Policies to track employee reimbursements should not be overlooked when it comes to bookkeeping practices. A clear policy that sets out a reimbursement process in dealing with employee expenses and receipts ensures there are no misunderstandings about claims and staff expenses. This article sets out helpful guidelines to give you the necessary focus points to put your policy in place.
Setting an expenses policy and procedure not only provides guidelines for your employees, but also is of particular importance for accounting and compliance. You are required to keep a record of employee expenses to prove they are genuine so make sure you are doing it correctly.
1. Create an Employee Reimbursement Policy
- Your employees will know what the rules and restrictions are so they can comply and be reimbursed quickly;
- Your bookkeeping team will know which claims to accept or reject;
- Senior management can be better advised to control costs, keep a track of expenses and manage the company budget; and
- Your business can demonstrate you are keeping in line with the law and regulations.
Your policy and guidelines should be short and concise; your employees shouldn’t have to read a fifty- page document before they jump in a taxi. Make the policy simple, clear and appropriate. If you keep it straightforward, firm and fair, then your employees are more likely to comply with it.
2. Draft the Terms of the Reimbursement Policy
What your expense policy contains should be clearly explained and aligned with the employee’s job role in the business. The initial step should be to identify the expenditure that the staff member needs to complete their job role effectively. Often the business will include extra privileges which staff may expense, and this is at the employer’s discretion.
On the other hand, to manage company budget, businesses may choose to cap certain expenses, such as meals while travelling can be on a daily capped budget. Using capped budgets can give your employees a guideline of what is acceptable. If you don’t set these policies and guidelines out, then you can’t reprimand your employees for not sticking to the guidelines.
3. Record Expenses
Make sure you collect the right amount of information from the employee and make sure it is relevant. By capturing the appropriate information (such as collecting receipts), you can avoid unnecessary delays in admin and also avoid problems with compliance later on. There is a fine line between capturing not enough information to be useful and spending unnecessary time in collecting information that won’t be used. Make sure you know what information you need to collect before you start collecting it as it will make your job a while lot easier, you do not want to have to go back over all the receipts later on to get the information you missed.
Make it easy to submit expenses online and remotely. As businesses become mobile and, workforces become global it is important that your submission process adapts to this change. At LegalVision we utilise the Xero platform that allows employees to submit and approve expenses on the go. Ensuring you are utilising technology not only helps with mobile workforces it also improves accuracy and provides data for analysis; a vital business tool.
4. Approve Expenses
Ensure expenses are submitted and approved on time. It is a good idea to set in place deadlines so your staff know when they can expect expenses to be reimbursed. Setting these deadlines will also help you with your business cash flow.
Enforce accountability for approving the expenses. Make managers accountable and ensure they have the confidence to push back on non-compliant submissions. This should be a vital aim for your expenses policy if an employee is allowed to expenses their taxi home from the staff party so should another employee. Having these parameters in place, and ensuring you stick to them, will ensure you avoid any potential employee bias and conflicts. It is best practice to make managers approve expenses, especially as the business grows this can be a vital aspect of your expense policy.
It is important not to forget GST. If you are a business that is registered for GST with the ATO then you might be entitled to GST credits for payments, you make to your employees for their expenses. To be able to claim these credits you will need to have the relevant documents, and you must ensure that the documents comply with the legislative requirements. This is, even more, reason why you should put your expenses policy in place.
5. Track Employee Reimbursements and Review the Policy
Make sure you regularly review and update your expense policy and the procedures of how to submit expenses. This is key to any policy; you should review your policy regularly, and feedback from employees can greatly assist with this aspect. Make sure you are up to date with new technology and processes that may assist both your employees and your business to better the process.
If you have any questions about drafting a reimbursement policy or an Employee Handbook, get in touch with legalVision. Contact us through the form on this page or give us a call on 1300 544 755.