Managing employee expenses

What you need to know

So your business is growing, that’s great! Adding even a few new employees to your business can be a huge step to maximise your top-line revenue. But it often comes at a cost – and we don’t just mean salary and super.

Day-to-day business expenses can make a serious dent in your budget if not managed correctly. There’s phones, stationery, technology, hotel/travel costs, client meetings, events, even Christmas parties – when you start to really take stock of all the little things you incur in a typical day of business, you might find they add up to something far larger.

So it’s always best to make sure your employees understand what can be and can’t be expensed in advance. You might not need to give them a play-by-play of what is included, but providing a realistic ballpark figure set by you (or by the ATO for travel expenses or per kilometre usage) not only caps your business’ potential expenses, but also puts the employee at ease knowing that you understand there will be times when they will incur costs.

That having been said, it’s best not to lowball that forecasted figure, it costs money to do business and you don’t want your people feeling resentful of their boss who wants them to drive six hours back from a business trip at 7 pm instead of forking out for a hotel. 

So what are your options for tracking expenses?

Grilling an employee about expenses can be uncomfortable for all parties. Ideally, you don’t want to have those conversations unless you are certain someone is abusing the system, lest your good employees start to feel like you don’t trust them.

To that end, anything you can do to minimise the time between when a purchase is made and when the expense is logged is likely to be reasonably effective. The last thing you want is to have someone submitting their receipts months after the transaction was made when they might not remember what was and was not work-related. There are a number of options to create little to no time-lapse between the time of purchase and the time that purchase is logged.

Arguably the easiest way to track employee expenses is by providing a company credit card. Ensuring purchases are never made with your employee’s personal funds eliminates the need for reimbursement and gives you the freedom to examine purchases made without having to have uncomfortable conversations with your employees unless absolutely necessary. This option also helps keep the idea that they are at work in the back of your employees’ minds and leaves little room for deception with regards to what they purchase.

If a credit card doesn’t suit your business, you might want to try a tech-forward solution. There are a number of apps available that will allow your employees to photograph their receipts and instantly log them for your perusal. Think of every time you’ve gone looking for a receipt you swear you put in your pocket. By photographing and uploading the receipt, your employees are able to quickly log their purchase, eliminating the risk that the receipt will be lost.

So that’s their job done, but what do you have to do?

Getting all your employees to log their expenses is an organisational challenge, but what to do with them is a far more complicated beast.

You can choose to process them internally, combing through the logged information for irregularities and opportunities, but being across all the avenues for tax rebates or exceptions is a lot of work. The opportunity cost of navigating the ins-and-outs of expenses is likely to make any savings or tax write-offs moot when compared to the money you could have made had you used that time to work on what you’re best at, growing your business. A qualified accountant will have the experience and wherewithal to ensure you’re on top of both your opportunities and your obligations as well as keeping you abreast of any inconsistencies or issues with the submitted information.

If you’d like to have a chat about how best to navigate your employee expenses, we’d be delighted to help. You can call us on 02 6023 1700 or drop us a note via the form below.