5 Ways to Make Expense Claims Easier for Business Owners
Updated: Apr 17
Is your process for managing employee expenses fit-for-purpose? Ideally, it should allow you to accurately record everything that’s claimable, while not leaving your staff unintentionally exposed to benefit-in-kind tax liability. And of course, if you can keep track of everything without drowning in spreadsheets, it should leave you with more time to focus on your core business.
Fortunately for anyone involved in small business accounting, there are plenty of tech tools out there that can help you streamline expense recording and reimbursement. With this in mind, here are our tips for combining technology and the right processes for pain-free expenses management.
1. Have a clear process in place
A quick recap on the general rule for expenses:
If the expense is incurred on something that your employee needs to do their job (and subject to any qualifying rules), it’s classed as a business expense. This means that no tax and NI is payable on it.
Private expenses are basically any expenses that do not count as business expenses. As an example, travel costs for visiting a prospect’s office to deliver a sales pitch would likely qualify as a business expense, whereas travel costs incurred in getting to and from your regular place of business is a private expense. If you cover the costs of an employee’s private expenses, you need to add the amount paid to the employee’s other earnings and deduct tax & NI through payroll.
For hassle-free small business accounting, you need to be able to show HMRC (should they enquire) that the expenses incurred are genuine – and that you are accounting for them correctly. For this, bear in mind the following:
Make sure employees are clear on what they can claim for. For the likes of train tickets and tech purchases, your policy should seek to prevent staff attempting to claim for items that are likely to be construed as personal expenses.
Make the claims process simple. For instance, if staff are required to fill in multiple versions of the same form, or if they have to wait for sign-off from lots of people in the firm, they may be more tempted to take short-cuts or inflate their claims.
Stay consistent. If all your sales staff carry out sales visits but only half of them submit mileage claims, it is more likely to raise questions regarding the veracity of those claims. The rules for some expenses explicitly require you to be consistent across the board: for instance, if you provide free or subsidised meals for staff, these must be available to the staff generally in order for the tax-exemption to apply.
2. Make use of scale rate payments
These apply to certain common business expenses, such as subsistence for employees working away and travel costs.
If you have to process each and every meal receipt for staff, it can easily turn into a major administrative chore. The scale rate approach involves setting a rate based on HMRC’s benchmarks or else agreeing on bespoke rates with HMRC based on typical costs incurred by your employees. Using these set rates, you then provide set amounts of cash to employees to cover the relevant expenses.
The beauty of this is that it removes the need to check and log individual receipts. Instead, all you need to do is follow HMRC’s guidance on sample checking to show that the scale payments you are using are broadly in line with the amounts that employees are actually spending.
3. Simplify the expense purchasing and logging process
As a smart version of the traditional company credit card, Pleo provides a useful illustration of what’s possible here.
With it, you provide employees with a real or virtual MasterCard. You can integrate it with your accounting software, load up the card with ease and set custom rights and limits for each employee. Receipts are automatically categorised and linked back to your accounting system as soon as purchases occur, and you can keep an eye on spending right across the company via a real-time dashboard. This also eliminates the need for employees to fill in expenses forms.
4. Use GPS for mileage tracking
Mileage is one of those areas where the distinction between business and personal can easily become blurred. It’s tedious for employees having to log each trip, while a tendency to ‘guesstimate’ can sometimes rouse HMRC suspicions on the accuracy of claims.
Available as both a mobile app and an in-car tracker, Autotrip uses GPS tracking to automatically capture employees’ trips. You can classify a trip as business or personal with a single swipe, or else define your work hours to classify trips automatically. Mileage reports can be submitted by the employee to payroll automatically and you can review actual trips taken on a map. Designed for a UK audience, you can apply the latest HMRC mileage rates, or else your company’s own custom rates.
This promises accurate and HMRC-compliant mileage recording without the need for logbooks or Excel: potentially good news for drivers and finance departments alike.
5. Cut out data entry
The likes of QuickBooks and similar finance apps have undoubtedly made it much easier for bookkeeping services providers and small business accountants to manage expenses. But of course, you still have to log the expense in the first place for it to be included on the system. Faced with lots of expense claims from a growing workforce, the sheer data entry aspect of expense claim management can be a major headache.
It wasn’t so long ago that document capture and character recognition software was the preserve of big financial institutions. These days, it’s much more accessible, with small business accountants and bookkeepers taking full advantage.
Promising no paper, no chasing and no data entry, ReceiptBank is a prime example. The solution reads and extracts key data fields on receipts and invoices, allowing you to publish the expense item to the relevant ledger with just one click.
Free up your finance team
The solutions we’ve highlighted are part of a new breed of tech tools designed to streamline the expense claim management process and reduce the need for manual entry.
But even with new tech at your fingertips, keeping your employees reimbursed while staying on the right side of the rules is no easy feat. Are you looking for ways to free up your finance team to focus on your core business? Discover how MJH Accountancy Bookkeeping and Payroll Services can lessen the load.