Expense reports are an integral part of your business. Whether you need to reimburse employees or claim deductions on your returns, an expense report is vital for many tasks.
Traditionally, organizations used paper spreadsheets to record their expenses. While some have moved to digital solutions, most businesses still rely on a paper-and-pen process.
We decided to lend a helping hand and provide a few tips to streamline your process and improve efficiency. You will be able to save time and effort and get control over all your expenses.
Here are the 5 expense report best practices to begin your optimization journey.
1. Follow The Basics For Expense Reports
Generating expense reports is not a very difficult task. You can get the job done without issues if you just stick to the basics. No matter which expense report template you follow, be sure to answer the following:
Who is being paid?
Your expense report should record who you are paying.
What is being paid for?
A Description column will help you record detailed information about the payment.
When is the payment made?
You should always enter the payment date under the Date column.
How much is paid?
A column to show the amount of money paid is essential. You can also have a Total column to add up your expenses.
How is the payment being made?
Mention whether you are using a credit card, wire transfer, cash, or other modes of payment.
The above format will help you create a simple expense report. You can always add more columns to accommodate more information. For example, a travel expense report can have a column for the location of accommodations used by your employees.
You will find several expense report templates online with a simple Google search. They are easily customizable and great for recording your expenses.
2. Simplify Expense Information Collection
Businesses generally reimburse employees based on receipts and information submitted by them. You will have countless documents making their way to your accounting department to be recorded in your expense reports.
This outdated practice of expense information collection hinders the process of quick bookkeeping. You cannot update your books unless your employees return from their trips or come back to the office.
Additionally, handing so many documents makes the process cumbersome and inefficient.
Simplifying your receipt collection can help you streamline your expense reporting process. Your employees can now click on images from their mobiles and directly send them to your bookkeeping department.
The IRS also entertains electronic receipts, so you have nothing to worry about.
Many businesses now use expense management solutions that come with a mobile app. Employees can easily scan documents and upload them instantly on your system. These digital solutions can even capture data from scanned images, including payment details like amount, payee, date, and more.
As a result, your books can show real-time figures for you to have full visibility into your expenses. Additionally, you can automate data entry and save time, effort, and money.
If you don’t want to shift to a digital solution, even enabling e-receipts simplify expense management.
3. Conduct Regular Audits
Expenses are internal matters of a business and made by its human resources. So, most of us would not think of conducting audits of our expense reports.
However, that may be the wrong path to walk!
According to the Association of Certified Fraud Examiners’, 13% of large businesses reported reimbursing fraudulent expenses. When it comes to organizations with fewer than 100 employees, the fraudulent claims rate goes up to 20%.
Naturally, reviewing your expense reports regularly is the key to identify fraudulent claims. Some common types of fraudulent expenses may be:
- Claiming more than the actual amount
- Expenses not categorized properly
- Made up expenses
- Claiming the same expense more than once
Not all of your employees may be honest. Therefore, regular audits will help you track down discrepancies and reimbursements you shouldn’t have made.
Additionally, reviewing your reports can help you identify areas of improvement. You may find services or expenses you are paying for that are not providing enough value. As a result, you can cut out unnecessary expenses and optimize your business spending.
Audits will ultimately help you stay within your budget.
4. Create a Standard Process
Lack of standardization can increase the complexity of your expense reporting process. Additionally, you may end up paying for expenses that are unnecessary or fraudulent.
Let all your employees know the rules in your expense policy. You should lay out everything clearly and make your policy as comprehensive as possible.
Let’s say you are dealing with travel expenses. So, your expense policy should clearly describe what is accepted and what’s not. Your policy can contain details like:
- What type of accommodation is entertained (3-star, 5-star, or budget)
- How your employees should book flights and hotels (booking platforms like Expedia or Tripadvisor)
- Allowed mode of transports (flight, bus, rail, cabs)
- Guidelines on types of receipts accepted
- How much food allowance your employees can claim
You can cook up a list of essentials to mention in your expense policy by sparing a few moments of thought. Gathering feedback from your employees who use the services is also helpful.
Standardizing your expense reporting process will allow you to eliminate inaccurate claims. You will be able to optimize your approval process as your claims are more legit and detailed.
Make sure you communicate your expense policy to all your employees who will be making claims.
5. Go For Automation
Automation is emerging as the top factor for businesses to save cost, time, and effort. Over 45% of activities paid for by wages have the potential for automation using existing technologies. The same applies to your expense reporting, which has adequate room for automation.
Many businesses today use expense management software to track and reimburse expenses. You don’t need a person to collect receipts and enter information in your books. The software will collect receipts uploaded by your employees and record all required data automatically.
Additionally, you won’t need to create manual expense reports. A single click will let you access all information about your expenses, updated in real-time. If you want reports, you can, again, click and generate customized reports to match your business needs.
A single expense management solution will let you create a range of expense reports. You can tailor your tool to your industry and never create any spreadsheet again.
The process will eliminate the need for manual data entry and save precious hours and wages. You may even automate approvals and spend less time going over each reimbursement.
An automated system will also improve accountability and transparency. Additionally, you will get a range of data to identify gaps and areas of improvement.
You will also be able to conduct audits of your reports efficiently.
Follow our best practices to optimize your manual expense reporting. Be sure to cover all details in your reports so that you have no doubts about your reimbursements. Along with that, conduct regular audits to stay on top of your expenses.
You can adopt expense management software to streamline your process, improve efficiency, and save your costs. Additionally, you will get complete visibility into your expenses with real-time updates.