How to build a better business expenses policy and combat dodgy claims
From extra milesto a new bathroomAs you might expect, the most common inflated or unauthorised expenses employees admitted to was claiming for more miles than driven (27 percent). Other common creative? spending habits included keeping office supplies they bought for work (20 percent), buying an extra round of drinks for co-workers at the pub and claiming the money back (20%), and inflating taxI receipts to make the fare claimed higher (16 percent). Less common (but notable!) expenses included using the company card to buy dog food, slimming pills, cod liver oil tablets, cat litter, cigarettes and condoms. A visit to a massage parlour and even an inflatable sheep were some of the other items that cropped up. One daring employee even went so far as to buy an entire new bathroom, and another admitted to expensing a holiday.
Why do employees submit false expenses?The big question for employers is why employees are claiming false expenses in the first place. A significant 38 percent admit to claiming expenses when they know they shouldnt be, while 60 percent said they don’t feel any remorse for their actions. It might seem like employees submit false claims for no good reason, and a minority do but if you look beneath the surface, it’s clear these habits are indicative of wider issues within businesses. There are a number of reasons why employees make these claims, but one stands out above the rest: 57% claim they are left out of pocket by their employer after spending their own cash on work related items. This is something that should never happen. __________________________________________________________________________________
Keeping HMRC happy when claiming expenses such as holidays and golf lessons Nobody wants to pay more tax than they need to, but company directors and sole traders often do, missing out on some significant opportunities when it comes to claiming expenses. __________________________________________________________________________________ However, nearly a quarter said they make these claims because they feel like they are working too much overtime and that their employer owes? them. A further 10 percent said they do it all the time, which may be down to the general belief that everyone else is doing it, while eight percent said they put through inflated claims when they’re having a tough time at work. Importantly for small business owners, many employees feel that they are unlikely to be caught suggesting a lack of transparency and control. Indeed, fewer than one in five have been caught for claiming expenses they shouldnt be.
Recognising spending habitsAccording to Dr Lynda Shaw, a cognitive neuroscientist who specialises in business psychology, employers should be aware of different spending personas and set guidelines to help give employees a degree of autonomy, while keeping their habits in check. These personas include: Reckless Ralph: Characterised by a more impulsive personality, he’s the one who will buy a round of drinks for office morale. One to keep an eye on. Devious Dan: He will always be trying his luck by adding on various small extras over time rather than doing anything too obvious. He’s the one who always seems to spend a bit more than the other employees. And, on the other side of the coin: Sensible Samantha: She would never risk her job or even getting in trouble over claiming too much. Cautious Chris: He’s too scared to use the company card for fear of losing it or spending on something he shouldnt. Forgetful Fiona: She lacks organisation and has a hard time knowing when to use her company card or not. Do you recognise any of these personas in your business? If you do, it may be a sign that big changes are needed. The key takeaway here is that not all employees feel confident in spending company money correctly and it’s up to employers to establish simple and transparent procedures to follow.
So, how can you combat dodgy expenses?Before you start getting too suspicious of your employees, remember that suspicion is not healthy in the workplace. Trust issues between employers and employees can become a serious problem. Also, remember that many of your employees may not be claiming expenses for small items that they purchase for work. All too often, keeping hold of receipts and entering details into an Excel sheet is too much of a hassle, so it may be that they are actually owed money. There are a number of steps that you can take to limit the impact of inflated or unauthorised claims by employees, without creating conflict. These include:
- Implement a clear and structured expense policy for employees to follow. That way, there are no grey areas about what they can and can’t spend company money on.
- Make spend reporting transparent and accessible, so that everyone is made to feel accountable for their purchases.
- Make sure every employee who needs one is issued with a company payment card, rather than sharing one company credit card around the office. This will cut down on the chances that someone will need to pay for small things out of their own pockets.
- Use prepaid cards instead of credit cards to get more control over spending. According to the research, 40 per cent of employees would be more responsible with their spending if they had tighter controls or a monthly limit.
- Automate the spend reporting process to make keeping track of expenses and reimbursing employees more consistent and efficient – and don’t rely on staff to record expenses themselves.