Out-of-pocket expenses should never be a headache for entrepreneurs. Here, Boris Bogaert, CEO of digital expense management firm Xpenditure, guides readers through introducing a staff expense policy that is clear and works for all.
You’ve got your business idea, secured some funding, and hired some great people. You’re wrapped up in the excitement of growing quickly and scaling up. But as your team begins to expand and you have to start meeting more and more investors and customers for business development purposes, what’s the absolute last thing you want to be dealing with? Expenses.
It’s not long before the expenses start rolling in. Expenses are a tricky legal and moral minefield to negotiate – and tough to strike the balance. They can easily become a source of friction between employees and founders of high-growth businesses.
It’s all very well to want to come across as a chilled boss who lets staff run rampant with the company card every Friday night, but this isn’t a sustainable way of management. On the other hand, deny your employees opportunities to use company funds and they’ll begin to resent you.
Defining and implementing an expense policy that works for everyone all the time is hard. If you haven’t prepared an effective expense management process, as a founder you’ll soon find yourself having to start forking out the cash from your own pocket.
So, first thing’s first: let’s start with the basics.
What exactly is a business expense? This is something you need to codify – write it down on paper as soon as possible in order to be able to communicate it effectively to your employees.
Essentially, an expense can be anything that benefits your business in terms of profits. This ranges from taking a trip to meet a client at their office, to the costs of buying printer paper. These kind of expenses are tax-deductible.
Remember to look carefully at which expenses are tax-deductible – commuting to and from work isn’t tax deductible, but travelling out of office for business purposes is.
Expenses can be necessary for the company if they provide a business benefit. It’s crucial that you make employees aware of exactly what they are allowed to expense.
Encourage them to expense vital things – but ensure they understand when they should look to save on expenses and when it’s appropriate to spend more. You’ve got to be reasonable with your expectations so your employees know that you trust them.
The danger is that once your employees know they can start expensing, they start getting too confident. Some 85 per cent of workers in the UK admit to submitting an expense claim that stretches the truth at least once a year, and five per cent over-claim every time.
A clear staff expense policy, therefore, is a key tool in improving your employee’s expenses behaviour. A policy that’s out-of-date makes it easier for employees to submit exaggerated or outright fraudulent expenses claims. Keep your expense policy up-to-date, ensure that limits are reasonable, and make sure there’s absolutely zero confusion.
There’s something we haven’t spoken about yet – something that has singlehandedly changed the way we manage expenses for ever. That’s right – technology.
Tech has totally transformed the way employees spend money – contactless, online taxi payments, apps and data – and it’s easier than ever for employees to fritter away company money.
An expense policy has to keep up-to-date to match this march of the robots. By 2025, 75 per cent of the workforce will be millennials who have grown up with technology. Implementing expense management technology means that it’s much easier to keep up with advances in digital payments and attract and maintain digital natives.
For a scaling business, time is like gold dust. But employees are still spending time on monotonous processes such as expense reports, wasting valuable time that could be spent on doing what they’re actually paid for.
When 79 per cent of office workers say they want reliable and modern technology that improves their productivity and engagement, it’s a no brainer that we should be embracing tech that saves time and money.
Entering one expense into a report via Excel, for example takes twenty minutes – fifteen minutes longer than a swift update via expense management technology, according to GBTA research. Those fifteen minutes end up adding up.
By keeping expenses on the cloud and making the best use of expense management software like Xpenditure, you can save swathes of time and allow your employees to focus on productive tasks.
So remember – you’ve got your business up and running, but don’t run before you can walk – make sure you define and implement a staff expense policy that works for everyone before it’s too late.
Boris Bogaert is CEO of Xpenditure, a paperless expense management company
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