together. For example, instead of lumping everything together as “hotel expenses,” employees should instead disclose how much the room cost, meals at the hotel and any entertainment costs during the stay.
4. Lead by example by ensuring that management takes place in the oversight process and adheres to the same policies that are required of other employees. Not only does this encourage lower level employees to be honest and careful about expense reporting, it can also discourage fraud among management, which can be especially common.
“A recent survey conducted by the Association of Certified Fraud Examiners revealed that employees comprising the ‘Executive/Upper Management’ level in a company account for nearly 27 percent of expense reimbursement fraud cases,” states Farrell. “The resulting disciplinary measures and dismissals of key employees can be a tremendous distraction -- just ask Hewlett Packard and Walmart.”
5. Make expense reporting easier for employees to complete correctly and easier for you to check by automating the process. This change can make a difference for small businesses.
“What’s funny is that many small companies today are highly automated in areas such as accounting, HR and sales,” states Neveu. “In the world of business travel-expense management, however, small companies are still in the dark ages. Our survey showed that 47 percent of small businesses use spreadsheets for expense management, while only 25 percent use web-based systems.”
In addition to being easier, automated systems can also help identify expense policy violations before they are even submitted. This will help employees learn the rules and save management time.
When you don’t set clear guidelines for expense reports and oversee that those guidelines are adhered to, you’re essentially throwing money away. Fortunately, it is easy to rectify that situation, so start setting up your new system today.